NCDEX warehousing arm to invest Rs 800 cr for expansion

The National Collateral Management Services (NCMSL), a warehousing and delivery arm of the National Commodity and Derivatives Exchange (NCDEX), has chalked out a mega expansion plan to upgrade warehousing and collateral management of agri commodities at an investment of Rs 800 crore.

Confirming the investment proposals, A Hari Prasad, managing director and CEO, said that the company was in the process of expanding in 60 locations in 20 states. With a clientele of 14 that consists of bankers across the country, NCMSL currently has operations in 35 locations across 12 states.

The spread of the company depends on the fund raising capacity, which is likely to be decided by May this year through private placement. Prasad, however, denied having in talks with any investors for divesting NCMSL's stake. He declined to comment on the possibility of any foreign direct investment (FDI) coming into the company.

"The fund raising capability of the company will be decided by market forces at the point of private placement, which is likely to completed in two years," Prasad said.

Meanwhile, it is also in the process of setting up warehouses in different locations by acquiring land from the government and land owners. At present, the company does not own any warehouse but deal with clients through 2,000 warehouses on franchise or rental basis.

Under the expansion drive, the company is in the process of strengthening its three prime services "" market intelligence, procurement services and storage services. However, testing and assaying services is likely to attract an investement of up to Rs 3 crore.

Recently, NCMSL has revamped its basic operations by defining three areas of activities separately depending on risk mitigation measures involved in it. The company charges fee according to the risk perceived in each separate activity.

Five banks have already switched to the new service system. Since, the systems have been introduced just two months ago, its remaining customers, mainly banks, are also under various stages of consideration for switching to the new system.

For collateral monitoring, where risk perceived is very moderate, the company charges Rs 15,000-20,000 a month irrespective of the quantity. Under the service, continuous monitoring and strict control over quality is assured to the borrowers by banks on our assurance.

Prasad clarified that the decision to buy or sell the underlying commodities lies with the borrower, that is, farmers who borrow from banks after mortgaging agri commodities.

Under collateral control, the risk mitigation is higher, the company charges a fee of Rs 75,000 and above, where it takes strict control of commodities under possession.

For the inspection and verification, it charges between Rs 2,000-4,000 a visit depending on the location and duration.

NCMSL has set a benchmark of minimum 1000 tonnes for orders in each location to procure on behalf of any private or government-run agencies.

Last year, the public sector Food Corporation of India (FCI), the country's largest food procurement agency, handled all procurement activities on its own and did not engage private players to procure on its behalf.