Public CompanyADAG chalks out plan to grow exchange business
Gears up to launch stock, commodity futures in three years.
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The Anil Dhirubai Ambani Group (ADAG) has started work on entering the stock and commodity exchange business.
While it has made a quiet entry into the space through a soft launch of steel trading on the Reliance Spot Exchange, a business plan is being prepared for the launch of a stock exchange, according to Rajnikant Patel, president and chief executive of Reliance Exchange Next, a wholly-owned subsidiary of Reliance Capital for its exchange business. Reliance Capital is ADAG’s listed arm for the financial business.
Though Patel did not provide any time-frame, a company source said the plan was to be in equity and commodity futures by 2012.
“At present, the focus is solely on the spot exchange business and a formal launch should happen by the next quarter (by December),” Patel said. A separate company would be set up for the stock exchange business. Also, a third company for the commodity futures business is required. These companies would be subsidiaries of Reliance Exchange Next.
“I have to have a USP (unique selling proposition) to offer in the equities space. There is no point being a me-too. We are working on possible products and models to see what we can do,” he said.
ADAG is the latest entrant to the exchanges business, which has seen the National Stock Exchange expand into the commodities space. In addition, Financial Technologies is present in the commodities futures business and has started MCX Stock Exchange, which is confined to the currency futures business and wants to expand into stock and interest rate futures. The inability of MCX promoters to divest their holdings in line with the norms is holding the exchange’s expansion plans.
Earlier, Reliance Money, another Reliance Capital arm, was handling the exchanges business, but now a separate vertical has been set up. ADAG wanted to acquire 26 per cent in the National Multi-Commodity Exchange (NMCE) but has received permission for purchasing only 10 per cent stake.
Patel said a decision would be taken on the NMCE holding once the commodity futures exchange was set up. The options included continuing as a financial investor or working out a synergy with ADAG’s plans.
“Being only in the commodity futures business in like sitting on the roof of a building that does not have a first floor. So, we are focusing on the spot exchange at the moment… There is no plan to sell any equity in this company till we build a strong entity,” he said.
After steel, Reliance Spot Exchange (R-SX) – which conducted the first trade around four weeks ago, plans to add other metals and has initiated talks with agriculture produce market committees in Gujarat, Maharashtra, Madhya Pradesh and Karnataka for spot trading of farm products. Tie-ups with transporters, warehouses and entities involved in assaying and grading are also being negotiated.
The membership would be expanded to include auto companies, metal producers, and processors and forging units. Adhatiyas, who are intermediaries in mandis, are proposed to be roped in as brokers.
Patel said the group was depending on a web-based system for spot trading. At present, the spot exchange had around 10 members and membership was by invitation, he added.
He refused to disclose the planned investment. “It is meagre. I have a team of 20 people,” he said.