NMCE to merge with ICEX, create third-largest commodity exchange

Combined entity to be the first in the world to offer diamond futures

The National Multi-Commodity Exchange (NMCE) has decided to merge with the Indian Commodity Exchange (ICEX), creating the third-largest commodity exchange in the country. 

The merger — discussions for which had been going on for the past few months — was jointly announced on Monday by the two exchanges after the proposal was approved by the boards of both exchanges. 

The merged entity will have a net worth of around Rs 200 crore, while its total capital base will be Rs 553 crore. It will offer a wide range of contracts, including bullion, oil and rubber, besides the world’s first diamond futures contract, which has already received in-principle approval from the markets regulator.

The country's largest exchange by volume is the Multi Commodity Exchange, or MCX, followed by the National Commodity and Derivatives Exchange (NCDEX).

ICEX shareholders will hold a 62.8 per cent stake in the merged entity, while NMCE shareholders will own the rest, a release issued by the ICEX said.

According to the agreement, one NMCE share will be issued against 10 ICEX shares, sources said.

Reliance capital has emerged as the largest shareholder in the merged entity with around 19 per cent stake. However, according to the Securities and Exchange Board of India (Sebi) norms, it will have to reduce its stake to 5 per cent, for which it has got two years. 

“The merger will result in greater financial strength, the consolidation of clients and members, an enhanced product basket and higher operational synergies, which will help the ICEX to further strengthen its position in the country's fast-growing commodity derivatives market," said Sanjit Prasad, managing director and chief executive officer, ICEX. 

The merger proposal is being sent to Sebi for approval, after which both exchanges will move to the National Company Law Tribunal (NCLT) for its nod. After the merger is approved, the board of the new entity will be expanded, sources said. 

Following the imposition of the commodity transaction tax from July 2013, the ICEX had suspended trading in 2014 as its volumes dipped to a level that made it unviable to continue business. It got permission to re-launch its operations after it raised its net worth again. 

“The merged entity will have vibrant rubber contract, which is an aggregation model where small and marginal farmers have been able to get best price on the exchange’s platform despite a strong buyers lobby. The merged exchange shall capitalise on this,” said Anil Mishra, MD & CEO, NMCE. Mishra, who has been CEO of the exchange since 2008, is credited with developing vibrant rubber contracts. 

He also said, “The large base of the Central Warehousing Corporation's warehousing facilities, with storage capacity of 9.89 million tonnes, will become available to the combined entity across India, which will help generate more liquidity due to wider participation of the larger base of active members of the combined entity.” 

The NMCE has 45 active members. The ICEX is yet to go live, but it already has 50 members. NMCE’s daily average turnover in 2017 is Rs 260 crore. 

“The merger is expected to be completed by December 2017, subject to regulatory approvals,” said the release issued by the ICEX.