Jaypee to sell 22.4% in NCDEX at a profit

Deals to sell all the stake in final stages

New Delhi-based Jaypee Capital Services is set to exit the country’s second-placed commodity futures exchange, National Commodity and Derivatives Exchange (NCDEX).

The Gaurav Arora-owned Jaypee Capital is an anchor investor in it, with a 22.38 per cent stake. Jaypee has done two deals to sell 10 per cent stake; talks with some investors for selling the other 12.38 per cent is in the final stage, and likely to be completed in a few days. The shares are being sold at Rs 180 apiece against the acquisition price of Rs 59 three years earlier, said two persons. NCDEX has a paid-up equity of Rs 50.7 crore.

Jaypee acquired stake in NCDEX at a concessional price, with a rider that the buyer would have to help the exchange raise its turnover in stages over three years. If not, the entity would have to make good the discount it had received. Currently, NCDEX’s average daily volume is Rs 3,500 crore. Before Jaypee’s entry, NCDEX had done a rights issue at Rs 110 apiece.

As the three years are coming to an end, Jaypee is selling the stake at a profit. Even after repaying the discount, it would make a profit, as the deals are at Rs 180 a share, valuing the exchange at Rs 900 crore. The exchange, according to a source, would function as an institutions-owned, without anchor investors. “The exchange has matured to grow on its own without an anchor and would remain professionally managed.”

 

The NCDEX declined to comment on the deals. IDFC PE, reported to be buying the stake, said “no comments”. Oman International, succeeded in entering India’s commodity futures by buying five per cent from  Arora, could not be reached. Oman was in negotiation with United Commodity Exchange to buy five per cent but that didn’t materialise.

According to sources, the IDFC and Oman deal pacts have been sent to the regulator, the Forward Markets Commission (FMC), for approval.

After the exit of Jaypee, Shree Renuka Sugars would be the single-largest shareholder in NCDEX, with a 12.5 per cent stake. According to FMC, shareholders of an exchange cannot trade on it. Renuka is one of the largest sugar producers but cannot even hedge its positions on  NCDEX, despite the exchange being predominantly in agri-trading. It is now trying to diversify to non-agri commodities.

FMC is exploring whether to allow shareholders to trade on the same exchange, with some checks. The regulator had recently sought comments from exchanges on the subject.