ICEX given revival plan to regulator

Plans to raise Rs 140 cr to meet its working capital requirement to restart futures trading in commodities

To avoid derecognition, Indian Commodity Exchange (ICEX) plans to raise Rs 140 crore to meet its working capital requirement for restarting futures trading in commodities. ICEX's investors include MMTC, the government-owned commodity trading entity, and a unit of Reliance Capital, which hold 26 per cent each.

According to the revival plan, given to the derivatives market regulator, Forward Markets Commission (FMC), the exchange proposes to raise Rs 40 crore from  existing shareholders through a rights–cum–debenture issue, to be floated soon. ICEX has proposed to raise Rs 100 crore through incorporation of new shareholders, for which talks are at an advanced stage.

FMC had on July 3 asked ICEX why its recognition and registration under the Forward Contracts (Regulation) Act, should not be revoked. For, it noted, there was no trading on the exchange platform and no new contract had been approved by it. ICEX had said it would present a business plan for revival of trading by November.

“We have submitted the exchange revival plan to the regulator and are awaiting the response,” said a senior board official of the exchange. ICEX is in the process of convening a board meet sometime this month.

Reliance Capital is promoter of Reliance Exchangenext Ltd, which had bought an anchor investor’s stake of 26 per cent from Indiabulls Financial Services. MMTC continued to remain an anchor investor, also with 26 per cent.

Since closure of operations, many senior executives have quit. The consistent loss had resulted in its base capital falling to Rs 25 crore, against the minimum requirement of Rs 100 crore in the FMC guidelines. With the existing investors not keen on fresh capital infusion, the exchange had announced suspension of trading.

“We are in talks with existing as well as some new investors for fresh capital infusion. Once the revival plan is approved, you will see a change in equity structure,” said an official.

Lack of innovation in contracts, coupled with weak trading sentiment, had pulled down exchange turnover tremendously. Since its launch in November 2009, it had continuously incurred losses.