ADAG to buy Indiabulls' 26 pc stake in Icex

Reliance-Anil Dhirubhai Ambani Group (ADAG) is close to acquiring a 26 per cent stake from Indiabulls Financial Services in Indian Commodity Exchange (Icex), the youngest commex in the country.

Four persons privy to the discussions told Business Standard that the deal is close to finalisation, and that regulator Forward Markets Commission (FMC) had been kept in the loop. Indiabulls holds 40 per cent stake in the exchange, which started operations less than a year ago.

When contacted, Indiabulls Financial Services CEO Gagan Banga and a Reliance Capital spokesperson declined to comment on the issue. The deal size could not be confirmed.

The exchange was originally promoted by Indiabulls and MMTC, but the private sector player was forced to rope in other investors -- including Indian Potash, Kribhco and Infrastructure Development Finance Company -- to comply with regulatory guidelines.

This is ADAG's second attempt to gain control of a commodity derivatives exchange.

Earlier, group company Reliance Money had attempted to acquire a 26 per cent in National Multi Commodity Exchange of India (NMCE), but received FMC permission for only a 10 per cent acquisition. It is now treating that as a financial investment.

The group, through its Reliance Capital arm, has lined up a plan to gain a foothold in the exchanges business, starting with the commodities segment. It has already set up Reliance Spot Exchange, which is headed by former Bombay Stock Exchange CEO Rajnikant Patel. While the company has received licences to trade from some state governments and Agriculture Produce Marketing Committees, its request for certain exemptions from FMC has been pending for the last few months.

With a commodity futures exchange in its portfolio, Reliance will be able to derive benefits from spot as well as futures businesses.

Indiabulls, where LN Mittal owns a stake, has decided to lower its holding in Icex at a time when Ispat Group Chairman Pramod Mittal, who is the steel magnate's brother, has sought permission to float a commodity futures exchange.

Others, too, are eyeing the business. The government has accorded in-principle approval to a proposal from IT People, Iffco, Bombay Bullion Exchange and Rashtriya Chemicals & Fertilisers to start Universal Commodity Exchange. Indore-based National Board of Trade, which mainly deals in trading of soya oil, has also sought FMC permission to upgrade from being a regional exchange to a national player.

Delhi-based broker Gaurav Arora, who controls Jaypee Capital, is looking to acquire a 26 per cent stake in National Comodity & Derivatives Exchange (NCDEX), the second-largest commodity futures exchange in the country. Arora is also the anchor investor in United Stock Exchange.

There is rising interest in the commodity futures business, where the turnover has increased rapidly. In the first four months of the current financial year, the value of trade was estimated at Rs 33.72 lakh crore, compared with Rs 21.24 lakh crore in the corresponding period last year, which represents an increase of nearly 59 per cent. Multi Commodity Exchange controls around 85 per cent of the market.

In addition, investors are drawing comfort from the government's plan to convert FMC into an independent regulator, apart from allowing institutions such as banks to participate in commodity futures trading.