Will clear dues in 30 weeks, says NSEL; brokers not convinced

However, detailed settlement plan failed to convince brokers who had gone on a warpath against the exchange management

National Spot Exchange Ltd (NSEL), which has been at the centre of a major payment crisis, has decided to settle the entire dues of Rs 5,574.31 crore in 30 weeks beginning August 20. From August 16, the pay-ins will happen every Friday, while pay-outs will take place every Tuesday.

The detailed settlement plan, however, failed to convince brokers, who had gone on the warpath against the management and promoters of the exchange on Wednesday. Among other things, they said the planned payment period was a rather long one.

Many brokers raised fresh doubts about the capability of the exchange to pay. IIFL Chairman Nirmal Jain said: “We want the government to take the responsibility of payments to investors. FMC (Forward Markets Commission) should ensure smooth payment.” Anand Rathi Executive Director Priti Gupta said the uncertainty over investors’ money remained. “Just a settlement calendar does not guarantee smooth payment,” she said.

In its plan, given to FMC, NSEL has committed itself to paying Rs 174.72 crore a week for the first 20 weeks. For the last 10, it would pay Rs 86.02 crore every week. About the remaining Rs 1,219.71 crore, the exchange said some members would “settle dues through sale of commodities, fixed assets and land, besides some other measures.”

Meanwhile, FMC Chairman Ramesh Abhishek told Business Standard: “FMC has asked NSEL to share its settlement plan through its website and get feedback from investors and brokers. FMC will take a view after receiving feedbacks. We have asked NSEL for information on IBMA (a related entity) and not to make any disbursement to it without our approval.”

NSEL Managing Director & CEO Anjani Sinha said: “As the MD & CEO, I and my management team at NSEL have been solely and directly responsible for all operations, including screening of parties, warehouse management, risk management and other related company matters. There are 24 buyers that required to complete pay-in obligations to ensure smooth settlement. I and my management team will solely focus on ensuring smooth settlement according to the schedule.”

The head of a Mumbai-based brokerage said the settlement should have been shorter. By spreading it across 30 weeks, it appeared, NSEL was just buying time. “A lot can change in 30 weeks and the matter could die its natural death,” he said.

Brokers are also worried if NSEL will be able to meet its obligations if prices of the underlying goods fall during these 30 weeks. Besides, NSEL had not clarified whether it would first repay small investors, who could be more impacted because of the delay, said brokers.

“This (settlement calendar) will work only if the entire process is strictly overseen by FMC and DEA (Department of Economic Affairs). It should not be implemented only by the exchange,” said Geojit BNP Paribas Financial Services MD C J George. Some like KR Choksey Shares & Securities CEO & MD Deven R Choksey are, however, relieved about the settlement schedule.

“According to me, it’s a big sigh of relief that clarity has emerged in the form of the settlement calendar and that full payment is being made, though with a delay,” said Choksey. “We understand it takes four weeks for agri-commodities to complete their cycle, and longer for non-agri ones,” he added.

The Financial Technologies stock, which was beaten down 35 per cent in the morning trade on Thursday, recovered to close at Rs 146.60, down 13.51 per cent from its previous close. On BSE, the shares of Multi-Commodity Exchange, another FT-promoted entity, were locked in lower circuit of five per cent, at Rs 253.30 — a new 52-week low.

FinMin task force to look into crisis
The Prime Minister’s Office is set to constitute a task force — under the finance ministry and comprising the consumer affairs and corporate affairs secretaries, besides officials from RBI, Sebi, Directorate of Revenue Intelligence and Enforcement Directorate — to look into the NSEL crisis. The mandate will also be to ensure there are no systemic threats. The finance ministry, however, maintains the body could only give its recommendations and the ministry does not have the power to deal with the issue.