INDIA BUSINESS WORLD - FEBRUARY 16^th - FEBRUARY 29^th - 2008

BSE SET TO PICK UP 26% IN NMCE

In a significant step towards foraying 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 multi commodity exchange. Asia’s oldest stock exchange has agreed to buy 26% in the Ahmedabad-based commodity exchange, which is lagging far behind 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 the value of the deal on confidentiality grounds. Market sources estimate the enterprise value of NMCE to be much lower than its peers, given the dismal trading activity on the bourse.

BSE is picking up fresh equity, which will bring down the promoters’ stake in NMCE substantially.

At present, Central Warehousing Corporation holds 26% while National Agricultural Co-operative Marketing Federation of India (NAFED) and PNB have about 10% each. Gujarat Agro Industries Corporation holds 5%. BSE is not buying out stake from any of these shareholders, said Mr. Patel.

The alliance between the two exchanges will be mutually beneficial. It will facilitate BSE’s entry into commodities trading and help revive NMCE, which is facing stiff competition from rivals. “We are in the process of putting in place a management team. We will bring 133 years of expertise, global brand value, technology, best corporate governance practices and nationwide reach to gain presence in the commodities market,” said Mr. Patel.

BSE has already appointed one of its key executives, SS Vyas, as COO of NMCE. It is understood that BSE is also in talks with NCDEX for a possible tie-up. But the talks could not materialise due to the presence of NSE as one of the shareholders in the commodities exchange. However, Mr. Patel denied any talks with NCDEX.

A senior NMCE official said that the deal is a kind of special consideration, wherein 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 to rural areas and recruit fresh talent, he added.