R-Money's additional stake buy in NMCE hits valuation block

The bourse is seeking better valuation in the face of a 142 per cent rise in turnover.

Anil Ambani-led Reliance Money’s (R-Money) plan to acquire an additional 16 per cent stake in the country’s first national commodity exchange, the Ahmedabad-based National Multi-Commodity Exchange (NMCE), has hit a road block over valuation.

Reliance Money, a securities brokerage and distribution company, had acquired a 10 per cent stake in NMCE last October for Rs 10 crore, putting a value of Rs 100 crore for the bourse. The Forward Markets Commission (FMC), the commodities market regulator, had approved the deal with potential for a 16 per cent additional equity holding.

According to the agreement, R-Money could acquire an additional 16 per cent stake in the commodity bourse within six months at an earlier negotiated price. Since the six-month stipulated period has ended in March, the Reliance Money would have to pay on the basis of mutually agreed valuations of Rs 300-350 crore.

The exchange’s turnover, which is the only factor for determining valuation of any exchange, has increased over 142 per cent during FY09 at Rs 122,649.42 crore as against Rs 50,761.41 crore in the previous year. Additionally, the bourse has maintained its leading position in trading in spices, rubber etc. “The valuation must increase and any fresh dilution of stocks should be at par with the current valuation of the exchange,” said Kailash Gupta, founder and managing director of NMCE.

When contacted, Sudip Bandopadhyay, director and CEO of Reliance Money, said, “We have neither made any attempt to buy an additional stake nor do we have any such plan in the near future.”

Meanwhile, NMCE is in talks with a couple of Indian private equity players and foreign institutional investors for stake sale to meet working capital needs. The exchange is planning to raise money from the market through preferential allotment of shares. However, Gupta would continue to hold 24.35 per cent stake and management control in the exchange, said Poonam Verma, vice-president (business development) of NMCE.

“As we have a small base, we need to create additional shares through preferential allotment. All those who wish to take fresh equity position in the exchange will have to pay according to the current valuation, subject to regulatory approval,” said Anil Mishra, chief executive officer of the exchange.

At present, amongst its major shareholders, Central Warehousing Corporation holds 26 per cent, Punjab National Bank (11 per cent), Nafed (5 per cent), Gujarat (11 per cent and Neptune Overseas, which is promoted by Gupta, holds around 24 per cent stake. The remaining stake is held by small stakeholders.