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BSE to take 26% stake in National Multi-Commodity Exchange

Taking a big stride towards its foray into commodities trading, the Bombay Stock Exchange (BSE) has decided to play an active role in the management of National Multi-Commodity Exchange (NMCE), India’s first demutualised online commodity exchange.

BSE has agreed to buy a 26% stake in the Ahmedabad-based commodity exchange, which is lagging behind its rivals MCX and NCDEX.

BSE is in the process of finalising the transaction and will soon make a formal announcement to this effect, said BSE MD and CEO Rajnikant Patel. He, however, declined to comment on value of the deal because of the confidentiality clause.

Market sources estimate the enterprise value of NMCE well below its peers, given its low trading volumes.BSE will be issued fresh shares, which will bring down the promoters’ stake substantially in NMCE. At present, Central Warehousing corporation holds a 26% stake while the National Agricultural Co-Operative Marketing Federation of India (Nafed) and the Punjab National Bank hold around 10% each. Gujarat Agro Industries has a 5% stake.

The alliance between the two exchanges will be of mutual benefit. It will facilitate BSE’s entry into commodities trading while it will revitalise NMCE which is facing stiff competition. “We are in the process of putting in place management team. We will bring 133 years of expertise, the global brand value, technology, best corporate governance practices and nation-wide reach to gain presence in commodities market,” said Mr Patel.

BSE has appointed one of its key executives, SS Vyas, as the chief operating officer of NMCE. It is understood that BSE was also in talks with NCDEX for a possible tie-up. But, the talks could not materialise, which was attributed to the presence of NSE as one of the shareholders in the commodity exchange. However, Mr Patel denied any such proposal.

A senior NMCE official told ET that the deal is one of its kind because the actual enterprise value is different from the transaction value. Elaborating on the objective of the alliance, he said there would be sharing of technology and talent pool between the two exchanges. NMCE will also utilise the funds to expand in the rural areas and recruit fresh talent, he added.

NMCE is the country’s third-largest online commodity exchange after MCX and NCDEX. The most actively traded commodities on the exchange are pepper, cardamom and rubber. The turnover of the exchange during the fortnight between January 16 and January 31 was Rs 1,332 crore, according to the data on the Forward Markets Commission’s website.

Source: Economic Times

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