Wall St biggies eye commodity mkt
After Fidelity International, now Goldman Sachs has bid for a minority equity stake in NCDEX.
By Sugata Ghosh, TNN |
MUMBAI: Some of the most formidable names in Wall Street have woken up to the wonderworld of Indian commodities. Goldman Sachs — the world’s leading investment banker and the biggest securities house — has bid for a minority equity stake in National Commodity & Derivatives Exchange (NCDEX), the commodity futures bourse.
Goldman Sachs is likely to buy close to 10% equity from ICICI Bank — one of the promoters of NCDEX. Negotiations between the US bank and ICICI Bank are currently underway, sources familiar with the talks told ET.
The development is taking place in less than six months after Fidelity International, a foreign institutional investor, acquired 9% stake in Multi Commodity Exchange of India (MCX) for Rs 216 crore. Promoted by Financial Technologies (India), MCX has the biggest daily volume in commodity futures. The Fidelity Group, which is the biggest fund house, has also floated mutual funds in India.
For Goldman Sachs, one of the biggest traders in commodity futures, the investment in NCDEX is likely to be `strategic’ in nature and the fund inflow will be categorised as foreign direct investment (FDI). As an investor, Goldman Sachs will bring in its experience in commodity markets across the world, which could be invaluable for NCDEX.
The proposed move will also mark a comeback for Goldman Sachs. After more than a decade, the US bank parted ways with the Kotak Mahindra Group this year. Even as the local financial services group bought out Goldman Sachs in the investment bank and brokerage JVs, Goldman Sachs had hinted that it’s charting its own course in India, and may look at avenues like investment banking, broking, real estate, private equity and asset management. The proposed interest in a commodity exchange is perhaps unexpected.
But, it’s a pointer to an emerging opportunity. In recent times, no other market in India has witnessed a growth as dramatic as commodities market. The combined commodity futures trading (one-side volumes) across bourses surged from Rs 4,500 crore in FY02, to Rs 66,500 crore in FY03, to Rs 1,29,400 crore in FY04, to Rs 5,71,000 crore in FY05. And the trading volumes touched Rs 21,34,471 crore in FY06.
The market exploded after the government lifted the age-old ban on forward trading in commodities, and online exchanges were established. Besides letting producers a hedging tool, commodity futures have emerged as a new leveraged investment option for high networth individuals and traders. The phenomenal volumes have attracted the glare of media as well as the government and regulators. More recently, the regulator — Forward Markets Commission — had advised one of the bourses to step up the margin on futures position in items like wheat amid rising prices of essential items.
Goldman Sachs is likely to buy close to 10% equity from ICICI Bank — one of the promoters of NCDEX. Negotiations between the US bank and ICICI Bank are currently underway, sources familiar with the talks told ET.
The development is taking place in less than six months after Fidelity International, a foreign institutional investor, acquired 9% stake in Multi Commodity Exchange of India (MCX) for Rs 216 crore. Promoted by Financial Technologies (India), MCX has the biggest daily volume in commodity futures. The Fidelity Group, which is the biggest fund house, has also floated mutual funds in India.
For Goldman Sachs, one of the biggest traders in commodity futures, the investment in NCDEX is likely to be `strategic’ in nature and the fund inflow will be categorised as foreign direct investment (FDI). As an investor, Goldman Sachs will bring in its experience in commodity markets across the world, which could be invaluable for NCDEX.
The proposed move will also mark a comeback for Goldman Sachs. After more than a decade, the US bank parted ways with the Kotak Mahindra Group this year. Even as the local financial services group bought out Goldman Sachs in the investment bank and brokerage JVs, Goldman Sachs had hinted that it’s charting its own course in India, and may look at avenues like investment banking, broking, real estate, private equity and asset management. The proposed interest in a commodity exchange is perhaps unexpected.
But, it’s a pointer to an emerging opportunity. In recent times, no other market in India has witnessed a growth as dramatic as commodities market. The combined commodity futures trading (one-side volumes) across bourses surged from Rs 4,500 crore in FY02, to Rs 66,500 crore in FY03, to Rs 1,29,400 crore in FY04, to Rs 5,71,000 crore in FY05. And the trading volumes touched Rs 21,34,471 crore in FY06.
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The market exploded after the government lifted the age-old ban on forward trading in commodities, and online exchanges were established. Besides letting producers a hedging tool, commodity futures have emerged as a new leveraged investment option for high networth individuals and traders. The phenomenal volumes have attracted the glare of media as well as the government and regulators. More recently, the regulator — Forward Markets Commission — had advised one of the bourses to step up the margin on futures position in items like wheat amid rising prices of essential items.
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