NCDEX plans IPO to provide exit option to early investors, raise capital

Apart from NSE, the largest shareholder with 15% stake, there are other investors who have been holding stakes since 2003. Some of them now want to flog their stakes

The National Commodity & Derivatives Exchange (NCDEX), India’s largest agri-centric commodities deri­vatives exchange, is planning to issue an initial public offering (IPO) in a bid to raise Rs 400-Rs 500 crore, sources in the exchange said.

With the IPO, the NCDEX, set up in 2003, looks to provide an exit option to some shareholders who are invested since long and raise growth capital.

Once listed, it will become the only listed commodities derivatives exchange after the Multi Commodities Exchange (MCX). In India’s exchange industry, it will be the third as the BSE is also listed.

The National Stock Exchange or NSE is the largest shareholder in the NCDEX with 15 per cent equity holding. 

Due to a regulatory order, the NSE’s commodity derivatives plans are on hold as of now, but it had earlier said that it will look at agriculture commodities derivatives contract. With agri commodities being the core business of the NCDEX, there is a possibility of direct competition between the two. 

Other big shareholders of the NCDEX are Life Insurance Corporation of India and NABARD with 11.1 per cent equity each, besides IFFCO and Oman India Joint Investment Fund, which hold 10 per cent each. 

When contacted, an NCDEX spokesperson said that the exchange had “no comments to offer”.

The exchange, according to the sources, has already initiated discussions with merchant bankers. A source said: “The exchange’s investors have been seeking exit option for the last few years and it has started working on plans to give exit options to investors, including a plan for an IPO.” 

With a cap on shareholding, an IPO remains the best option to give exit to the shareholders.

The source said meeting the quarterly result submission requirement will be challenging for the exchange after it comes out with an IPO. 

The exchange’s daily average volume has started improving. In FY 19, it was Rs 2,087 crore but in the last few months, the volume has been higher than average and in FY 20 so far, it has cloaked a daily average volume of Rs 2,284 crore. 

However, the sources said that the exchange needs to expand the basket of liquid commodities, which requires more investment.

Guar and vegetable oilseeds contribute most to the volume but some major commodities like wheat need a big push. 

The NCDEX has two major subsidiaries — Neml or NCDEX e-market Ltd, its spot exchange, and National E-Repository Ltd (NERL), which keeps records of the stock of commodities in warehouses. 

In NERL, NCDEX has a 67 per cent stake; the remaining 33 per cent is with SBI, ICICI Bank and NABARD. Its net worth is Rs 79 crore and is Ebidta positive company, said the source. 

Neml is a 100 per cent subsidiary of the NCDEX and is also a profit-making company. The NCDEX’s clearing corporation was also set up last year which is a 100 per cent subsidiary.

However, FY18 — for which the NCDEX’s consolidated accounts are available — was not good for the exchange as it reported a marginal loss of Rs 14 crore.