Mumbai, Feb. 11 Atlanta-based Intercontinental Exchange (ICE) has made a $16-million charge to write down in the value of its 8 per cent stake in the National Commodity and Derivatives Exchange of India.
ICE picked up ICICI’s 8 per cent stake in NCDEX at $37 million in 2006. NCDEX received a valuation of a little less than $500 million when ICICI Bank — one of the original and leading investors in the commex — sold its stake to ICE.
Earlier, Goldman Sachs had bought 7 per cent from ICICI. Post the deals, ICICI completely exited from its investment in the commodity exchange.
“ICE has taken a pre-tax, non-cash impairment charge of $16 million related to its 8 per cent equity ownership in NCDEX, a derivatives exchange located in Mumbai, India. ICE acquired its stake for $37 million in 2006,” the Atlanta-based exchange said in press release.
In response to political pressure regarding high commodity prices, the Union Government suspended trading in several key agricultural contracts traded on NCDEX during 2007, and that ban remains in place, it said.
The Union Government also announced a law that may require foreign entities, including ICE, to divest holdings above an imposed limit of 5 per cent total ownership in Indian commodities exchanges. This may result in ICE reducing its stake in NCDEX from 8 per cent to the 5 per cent threshold by June 30, 2009.
Considering these factors and current valuations in the global exchange sector, management determined that its cost method investment in NCDEX is impaired under US GAAP standards. “ICE continues to work closely with NCDEX as a key strategic partner, which provides access to an important emerging market,” ICE said.
Turnover on the NCDEX has taken a beating in the last few years due to the Government ban on futures trading in few agriculture commodities. NCDEX turnover fell 28 per cent to Rs 29,815 crore in December against Rs 41,485 crore recorded in the same period last year.