India Inc takes fancy to commodity futures

Arvind Mills, ITC, Cargill and Britannia have already taken the plunge.

India Inc is increasingly looking at the commodity futures market to hedge price risks. Companies like Arvind Mills, Godrej Agrovet, Ruchi Soya, ITC, Cargill and Britannia have already taken the plunge even though their exposure is not very high with the commodity market still at a nascent stage.

With crude oil contracts performing extremely well in the market within months of their launch, companies like Hindustan Petroleum and Bharat Petroleum are also looking at the markets. Metal companies like Hindalco, Essar and Sterlite, too, are watching the markets closely.

SK Joshi, BPCL's executive director, corporate treasury, said, "A downstream refining and marketing company like BPCL is looking for singular exposure in the market. Indian markets do not offer contracts in crude products. Once other crude related products are launched, we will invest in the Indian market as well."

Ruchi Soya Industries has been using the Indore-based National Board of Trade as a platform to hedge risks in soyabean oil, seeds, and soya complex for some time now. It is also taking positions in the multi-commodity exchanges.

Ruchi Soya Industries Managing Director Dinesh Shahra told Business Standard, "Ten per cent of our business risk are covered through taking positions in the commodity markets. The processing industries get higher benefits when the market is volatile."

Godrej Agrovet Managing Director CK Vaidya said, "In the last three to four months, we have begun actively taking positions in commodities like soya complex, maize and cotton seed cake where we have a direct interest."

He pointed out that with volumes just about picking up, taking large positions did not make commercial sense for the company as yet.

The National Commodities and Derivatives Exchange of India and the Multi-Commodity Exchange, both Mumbai-based, are clocking an average daily volume of Rs 10,000 crore between them.

A senior Britannia Industries executive said, "Once there is liquidity in the market, we are definitely interested in taking advantage of the local platform to buffer price risks. Over the last six months, we have been keenly looking at exploring the market."

An exchange official said more and more corporates had been talking to exchanges for getting membership. "It is only natural as they want to hedge their positions by taking exposure in the futures market," he pointed out.