Like Shares, Hold Com­modi­ties in De­mat Soon

BSE and com­mod­ity bourse MCX to pick 24% stake each in CDSL’s new ven­ture

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: Soon, you will be able to hold com­modi­ties in your de­mat ac­count, the way you hold shares. Cen­tral De­pos­i­tory Ser­vices (CDSL) is set to launch the coun­try’s first de­mat fa­cil­ity for com­mod­ity mar­kets. Both the BSE and com­mod­ity bourse MCX have agreed to pick 24% stake each in the ven­ture, two of­fi­cials close to the de­vel­op­ment said. The CDSL will hold the rest 52% stake in the com­pany that will have a eq­uity cap­i­tal of Rs 40-Rs50 crore. “CDSL’s new ven­ture will pri­mar­ily al­low ware­house re­ceipts in de­mat form,” said Cyrus Kham­bata, CEO, CDSL Ven­tures and se­nior VP, CDSL. “This will chiefly ben­e­fit farmer and those deal­ing in agri-com­modi­ties.”

Other of­fi­cials in­volved with the new ven­ture said that de­mat ser­vices will also be ex­tended to bul­lions later. While the BSE re­fused to com­ment, MCX said it has al­ready re­ceived board ap­proval to buy 24% stake in CDSL’s com­mod­ity ser­vices com­pany.

A ware­house re­ceipt is a proof of own­er­ship of the com­modi­ties, in­clud­ing agri­cul­tural pro­duce or even met­als ly­ing in ware­house. Fi­nanc­ing of ware­house re­ceipts is a more than a Rs 30,000 crore busi­ness an­nu­ally in In­dia as per rough es­ti­mates and ex­perts say it has the po­ten­tial to dou­ble in the next cou­ple of years. While ware­house own­ers are known to is­sue such re­ceipts, the ab­sence of a na­tional-level risk man­age­ment au­thor­ity that would take the onus of as­cer­tain­ing the quan­tity and qual­ity of goods ly­ing in the ware­house to make the re­ceipts trad­able is a con­cern. Ware­house re­ceipts may be ne­go­tiable or non-ne­go­tiable. The need for de­mat ser­vices in com­mod­ity mar­kets was first felt af­ter the Na­tional Spot Ex­change (NSEL) fi­asco. The main rea­son for NSEL to go bust was a mas­sive short­fall in com­modi­ties ly­ing in the ware­house than traded on the ex­change. The is­suance of de­mat re­ceipts by na­tional play­ers like the CDSL would bring in the much­needed risk man­age­ment for com­mod­ity mar­kets.

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