Reliance Exchangenext (R-Next), a subsidiary of the Anil Dhirubhai Ambani Group’s Reliance Capital, has acquired a 26 per cent stake in the Indian Commodity Exchange Ltd (ICEX) from Indiabulls Financial Services for an undisclosed sum. With this, R-Next has become anchor investor; Indiabulls’ stake has fallen to 14 per cent.
ICEX is the fourth national screen-based online derivatives bourse, offering futures trading in 18 commodities, including bullion, base metals and agriculture items. The exchange’s average fortnightly turnover has been Rs16,000-18,000 crore since inception.
Other major stakeholders in the exchange include the public sector Minerals and Metals Trading Corporation, with 26 per cent stake, Indian Potash Ltd with 10 per cent, and Kribhco and IDFC with five per cent each.
The commodity derivatives market regulator, the Forward Markets Commission (FMC), had cleared the proposal in September last year.
ADAG earlier had plan to set up a commodity derivatives exchange. “Our plan to set up a new commodity futures exchange is in cold storage due to the immense opportunity available with existing players,” said Sam Ghosh, chief executive of Reliance Capital.
Through its subsidiary, Reliance Money, it had acquired a 10 per cent stake in Ahmedabad-based National Multi Commodity Exchange (NMCE) in October 2008 and got a mandate to increase this stake to 26 per cent. That didn’t happen due to a significant rise in valuation. So, R-Money looked for an alternative way to gain management control of a commodity bourse.
“The earlier one (NMCE) was an investment, while the current one is a strategic stake to take management control,” said Ghosh.
ICEX was also looking for an opportunity to divest equity to meet the revised regulatory guidelines. FMC guidelines say an anchor investor cannot hold more than 26 per cent in an exchange. Indiabulls had 40 per cent.
“We see a huge potential in the commodity market space. With this, we plan to develop an integrated and transparent national electronic commodity market place.
ICEX has pedigreed investors and we look forward to working with them to take ICEX to the next level of growth,” said Rajnikant Patel, president and CEO of R-Next, who has been inducted as a wholetime director in ICEX.
R-Next has already set up a national commodity spot exchange through its wholly-owned subsidiary, Reliance Spot Exchange (RSX). “We feel there is a need to have an integrated spot and futures market and see a great synergy between these two institutions. ICEX and RsX both offer complementary products. ICEX will be able to offer physical delivery facility to its members, while RsX members will have the ability to hedge. This will immensely benefit members of both the exchanges and upgrade the existing ecosystem,” said Patel.
“This alliance will help the exchange’s business significantly and take it to the next level of growth, particularly in agri-business. Capitalising on the synergies between the two institutions, ICEX is poised to emerge as an integrated commodities market platform, providing a vital link between the physical and futures segments,” said Sanjay Chandel, chief executive officer.
The entry of Reliance Capital with management control is likely to bring a significant jump in the commodity derivatives market, which crossed the Rs1 lakh crore mark in 2010.
