Ownership norms: MCX, NMCE get 6 months

MCA cancels NSE’s voting right of excess shares too.

The ministry of consumer affairs (MCA) has decided in principle to grant six more months to both Multi Commodity Exchange (MCX) and the National Multi Commodity Exchange (NMCE) for complying with the ownership guidelines issued in 2009. It has also cancelled the voting rights of excess shares held by the National Stock Exchange (NSE) in case of National Commodity and Derivatives Exchange (NCDEX) till the stake is diluted by NSE.

Meanwhile, MCA has started a review of the conditions under which the exchanges were unable to fulfil the equity holding norms prescribed in the ownership guidelines even after two years since the guidelines were issued. While the ministry has asked the reason for delaying the process by MCX and NCDEX, it has raised queries related to the charges of mismanagement, fraud in the exchange and ongoing court case against one of its promoters and its impact on the fund raising and stake dilution plans in case of NMCE.

The time limit for complying with ownership guidelines expired in September, thus completing two years of issuance of these guidelines. MCX will have to bring down its parent Financial Technologies’ holding to 26 per cent from 31 per cent and for this it has proposed to come out with an initial public offer. Towards this it has already filed the draft red herring prospectus with the Securities and Exchange Board of India.

NMCE has to raise its equity to Rs 50 crore from Rs 16.67 crore and net worth to Rs 100 crore. In NCDEX, its promoter NSE has to bring down it stake from 11 per cent to five per cent.

MCX, in its representation for extension of the time limit, had cited procedural delays for coming out with its proposed initial public offer, official sources said. They further added that NCDEX is yet to get back with the reply. While MCX did not comment, both NCDEX and NMCE did not respond to any queries of Business Standard.

Sources said the internal developments in NMCE and consequent court case is delaying the process and hampering the prospects of ownership restructuring by the exchange.

It could be mentioned that the commodity market regulator Forward Markets Commission (FMC) has charged Kailash Gupta, the founder and vice-chairman of NMCE for mismanagement and favouring his family members by misusing his position in the exchange.

Charges include breach of his responsibility to the exchange, systematic fraud and series of crimes under various laws for benefiting himself, his family and his family-owned and/or family controlled companies. Currently, these charges are being contested in the high court.