The BK Modi group’s finance arm, Spice Finance, has proposed to buy a 15 per cent stake in Ahmedabad-based National-Multi Commodity Exchange (NMCE).
Sudip Bandyopadhyay, who recently joined as head of Spice Finance, is understood to be negotiating the deal with NMCE Managing Director Kailash Gupta. Though Gupta declined comment, Bandyopadhyay said Spice was interested in buying the stake. He however, refused to discuss the valuation. “The aim is to develop a vibrant market for agri and non-agri products,” he said.
NMCE was valued at Rs 100 crore when Anil Ambani-promoted Reliance Money bought a 10 per cent stake in it last year. Then also, Bandyopadhyay, as managing director of Reliance Money, was instrumental in the deal.
If the deal goes through, it would be the Spice group’s second acquisition in the financial services industry. It had acquired a 51 per cent stake in Wall Street Finance from Reliance Money a few months ago.
According to new rules framed by the commodity markets regulator, the Forward Markets Commission, no single investor can hold more than 15 per cent in a commodity exchange. Sources said Reliance Money would remain an investor in NMCE with a 10 per cent stake and was not keen to be an active player in the commodity exchange space.
Reliance Money had originally expressed its intent to buy 26 per cent in NMCE. Since then, it has started a spot exchange and plans to set up a commodity futures and stock exchange.
Gupta, who during his road shows in the US made presentations to private equity players for selling a stake, valued the exchange at Rs 300 crore on the basis of the rise in turnover from Rs 250 crore last year to close to Rs 800 crore in 2009.
NMCE, which started in 2002 with 24 commodities, has cornered a major share of rubber and coffee futures trading in the country. Commodity trading in the country is dominated by metals and crude oil. The market for exchange-traded agri and non-agri products is yet to pick up. The National Commodities and Derivative Exchange and the Multi-Commodity Exchange are trying to develop agri trading.
Apart from Reliance Money, NMCE has three major shareholders — Central Warehousing Corporation (26 per cent), Neptune Overseas (promoted by Gupta and has 25 per cent stake) and Punjab National Bank (10 per cent). Gujarat Agro Industries Corporation holds a 7 per cent stake while the National Agricultural Cooperative Marketing Federation of India has a 5 per cent stake.
The Modi group plans to invest close to Rs 500 crore in the financial services sector out of the Rs 2,700 crore it got in 2008 from a stake sale in its mobile services company, Spice Communications. The group plans to foray into insurance, asset management, broking, distribution and micro-finance businesses through both new projects and acquisitions.
It has incorporated three subsidiaries under its broking and distribution business, one each for equity, insurance and commodity broking, under a holding company called Spice Bulls. Spice has engaged a top Mumbai-based investment banker, who is looking into the possibility of acquiring a broking outfit in the range of Rs 50-60 crore.
