Renuka Sugars to exit NCDEX

Signs share sale agreement; expected to garner Rs 55 crore

As part of a strategy to sell its non-core business, Shree Renuka Sugars (SRSL) has signed a share sale agreement with a large Mauritius-based fund to sell its five per cent remaining stake in the National Commodity and Derivatives Exchange Ltd (NCDEX).

SRSL would get Rs 55 crore from this deal at an estimated enterprise value of Rs 1,100 crore for NCDEX. It awaits approval from the Securities and Exchange Board of India (Sebi). It would allow SRSL to fully exit NCDEX.

“Its approval is in an advanced stage of consideration,” a senior Sebi official added. Motilal Oswal advised SRSL on the deal, which trade sources say is a fair one. An SRSL spokesperson neither confirmed nor denied the deal. “No comment,” he said. An NCDEX spokesperson said, “The exchange cannot comment on shareholder matters.”

SRSL had entered the exchange in 2009, with a five per cent stake buy from Goldman Sachs Asset Management India for $7.5 million. The company raised its stake to 12.5 per cent, by acquiring additional stake from rating agency CRISIL in 2010. Then, it had divested 7.5 per cent stake in May 2014 for Rs 66.5 crore ($11 mn). This was to comply with regulatory changes directed by the then commodity markets regulator, Forward Markets Commission.  

In May 2014, the overall enterprise value of NCDEX was estimated at Rs 887 crore; its then daily average turnover was around Rs 3,000 crore. The latter, barometer for evaluating the enterprise value, rose to Rs 4,500 crore in September 2015. SRSL was since looking at a Rs 1,250 crore valuation of the exchange. However, sentiment in agri commodity derivatives had weakened, with the suspension of trading in castor seed and chana (chickpea), the two most liquid contracts on NCDEX. It resulted in a sharp fall in the daily average turnover to Rs 2,700 crore at this exchange.

National Stock Exchange has 15 per cent in NCDEX. Among the others, Life Insurance Corporation has 11.1 per cent and so does the National Bank for Agriculture and Rural Development.