Jaypee Capital exiting NCDEX, plans to return to trading

IDFC Alternative, Oman, Build India pick up stake in exchange

With Gaurav Arora, chairman of Jaypee Capital, planning to exit from the National Commodities and Derivatives Exchange (NCDEX), the second largest bourse is preparing to operate without anchor investors.

Of Jaypee’s 22.35 per cent stake, IDFC Alternatives’ private equity arm said on Wednesday it was taking five per cent. Build India Capital Advisors LLP has taken another five per cent from Jaypee, taking its total holding to 6.1 per cent. Oman India Joint Investment Fund (a joint venture between State Bank of India and the Oman government’s sovereign wealth fund) has taken 4.7 per cent, leaving the Jaypee holding at 7.68 per cent.

Sources said the Oman India fund is negotiating with Jaypee for another 5.3 per cent. Once the Oman deal is through, Jaypee intends to sell another 1.39 per cent, wanting to retain no more than 0.99 per cent. For this, the company is said to be in negotiation with a few investors.  The deal with IDFC Alternatives was done at Rs 45.6 crore at for the five per cent stake, valuing the exchange at Rs 912 crore. Other deals have also taken place around that level, said sources privy to the development. However, Jaypee’s deal for the residual stake is expected to be at a higher valuation.

Arora said, “We will go back to our traditional line of business of trading on the exchanges.” Three years earlier, before he bought stake in NCDEX, he was among the large liquidity providers and volume generators on derivative exchanges across segments — commodities, currencies and equities. The guidelines of the regulator, the Forward Markets Commission, do not allow shareholders having more than one per cent of the shares in an exchange to trade on it; so, Arora had to discontinue this. Arora had taken the stake at a concessional rate, on the condition that he’d help the exchange to raise volumes and liquidity. This could not happen and since that agreement was for three years, he is exiting, and will have to compensate the exchange.

When spoken to, Samir Shah, managing director and chief executive of NCDEX, said: “NCDEX enjoys the distinction of being the only exchange in the country promoted by national-level institutions and investors like IDFC Alternatives will add strategic value through their considerable experience and insight into Indian financial markets.”

Since Jaypee Capital was acting as an anchor investor, with its exit the NCDEX will operate without anchor investor.