MMTC to exit ICEX, starts process to divest 9.5% stake in the exchange

MMTC had divested 10% in Jan 2016, will now appoint consultant or merchant banker to exit completely

State-run trading company MMTC has initiated the process of divesting its 9.55 per cent equity in the Indian Commodity Exchange (ICEX), marking its exit from the bourse.

The exchange is a public-private partnership, with Reliance Exchange Next Ltd, MMTC, Indiabulls Housing Finance Ltd, Indian Potash Ltd, Kribhco, and IDFC Bank as the major shareholders.

In January last year, MMTC had divested its 10 per cent equity in the exchange. Now, it wants to liquidate the balance 3.2 million shares with a face value of five rupees each.

MMTC has proposed to rope in a consultant or merchant banker to manage the disinvestment. 

A source at MMTC said: “Our board has decided not to make any further investment in the ICEX and pull out of it. Initially we held a 26 per cent stake in the exchange and had a say in its decision-making. But our equity has been coming down and being a minority participant does not make sense.”

During its last sell-off of 10 per cent equity, MMTC got double the face value of each share. From this stake sale of 3.2 million shares, it hopes to mop up at least Rs 32 crore. 

Though the MMTC source did not elaborate on its exit, an industry source attributed it to the ICEX’s “dismal performance” over the years. “The ICEX was established nearly six years ago. But it did not take off in a big way. Trading on the exchange remained suspended for three years. It has again proposed to restart with diamonds futures.” 

An MMTC spokesperson declined to comment.

The ICEX sought to play down the impact of any potential exit by MMTC, saying it will not impact the exchange’s operations. 

A source at ICEX said: “We have no information on MMTC’s intent to sell its residual stake in the exchange. If it divests, it won’t be a big deal for us.” 

In March this year, the ICEX, a screen-based on-line derivatives exchange for commodities, completed its rights issue and achieved the prescribed capital adequacy. 

With this, the ICEX now meets all norms of the Securities and Exchange Board of India (Sebi), including the Rs 100 crore net worth criterion, prescribed for commencing trading operations. The exchange has received in-principle approval from Sebi for commencing business and trade operations for diamond, crude and Brent Oil contracts.

MMTC, meanwhile, has invited bids. The deadline for submitting bids is June 15.

Major shareholders of Indian Commodity Exchange

• Reliance Exchange Next
• MMTC
• Indiabulls Housing Finance 
• IDFC Bank
• Krishak Bharati Cooperative 
• Indian Potash 

(Source: http://www.icexindia.com)