ICEX shareholders attempt to revive commodity exchange

With losses having eroded much of its earlier capital, existing shareholders to infuse more in proportion to their stake; talks also on with external entities

Indian Commodity Exchange (ICEX), the commodity derivatives trading platform which had frozen operations since April, plans to revive itself through a capital infusion from existing shareholders.

 

At a meeting last Friday of its board of directors, a resolution is believed to have been passed in this regard. The capital infusion from existing shareholders is expected to be in the proportion of their stake. Talks are believed to be on with some players to get capital infusion from outside.

 

Relinace Capital is the promoter of Reliance Exchangenext Ltd, which had bought an anchor investor’s stake of 26 per cent from Indiabulls Financial Services. MMTC, the government-owned commodity trading company, continues to remain another anchor investor, also with 26 per cent stake.

 

An email sent to Ramesh Shetty, the designated officer for responding to queries, got no response.

 

The exchange had moved to third slot in terms of turnover only in 2013, after Multi Commodity Exchange and National Commodity & Derivatives Exchange, significantly lost trading volume. Lack of innovation in contracts, coupled with weak trading sentiment, had pulled down exchange turnover tremendously. Since its launch in November 2009, it had continuously incurred losses. A commodities transaction tax, imposed in July 2013, was perhaps the final spoiler.

 

Last December, the board had decided not to launch new contracts till the ebbing of negative sentiment towards commodity futures markets. ICEX then discontinued trading this April.

 

The consistent loss had resulted in its minimum base capital falling to Rs 25 crore as of the present, against the requirement of Rs 100 crore in the guidelines of the the commodities derivatives markets regulator, the Forward Markets Commission.

 

The exchange could seek capital infusion through the introduction of a rights issue and ask its existing shareholders to subscribe in proportion to their stake to keep their shareholding intact or bring in new investors.

 

The exchange believes there is still a room for a second slot in the commodity futures space, as the gap between the two leading ones very wide. “We are eyeing the second slot space through revival,” a board member said, without divulging details on the plan.