US-based financial service giant Merrill Lynch is in advanced talks to pick up a six per cent stake in Mumbai-based Multi Commodity Exchange (MCX), say informed sources. MCX provides a platform for derivative trades in commodities including metals and agricultural futures.
Sources close to the development told Hindustan Times that Merrill has valued the six per cent stake around $40 million (Rs 180 crore). The government is expected to come out with guidelines on foreign holdings in commodity exchanges soon and MCX has already started lining up suitors for its stake. A senior MCX official refused to comment on the issue.
The development follows Atlanta-based Intercontinental Exchange’s announcement of its plans to buy ICICI’s eight per cent stake in the National Commodity and Derivatives Exchange. Recently, the Singapore Stock Exchange and Deutsche Börse picked up 5 per cent each in the Bombay Stock Exchange, while the New York Stock Exchange Group, General Atlantic, Goldman Sachs and Softbank Asian Infrastructure Fund together bought five per cent each in the National Stock Exchange.
The Dubai Multi Commodities Centre (DMCC), owned by the Dubai government, is also understood to be eyeing a sizeable stake in MCX. Sources close to the development said DMCC, which plans to increase its influence in the Asian commodity marketplace, would initially pick up a minor ownership in the MCX and later increase it following MCX’s initial public offering (IPO). DMCC, MCX and Financial Technologies had together set up the Dubai Gold and Commodity Exchange, which had commenced trading more than a year back.
In the recent past, there have also been industry talk that the New York Mercantile Exchange is eyeing a nine per cent stake in MCX for about $60 million.
In early 2006, foreign institutional investor Fidelity International had picked up more than nine per cent in MCX for $49 million. However, the Forward Markets Commission (FMC) froze foreign stakes in commodity exchanges and sent suggestions to the government on foreign investment. An FMC official said fresh guidelines were expected very soon. MCX is planning an initial public offering (IPO) to raise about Rs 300 crore after the government announces the norms on foreign ownership in commodity exchanges.
The major shareholders of MCX other than its promoter Financial Technologies are State Bank of india, the National Bank for Agriculture and Rural Development (Nabard), the National Stock Exchange, Union Bank, Canara Bank, Bank of India, Bank of Baroda, HDFC Bank and SBI Life Insurance.
The government has allowed foreign investment up to a total of 49 per cent in the country’s stock exchanges. However, foreign direct investment in stock exchanges is individually capped at 26 per cent, while foreign institutional investment is restricted to 23 per cent.