Commodity bourses told to broadbase shareholding

Govt aims at diversifying shareholding 'to the maximum extent possible'.

The Forward Markets Commission (FMC), at the instance of the ministry of consumer affairs and public distribution, last week directed all demutualised commodity exchanges in the country to diversify their ownership pattern.

The new guidelines, finalised by the government, aims at diversifying their shareholding pattern "to the maximum extent possible". Towards this end, the shareholdings of "major public limited companies/financial institutions/state government undertakings, etc" have been capped at 30 per cent of the equity.

In case of other public limited companies and institutions other than FIs, the limit is fixed at 10 per cent while private limited companies' exposure has been restricted to 5 per cent.

The exchanges have been given one year to broadbase their equity structure. They have been directed to keep the regulator informed every month about the steps they are taking to diversify their equity base.

While going for equity tie-ups with entities other than the original promoters, the demutualised exchanges will be required to issue public notices in national dailies.

Under the new guidelines, all demutualised exchanges are also required to provide for one-third representation to independent directors on the board with approval of the FMC and a nominee director from the regulator. This is, however, not a new norm as the exchanges have been following this rule.

A section of the commodity exchanges has been taken aback by the "sudden" government decision, as this has not been part of the original licensing agreement. "We will move the government to reconsider this as one year is too short a time to offload the promoters' stake. One will not be able to unlock the real value if one is forced to offload (stakes) in a hurry," said one exchange official on condition of anonymity.

There are three demutualised commodity exchanges in the country: the National Multi Commodity Exchange (NMCE), the Multi Commodity Exchange of India (MCX) and the National Commodity & Derivatives Exchange (NCX). Following the directive, the MCX in Mumbai and the Ahmedabad-based NMCE will have to diversify their holding within a year.

Financial Technologies (India) Ltd holds 100 per cent in MCX. It is understood that the exchange is in the final stages of sewing a deal to rope in Iffco as a partner. Iffco is expected to pick up a 30 per cent stake.

Post this deal, MCX's equity base will go up from Rs 15.5 crore to about Rs 21 crore. Even after this, MCX will be required to diversify its holding further.

Central Warehousing Corporation (CWC) is the largest stakeholder in NMCE holding 26 per cent stake. Its managing director Kailash Gupta too holds over 20 per cent stake in the exchange.

The list of stakeholders in NMCE includes the National Institute of Agricultural Marketing (NIAM), National Agricultural Marketing Federation (Nafed) and a few others.

Now Gupta will have to pare his stake. The fate of CWC is not known as it is neither a state government undertaking and nor an FI. A source, however, pointed out that technically even a central government undertaking could get the benefit of a state undertaking.

NCX will not be required to change its holding pattern as no entity is holding more than a 20 per cent stake here. ICICI Bank, the National Stock Exchange, Life Insurance Corporation of India and the National Bank for Agriculture and Rural Development hold 20 per cent each in NCX while rating agency Crisil holds 12 per cent and Punjab National Bank 8 per cent.

However, it is not known whether the government wants to cap the collective exposure of big corporates and FIs at 30 per cent. NCX has a paid-up capital of Rs 22 crore and authorised capital Rs 30 crore.

Industry experts feel that the government has shown undue haste in boradbasing the equity pattern of commodity exchanges. "New private sector banks were given four years to bring down promoters' stakes. In case of insurance companies, the timeframe is 10 years. Why should the commodity exchanges be denied such a benefit?" asked one expert.

Incidentally, in case of both banks and insurance companies, promoters are required to dilute stakes through public offerings. Even in demutualised stock exchanges, the Securities and Exchange Board of India (Sebi) has proposed 51 per cent public holding after a year.

However, the government guidelines for diversifying holdings of demutualised commodity exchanges are silent on public offerings.

The ages of the three demutualised commodity exchanges vary between a year a few months. NMCE took off in January last year; MCX in November and NCX in December.