The National Commodity & Derivatives Exchange (NCDEX) is gearing up to launch its equities and equity derivatives segment after receiving Sebi’s in-principle approval on July 29.
It is readying upgrades and installations and has already hired 60 personnel in technology-related posts and several more across multiple roles, said a senior executive.
Funding the expansion: Investor backing and valuation
“We have received encouraging response from investors and companies,” the executive said. A group of investors, including Groww and Zerodha, participated in its ₹700-crore preferential issue to fund the new vertical. In the grey market, NCDEX shares are now trading at ₹345, after hitting ₹355 mid-August, a steep rise from ₹210 at the end of May, according to Sharescart.
CA Aditya Sesh, founder of Basiz Fund Services, said the exchange does not have legacy issues and could find some competitive edge. “Shares of both BSE and CDSL (depository) gave me 1,000% returns. I now hold NSDL shares (newly listed) at a profit. NCDEX is bound for IPO soon. I will definitely buy,” Sesh said. Other market experts said the NCDEX issue is being awaited.
Independent brokerages are, however, sceptical on the new segment of the NCDEX.
At the recent allotment price, NCDEX is valued at around ₹1,770 crore, compared with ₹2,300-crore value in the grey market. This, however, is miniscule compared with the unlisted giant, National Stock Exchange (NSE), the biggest player and a major shareholder of NCDEX, valued at around ₹5.2 lakh crore, and the listed BSE, worth ₹88,000 crore.
“The NSE is aggressive, the BSE is already struggling and the NCDEX will take time to scale,” said the chief executive of a domestic brokerage.
Navigating a competitive landscape
The CEO of another independent brokerage said the NCDEX had lost market share to the Multi Commodity Exchange (MCX) and never recovered. MCX shares rallied 48% in the last six months. The bourse, which enjoys a near-monopoly in commodity derivative trade, has a market capitalisation of ₹37,728 crore.
Apart from the NSE (15%), the major existing shareholders of the NCDEX include Life Insurance Corporation and NABARD (11.1% each), Oman India JIF (8%), Punjab National Bank (7.3%), and Canara Bank. As per regulation, institutional investors can hold up to 15% while brokers are capped at 4.99% each.
The new business is a significant diversification from NCDEX’s core commodity business and the exchange requires requires ₹600 crore to set it up. In a phased manner, the NCDEX will offer equities, equity derivatives, ETF baskets and agri-infrastructure REITs.
