Several deals in the exchange space are on the verge of finalisation, with most of these in the commodity exchange segment. One exchange is raising fresh equity funds, while a couple of others are finding anchor investors. Several of these deals are expected to be finalised by Diwali, if not earlier, said insiders.
The Indiabulls group, for instance, is mulling an entry into the stock exchange space. The buzz is that it may buy a stake in the Over-The-Counter Exchange of India (OTCEI), an exchange for small and medium enterprises that the Reliance-ADAG group has received a mandate to revive. Indiabulls has offered to sell 26 per cent of its stake in the year-old Indian Commodity Exchange (ICEX) to an ADAG group company.
The proposal is under consideration by commodity futures market regulator, The Forward Markets Commission (FMC). ICEX holds 40 per cent in the exchange. Ajit Mittal, director, Indiabulls group, declined to confirm or deny the group’s plan to enter the stock exchange space and also declined to comment on an ICEX deal with ADAG. However, he admitted, “We are looking for a strategic investor in the exchange (ICEX).”
| STOCK TAKING |
| * Indiabulls group mulling entry into stock exchange |
| * R-ADAG gets OTCEI for '0.90 crore |
| * Ruchi group company may take anchor role in NBOT, once this Indore-based exchange gets national status |
| * NSE searching for buyers in NCDEX while Jaypee Group’s proposal pending with the exchange |
OTCEI, formed in the mid-nineties, remained dormant for many years. However, bids were recently invited to revive the exchange and awarded to ADAG’s Rs 90-crore highest bid. When contacted, Rajnikant Patel, who heads the exchange vertical of ADAG, declined to comment on future plans. ADAG will have to dilute stake in OTCEI eventually, although handing over OTCEI is still incomplete.
Ahmadabad Commodity exchange (ACE) has been permitted to go nationwide with Kotak group as anchor, and the exchange is set to start operations very soon. Another regional exchange, Indore-based National Board of Trade (NBOT) is preparing a plan to convert to a national exchange. A market leader in soya oil and soybean futures, NBOT has already started the process of demutualisation and recently issued 100 fresh shares of Rs 10 to each of its 119 members. Soon, bonus shares will be issued to expand the capital base.
After forming a company to convert itself into a national exchange, the next step would be to find an anchor investor. Sources privy to developments said that, when allowed, some of the Ruchi group companies may assume the role as anchor investor in the exchange. When contacted, Kailash Chandra Shara, chairman, Ruchi group, declined to comment. Ruchi group is a major player in the vegetable oil segment. Sources also said that once demutualisation is complete and an anchor investor finalised, the exchange will sell 26 per cent to financial institutions.
Ahmadabad-based National Multi-Commodities Exchange is also raising funds by selling fresh shares to the tune of 5-10 per cent. Investors that can provide strategic inputs are expected to pick up shares. The exchange is talking to domestic as well as foreign investors. However, based on the progress so far, a domestic investor might get preference. A deal is expected soon, said the source.
The country’s second-largest commodity futures exchange, National Commodities and Derivatives Exchange (NCDEX), may also see more investors. An application from Jaypee Group, one of the largest derivative broking houses in north India, is under consideration by the exchange. FMC has asked the exchange to seek approval from other shareholders to sell shares to the Jaypee Group, which did not find favour among new entrants like Renuka Sugars.
However, the proposal is still with the NCDEX board, as it proposes to issue fresh shares to Jaypee. Earlier, the plan was that Jaypee would get shares at a price lower than the last deal price, provided it commits to raising volumes on the exchange. An NCDEX official, on condition of anonymity, said, “The proposal to issue fresh capital up to 26 per cent to Jaypee Capital was submitted to FMC after obtaining majority shareholders’ approval and we are awaiting a reply. Jaypee is expected to play a role in the overall improvement of the exchange.”
FMC rules do not allow a shareholder to trade on its own exchange and, hence, Jaypee has offered to surrender its NCDEX membership. FMC has also declared the company “fit and proper” to hold shares in a commodity exchange. Jaypee has also anchored the United Exchange of India to trade in currency futures. Sebi rules want it to dilute its stake to 5 per cent. The group is expected to complete this in the very near future, said an insider in the exchange.
However, Jaypee may not be the only new shareholder on NCDEX. This exchange was first promoted by ICICI Bank. Eventually, it sold its stake and National Stock Exchange assumed the role of promoter. Last month, FMC issued a notification saying the stock exchange cannot hold more then 5 per cent in a commodity derivatives exchange and NSE, which holds 15 per cent, would have to offload the excess holding.
Even market leader MCX might see some deals, as NSE has offered to sell its 1 per cent stake in the exchange whenever MCX floats an IPO.
