The news of Asia’s oldest stock exchange acquiring a substantial stake in the Ahmedabad-based National Multi Commodity Exchange (NMCE) may have come as a surprise to many. To those in the know, it was a pure financial move by the Bombay Stock Exchange (BSE) in that it may prove to be a multi-bagger going forward when some financial bigwigs enter the commodity arena.
Recently, the BSE bought a 26% stake in NMCE for an undisclosed amount of money. People familiar with the deal say that the stock exchange had to shell out around Rs 40 crore for the stake, valuing the comex at around Rs 150 crore.
“BSE is of the firm belief that going ahead, others would be interested in acquiring a stake in NMCE. At that time, it would have an option of diluting a part of its stake and that too at a premium,” says a source. It is clear that the stock exchange would not be involved in the daily working of the comex. BSE members would also not be automatically eligible for NMCE memberships. They would have to submit a request to the Forward Markets Commission (FMC).
BSE is said to have tried its luck with MCX but steep valuations were a hindrance. Also, the National Stock Exchange has a small stake in the exchange. It is also said that the timing of the deal has a lot to do with the forthcoming public issue of Multi Commodity Exchange (MCX) that is being valued at over $1 billion.
BSE knows that if it enters the arena at the right time at the right price, then going ahead it would be able to net a cool gain, said the official. Similarly, NCDEX was out of the question since NSE is one of the largest shareholders with a 15% stake in it.
This brought NMCE, a strong player in agri commodities, into the picture. NMCE occupies the third slot among the leading commodity exchanges of the country. The daily average turnover of the Ahmedabad-based exchange is around Rs 500 crore.
“BSE’s larger counterpart (National Stock Exchange) already has a presence in the commodity market via NCDEX,” said an official. In his view, it was only a matter of time before BSE took a stake in one of the leading commodity exchanges. “BSE does not have a commodity licence and FMC would not give a new one. So, the only option was to acquire a stake in any of the three leading commodity exchanges,” added the official.
FMC norms stipulate that a single domestic investor cannot be given more than 26% stake in a commodity exchange. In the case of foreign investors, the limit has been capped at 5%. While the stake would make BSE eligible for a board representation, it is believed that the stock exchange would ask for two representations on the NMCE board.
Source: Economic Times