Foreign investors can cut comex stake by Sept

Foreign investors can cut comex stake by Sept

NEW DELHI: Deadline for foreign investors to bring down their holdings in commodity exchanges to below 5% has been extended by three months till September 30.

Holding more than 5% of equity in these exchanges after the deadline by a foreign investor or entity, including persons acting in concert, will be considered as a violation of the Foreign Exchange Management Act (FEMA), a statement released by the department of industrial policy and promotion (DIPP) said.

The move will give Goldman Sachs, Intercontinental Exchange (listed with the New York Stock Exchange) and Fidelity more time to comply with the new regulations. While Gold Sachs and Intercontinental hold 7% and 8% stakes, respectively, in National Commodity and Derivatives Exchange (NCDEX), Fidelity holds around 9% stake in Multi Commodities Exchange (MCX).

According to some investment bankers contacted by ET, foreign entities have been in talks with buyers to sell their stakes above 5%, and the deals are expected to be struck in the coming months.

Joseph Massey, CEO of MCX (the country���s largest commodity exchange in terms of turnover), pointed out that the investors had taken their stakes in the commodity exchanges at a time when there were no caps in place and needed some time to bring it down. ���Investors will be able to comply with the guidelines as the deadlines are extended,��� Mr Massey told ET.

All commodity exchanges should furnish a compliance report informing the foreign investment in the commodity exchange as on September-end, along with details of equity structure, to the department of industrial policy and promotion, department of consumer affairs, Foreign Investment Promotion Board, Forward Markets Commission and Securities and Exchange Board of India (Sebi).

According to the guidelines, the existing commodity exchanges have a composite ceiling of 49% for foreign investment, allowed with prior government approval, subject to the condition that investment under the portfolio investment scheme will be limited to 23% and that under the FDI scheme will be limited to 26%.