Big plans

Mumbai, Feb. 25: The Bombay Stock Exchange (BSE) today signed a strategic agreement to acquire a 26 per cent stake in Ahmedabad-based National Multi-Commodity Exchange of India (NMCE).

The stake acquisition, which will be done through a fresh issue of shares to the BSE, will mark the stock exchange’s foray into a commodity bourse.

The tieup will facilitate the buying and selling of NMCE-listed commodities online through the BSE’s trading terminals.

Although the valuations of the deal have not yet been finalised, officials from the BSE said it would pick up a little over 52 lakh shares of the NMCE and the transaction would be completed within the next two months.

B.C. Khatua, chairman of the Forward Markets Commission, said the NMCE had a very small membership at present.

The alliance will facilitate the BSE’s entry into commodities trading, while it will help the NMCE to increase its market share with the BSE as a promoter. This also indicates certain alterations in the management control of the NMCE after the deal. Although the final management structure of the NMCE was not disclosed, Rajnikant Patel, managing director and CEO of the BSE, said he would be appointed on the NMCE board after the transaction took place.

“BSE’s foray into the commodities market space will bring 133 years of expertise, the global brand value, technology, best corporate governance practices and nation-wide reach. It denotes the BSE’s expanding horizon in the financial market space,” Patel said.

The NMCE has futures trading contracts in nearly 27 commodities mainly in rubber, pepper, raw jute, cardamom, castor seeds, oil seeds, menthol crystals, and metals.

The bourse commenced futures trading in 24 commodities in November 2002 on a national scale and the basket of commodities has grown since then to include cash crops, food grains, plantations, spices, oil seeds, and metals.

Central Warehousing Corporation, Neptune Overseas Ltd and Punjab National Bank are the three major shareholders of the NMCE, holding 26 per cent, 25 per cent and 10 per cent, respectively. Officials from the NMCE said the holding of Neptune Overseas would be diluted to about 18 per cent from 25 per cent after the deal.

The NMCE’s market share is the lowest in the commodity space among the three national commodity exchanges, with the Multi Commodity Exchange having the highest share, followed by the National Commodity and Derivatives Exchange.