NMCE to raise fund through new share issuances

To appoint merchant banker in a week; may submit detailed plan for increasing networth to Sebi soon

Ahmadabad-based National Multi-Commodity Exchange (NMCE) plans to raise funds through fresh share issuances to achieve the minimum networth criteria fixed by Securities and Exchange Board of India (Sebi) last week.

As stipulated by the regulator, NMCE requires Rs 100 crore of minimum networth by May 2017 of which the exchange currently has Rs 71 crore including Rs 13 crore contributed to the Settlement Guarantee Fund (SGF).

So, the exchange requires to raise Rs 29 crore of additional networth in around 18 months from now. But, the exchange needs to submit a detailed plan approved by shareholders to this effect to Sebi by March 2016.

Barely two-days after Sebi's 'timeline' circular issued on November 26, NMCE shareholders met to draw a roadmap on 'how to achieve Rs 100 crore of minimum networth required by Sebi for continued to be recognised as a commodity exchange'.

"In our board meeting, shareholders were of the view that new shares should be issued to new investors. We have a number of corporate shareholders who hold more than 5% stake and they require to bring it down to the level of 5% and below. So, their stake would automatically be diluted by issuing fresh shares. At the same time, we would be able to raise funds to meet our networth requirement," said Anil Mishra, managing director, NMCE.

This is the only national level exchange which enjoys with less than Rs 100 crore of minimum stipulated networth. The remaining two exchange ie Multi-Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX) are way above in terms of networth requirement.

While the company has initiated procedure to appoint a financial advisor in a week, fund raising may not be easy due to falling daily average turnover (DAT), a benchmark to assess the valuation of any exchange.

NMCE was valued at Rs 200 crore in 2010 when the then financial advisor Equirus Capital successfully looked for new investor Bajaj Capital for buying 12.82% stake in the exchange at Rs 25 crore.

Then also, the exchange issued new shares resulting into a sharp decline in the equity stake of existing shareholders. In fact the stake of Reliance Capital was diluted to 8.72% post NMCE's stake sale to Bajaj Capital from 10% earlier.

However now, according to the sourc close to the development, "Reliance Capital will not raise its stake in NMCE. It is a strategic investor and would continue to remain so".

Going would be difficult this time as NMCE's daily average turnover has declined to one-sixth to Rs 246 crore now from Rs 1,486 crore in 2010. During same period, however, NMCE's share in overall commodity exchanges' turnover has slumped to a negligible 0.94% now from 5.84% five years ago. Interestingly, the daily average turnover of the three national commodity exchanges (representing over 99%) has risen marginally to Rs 2,6301 crore now from Rs 2,5431 crore in 2010.

Meanwhile, NMCE might play with letter it received in April 2013 from the Ministry of Consumer Affairs, the then parent ministry of comexes regulator the Forward Markets Commission (FMC), saying, "No deadline is applicable on NMCE till the pendency of the case in the supreme court against its erstwhile promoter Neptune Overseas Ltd (NOL)."

NOL holds 30% stake in NMCE and its shareholding is sub-judice in the apex court.