NCDEX gets SEBI G0-Ahead For RS 500 CRORE IPO

Compared to the previous two years, the number of IPOs hitting the markets this year has been scarce, to say the least. The financial markets have already witnessed one major IPO getting cancelled in view of the worsening economic situation due to the COVID-19 pandemic.

Unfettered by this rough patch, NCDEX has gone ahead with its plan of issuing an IPO by filing the necessary documents with the Securities and Exchange Board of India (SEBI) for approval. The request for approval of this Initial Public Offer was filed by NCDEX on February 11, 2020. SEBI’s approval to NCDEX IPO came nearly 2 months later, on April 09, 2020. Here’s all that you need to know about the company and the NCDEX IPO.

NCDEX – A brief introduction

The National Commodity & Derivatives Exchange (NCDEX) is presently the country’s largest exchange dealing in agricultural commodities and derivatives. Incorporated in the year 2003, the exchange quickly rose up the ranks to become India’s foremost agricultural commodity stock exchange in terms of Average Daily Turnover (ADTV). With a lion’s share in the agri-commodity market going up to around 75% to 80%, NCDEX has virtually cemented its place in the commodities segment.

Coriander, guar gum, cumin, castor seed, chana, and moong are some of the agricultural commodities that are exclusively traded in the NCDEX. Several market players including Farmers’ Producers Organisations (FPOs), processors, stockists, and traders actively participate and rely on these commodities’ derivative contracts for price discovery and movement.

NCDEX IPO approval : An overview

Subsequent to the filing of the Draft Red Herring Prospectus (DRHP) by NCDEX in the month of February, 2020, SEBI had given certain observations to the IPO on April 09, 2020. These observations made by SEBI are mandatory for all kinds of issues of shares including IPO, FPO, and even rights issues.

According to the company’s Draft Red Herring Prospectus filed with SEBI, the National Commodity & Derivatives Exchange is planning to raise around Rs. 500 crores via the Initial Public Offer. Apart from issuing fresh shares worth Rs. 100 crores, the entity, via the IPO, will also give its existing investors an Offer for Sale (OFS) to exit from the company by selling their shareholdings.

The existing shareholders in NCDEX include several big players such as NSE, LIC, and NABARD, with around 15%, 11%, and 11% shareholdings respectively. Other relatively minor shareholders include Oman India Joint Investment Fund (10%), Indian Farmers Fertilizer Cooperative (10%), PNB (7.29%), Canara bank (6%), and Investcorp Private Equity Fund holding around 5% of the shares, among others.

PNB, NABARD, Canara bank, IFFCO, and Oman India Joint Investment Fund are some of the existing shareholders putting up their shares for sale through the Offer for Sale segment of this NCDEX IPO. As per the documents filed with the SEBI, the company has proposed to utilize the net sale proceeds of its shares towards fulfilling the following objectives –

• – Contribution towards the Core Settlement Guarantee Fund (CSGF)
• – Contribution towards funding of net-worth requirements of National Commodity Clearing Limited (NCCL)
• – Other generic corporate purposes

ICICI securities and SBI capital markets have been appointed as the lead managers FOR running the book building process of the NCDEX IPO, with the shares of the entity proposed to be listed in both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Conclusion :

Consequent to SEBI’s approval to NCDEX IPO, and provided that the issue goes live without any hindrances or roadblocks, the entity would then successfully become the third stock exchange in the entire country to get listed in the bourses. This IPO would not only help the NCDEX raise funds, but it will also work towards building and enhancing the stock exchange’s brand.

In addition to that, it could also put the commodities market in the radar of investors and could possibly lead to furtherance of participants in the stock exchange. And also, going by NCDEX’s financial performance, professional management, and vice-like grip in the commodities market, it shows promise of becoming a multibagger stock in the years to come.