E-gold repayment: Don't look for profit

Investors will get the money directly in their demat accounts or through their brokers. They won't get physical delivery any more

Ajay Kedia, managing director of Kedia Commodities, says about Rs 40 lakh was invested by 350-400 of his clients in National Spot Exchange Limited (NSEL)’s e-gold contracts since 2012. His clients had opted to systematically invest in the one gram e-gold scheme. On May 23, his team got an intimation from the spot exchange, saying the exchange was repaying investors. There were 33,000 investors with their investments stuck in the e-series contract of NSEL.

“There are two ways in which money will be paid. Those investors who have a demat account will get the money directly into their accounts,” says Kedia. Those who had invested through a broker’s pool account (wherein a broker pools all the investors’ money and invests through a single account), will get the money from the broker because the spot exchange will pay the broker on behalf of such clients.

The only hitch is investors looking for physical delivery will not be able to get it any more. “In the last week of April, NSEL had intimated customers who wanted physical delivery to come forward. However, rematerialisation (converting electronic holdings into physical form) was subject to only certain denominations of metals, which was feasible to deliver (typically 100 grammes or more),” says Sunil Sarda, CEO and director at Systematix Stocks and Shares.

Now, the exchange is only selling the stock and proportionately distributing between the investors. For instance, if the exchange had Rs 100 crore worth of physical gold but it could get bids only for, say Rs 50 crore, then the exchange will divide the Rs 50 crore equally among the investors.

The rate at which investors will be get returns will be the average of the rates at which a metal was sold. Experts say  more than 90 per cent of investors’ money in e-gold has been returned. Bids for e-silver contracts are moving on a snail’s pace. There have been no bids for base metals such as nickel, zinc and lead. If there are no bids for some of these metals, there is no other option left for investors other than waiting even longer for whatever little they can get back.

According to Arun Dalmia, secretary of NSEL Investors’ Forum, the spot exchange had Rs 434.19 crore worth of metals (base and precious metals). And around Rs 68 crore worth of precious metals (gold, silver and platinum) have been given in physical form till May 8. Around Rs 140 crore worth of repayments have been made to e-gold investors and about Rs 225 worth of metals is remaining with the spot exchange, which has to be sold to repay investors.

There are around 33,000 investors with investments stuck in e-series contracts. Last week NSEL decided to make payment of Rs 140 crore to its e-series investors. This is the first payout in e-series contracts. The auction process had started on May 8.

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