ACE to expand capital base by 20%

The new entrant in commodity futures space, ACE commodity exchange, has decided to expand capital base by 20 per cent by next July-August. A majority stake in the exchange is owned by the Kotak Mahindra Bank. By doing this the exchange’s capital base would expand by Rs20 crore and premium (depending upon valuations) will be added to reserves. After this, Kotak’s share will fall from 51 per cent to 40 per cent which will be in line with the regulatory norms.

Ahmedabad commodity exchange was a regional exchange and was later upgraded to a national exchange with Kotak Mahindra Bank being anchor investor with 51 per cent equity. The exchange will have to dilute its stake to 40 per cent in one year of starting operations as stated by the commodity futures market regulator, the Forward Markets Commission (FMC). “To comply with FMC guidelines, the company plans to issue fresh equity which will bring down Kotak Mahindra Bank’ holding to 40 per cent, while some more time is left for this and no final decision has been taken,” said Dilip Bhatia, CEO of ACE.

The exchange was floated with Rs 100 crore as capital, where 10 per cent is held by members of erstwhile Ahmedabad commodity exchange, 15 per cent with Haryana agriculture marketing federation (Hafed) and some banks.

The exchange plans to use these funds for expanding product base for trading and improving technology.

Ace Commodity Exchange currently has six agri products in its basket — castor, chana, mustardseed, soybean, refined soyoil and sugar. It plans to launch two more agri products in the next two-three months to widen its agri product basket. This will be followed by the launch of metals and energy products.