UCX seeks 6 months to sell 16% to a PSU

Technology firm IT People-promoted Universal Commodity Exchange (UCX) has sought a six-month extension to comply with the mandatory regulatory guidelines completely. The exchange has so far failed to discover a public sector undertaking (PSU) which can buy 16 per cent stake in it.

Early in July, IDBI Bank bought 10 per cent stake in UCX, at par, by paying Rs 10 crore with a deal value of the exchange at Rs 100 crore. The advantage for IDBI with this deal was that being the only bank among the promoters in UCX, all transactions of the exchange were scheduled to be routed through it. The last date for complying Forward Markets Commission (FMC) norms is August 23.

According to the FMC guidelines, equity participation from one or more PSUs should not be less than 26 per cent for awarding recognition to a national level commodity exchange.

“The exchange has applied for an extension for a period of six months, which we are in the process of granting. The formal communication, will be issued soon,” sources said.

With the rest of the mandatory pre-requisites like due diligence, technology installation, inspection by the FMC, risk management, etc already in place, the exchange is likely to go live immediately after resolving the PSU issue. Claiming, thereby, the status of India’s sixth nationwide commodity derivatives trading platform.

Currently, five national level commodity derivatives trading platforms — including, MCX, NCDEX, NMCE, ICEX and ACE — generate a total annual turnover of Rs 110,000 crore, with average growth of over 40 per cent in recent years, and facilitate futures trading in approximately 60 commodities. Of this, the Financial Technologies-promoted Multi Commodity Exchange (MCX) contributes 83 per cent, followed by National Commodity & Derivatives Exchange (NCDEX) , contributing 11 per cent.

Although, the exchange will hardly have anything new to offer within the existing regulatory framework, promoter Ketan Seth is enthusiastic, mainly looking to share a pie of the growth of the overall commodity derivatives market.

“We had an issue of finding a PSU as one of the shareholders with a minimum 10 per cent of equity participation in the exchange to comply with the regulatory guidelines. We have found an investor. All discussions are over and we may get a cheque from the PSU anytime. But, until then, we cannot say the exercise is over,” said Seth.

Early this year, Oman Investment Fund, an investment institution owned by the Omani government, bought five per cent stake, the maximum stipulated limit by a foreign institutional investor in any Indian exchange.