MMTC revives plan to sell stake in ICEX due to tepid trading performance

MMTC, which owns 9.55% equity, had thought of retaining the stake after ICEX's merger with NMCE and and the beginning of diamond futures

State owned trading company MMTC Ltd has revived plans to offload stake in Indian Commodity Exchange Ltd (ICEX), following tepid trading performance by the exchange and volatility surrounding commodity markets. MMTC currently owns 9.55 per cent equity in the bourse. 

“We had thought of retaining stake in ICEX after its merger with the NMCE (National Multi Commodity Exchange) and the beginning of diamond futures trade. But the trade volumes are not satisfactory. More, being a minor equity participant does not make much business sense for us. Now, we are looking for a consultant to steer us in the equity sale process,” a senior MMTC executive said.

It isn't known if MMTC would divest its entire stake in ICEX. As per a global tender floated by the company, MMTC would like to divest one per cent or more equity held in the exchange in a transparent manner. The shares will carry a minimum reserve price. MMTC would engage a merchant bank or consultant to guide it through the divestment process. The consultant will be tasked with financial evaluation of the audited accounts of joint venture to arrive at the present value of share, preparation of the document that provides information on JV and procedure of bidding, assist MMTC in evaluation and analysis of bids and choose the successful bidder.

Initially, MMTC held 26 per cent equity in ICEX, which has Reliance Exchange Next Ltd (Reliance Capital), Indiabulls Housing Finance Ltd, Indian Potash Ltd, Krishak Bharati Cooperative Ltd (Kribhco) and IDFC Bank as its key shareholders.  

With the approval of its board in September 2007, MMTC had participated in setting up a JV in association with India Bulls Financial Services Ltd (IBFSL) to establish a national stock exchange. On July 17 2008, commodities market regulator Forward Markets Commission (FMC) had granted in-principle approval and subsequently, ICEX was incorporated on August 12, 2008. FMC granted recognition to ICEX on October 9, 2009 and commercial operations started on November 27, 2009.

On February 12, 2009, a shareholder agreement was signed between MMTC, IBFSL and ICEX. IBFSL and MMTC held 40 per cent and 26 per cent equity respectively. The balance 34 per cent was held by other investors. But, in December 2010, IBFSL transferred 26 per cent shareholding in ICEX to Reliance Exchange Next Ltd. Later, in January 2016, MMTC also sold its 10 per cent stake in ICEX to Bharti Infratel chairman Akhil Gupta and another Delhi-based investor Vijay Sharma of B N Enterprises.

Later, MMTCs net shareholding lowered to 9.5 per cent as it stayed away from two rights issues of ICEX.