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India’s largest equity bourse, the National Stock Exchange (NSE), is in the final stages of acquiring the National Commodity and Derivatives Exchange (NCDEX) for an enterprise value of ₹900-1,000 crore.
The NSE, the original promoter of NCDEX, still holds a 15 per cent stake in the exchange as an anchor investor. Sources told BusinessLine that the deal is expected to be completed over the next few months. A senior official from the exchange was seeking the role of Deputy MD at the NSE as part of the deal, the sources said.
NCDEX had got a go-ahead from market regulator SEBI to launch its initial public offer. The exchange intended to raise ₹500 crore through share sale. But this is likely to be put on the backburner due to the merger talks with the NSE, the sources said.
Earlier, the NSE and the MCX were exploring a merger but it did not go forward as SEBI believed many regulatory hurdles could crop up in the deal.
NCDEX struggling
While the NSE has been scaling new heights in the equity trading business, NCDEX has been struggling. NCDEX’s consolidated profit last year was ₹8.46 crore.
In the commodity segment, the Multi Commodity Exchange (MCX) gained a monopoly status with its focus on bullion metals and crude oil derivatives trading. But NCDEX kept its focus on agri-commodities. In July, the average daily turnover value (ADTV) of NCDEX doubled to ₹2,151 crore compared with the same month of the previous year. Last year, the ADTV was ₹785 crore. If the merger goes through, the NSE will again compete with its old rival, the BSE, in the agri segment. The BSE runs e-Agricultural Markets Ltd, an electronic spot platform for agricultural commodities.
Other investors
The NCDEX merger may also push up the NSE’s valuations ahead of its IPO, analysts said.
With 11 per cent stake, LIC is the No 2 shareholder in NCDEX.
Other shareholders include National Bank for Agriculture and Rural Development, Indian Farmers Fertiliser Cooperative Limited, Oman India Joint Investment Fund, Punjab National Bank, Canara Bank, InvestCorp PE Fund I, Build India Capital, Shree Renuka Sugar, Jaypee Capital all of which may get shares in the NSE following the merger deal.
Neither the NSE nor NCDEX responded to BusinessLine ’s queries.
“There is a belief within SEBI that NSE has better standards of regulatory compliance and deep pockets to revive agri-commodity trading in India, something which the incumbent government has been much interested in,” said a market expert.
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