Foreign investors like Goldman Sachs, Fidelity and exchanges like the Inter-Continental Exchange have been given a year?s breathing space to reduce their holdings in Indian commodity exchanges.
The government on Wednesday gave domestic commexes until June 30, 2009 to reduce their foreign investment exposure to within 49% of total equity. Further, no single foreign investor or entity, including ?persons acting in concert?, would hold more than 5% of the equity in these companies, the statement added.
The guidelines had been issued on March 12, but many exchanges had not complied. ?It has been brought to the notice of the government that some existing commodity exchanges had foreign investment above the permitted level as on the date of issue of the press note,? the note issued on Wednesday stated.
Under the guidelines, a composite ceiling for foreign investment of 49% was allowed with prior government approval, subject to the condition that investment under the Portfolio Investment Scheme would be limited to 23% and under the FDI Scheme to 26%.
Goldman Sachs owns 7% stake in India?s largest agriculture exchange, the National Commodity & Derivatives Exchange Ltd, in which Intercontinental Exchange also holds 8%. Fidelity has a 9% stake in the country?s largest commodity exchange by volume, MCX. But Citigroup, Merrill Lynch and NYSE Euronext, which each hold 5% in the exchange, will not be affected as they are within the permissible limit.
Recently, the country?s third national exchange, NMCE also expressed its intention to offload 5% stake to foreign buyers. Sources said most exchanges failed to comply with government guidelines because they had offloaded stake to foreign buyers when there was no clear guidelines and investment in commodity bourses was clubbed under ?other? investment. ?Now that the government has spelt out clear guidelines, we will have to fall in line,? said a senior exchange official, who did not wish to be named.
Not only are the exchanges required to prune their foreign holding, but they also have to give a compliance report to the government about their foreign holding and details about their equity structure. The turnover of commodity exchanges is expected to grow 24% to $1.14 trillion by March 2009.