The Hindu Business Line : FDI in commodity bourses to boost valuations

Mumbai, Jan 30 After mandating an autonomous status for commodity market regulator Forward Market Commission (FMC), the Union Cabinet on Wednesday allowed 49 per cent foreign direct investment (FDI) in commodity exchanges.

Mr Kailash Gupta, Managing Director, National Multi-Commodity Exchange of India (NMCE), said: “It is a welcome move. Till now, lack of clarity on foreign investment had restricted the growth of commodity exchanges. Valuations of the exchanges will improve.”

In June, the Bombay Stock Exchange (BSE) had approached the FMC for buying a 26 per cent stake in NMCE.

Among others, Neptune Overseas Ltd owns 25 per cent stake, while Central Warehousing Corporation, another promoter, has 26 per cent.

“Many foreign investors have evinced interest in buying into NMCE. Apart from valuation, we will weigh other parameters, strategic value additions and technology the foreign partner can offer before taking a decision,” Mr Gupta said.

Regional bourses

According to analysts, it will help regional exchanges which are looking out for investments, but they have to become demutualised before attracting funds.

Mr Jignesh Shah, Managing Director and Chief Executive Officer, Multi-Commodity Exchange, said: “We have not seen the policy in detail and would not be able to comment. But from whatever we learn from media reports, we are happy with this progressive approach of the Government and are confident that this will help the industry to grow.”

The New York Stock Exchange and the New York Mercantile Exchange have shown interest in picking up stake in MCX. Mr Dilip Bhatia, Director, Kotak Commodities, said: “The move will help exchanges launch sophisticated products. While foreign institutional investment can provide funds, FDI can bring in technology and expertise.”

Mr Sushil Sinha, Assistant General Manager, Karvy Comtrade, said: “The Cabinet decision has come at a right time. When foreign investors have been pulling out of the stock market, the Government has opened up a new investment avenue.”

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