IPO-bound NSE mulls expansion in commodities with new non-agro contracts

The National Stock Exchange (NSE), which is awaiting clearance from the securities regulator to proceed with its IPO plans, looks to strengthen its commodities segment by rolling out new contracts in the next few months, an exchange official said on Friday. The exchange currently has around 5% market share in India's commodity futures trading, while Multi Commodity Exchange of India (MCX) commands a substantial 60% market share in this space.

“The focus areas for expansion include energy contracts, bullion (gold and silver), and base metals like copper, lead, zinc, and aluminum,” says Sriram Krishnan, Chief Business Development Officer, NSE, in a media interaction in New Delhi.

Krishnan said that the exchange is currently focusing on non agricultural commodities as there is some certainty in this segment and lack of government intervention as compared to agricultural ones. “In agricultural commodities, sometimes the government intervenes and cancels trades on certain contracts, and it creates disruption. Also, the risk is very different. In the case of agricultural commodities, you need a very different kind of capability to be able to deal with perishable commodities and so on…,” he explained.  

He further says that the additional contracts will be selected from a wide array of SEBI-approved commodities, which could significantly expand the market. Krishnan expects commodity trading volume to pick up over the next few years.

Responding to a question on the timing of focusing on commodities when equities are performing well, Krishnan argued that as India aspires to become a $10 trillion economy in the next 10 years, it would require a larger commodities market, indicating untapped potential in this sector.

“The journey of India from a $4 trillion to $10 trillion economy can’t be possible with such a tiny commodities market, which means a lot of action is yet to happen in commodities,” he says.

On NSE's IPO, Krishnan said the exchange has not received any approval from the market regulator, Securities and Exchange Board of India (SEBI). “Our MD CEO Ashishkumar Chauhan has recently mentioned in the analyst call that we have still not got the approval of the SEBI. We have to wait for the approval of SEBI. Whenever the approval comes, we will go ahead.”

In August this year, NSE reapplied with the SEBI for a "no-objection" certificate for the IPO. After receiving the NOC from the regulator, the exchange will draft a prospectus and submit it to the SEBI. Once the regulatory review is complete and approval is granted, the exchange will proceed with launching its IPO.

The highly anticipated IPO of NSE has already created buzz in the grey market, with websites such as 'Sharechart.com' and 'Unlistedzone.com' showing the exchange's market value at a whooping ₹4.70 lakh crore ($56.6 billion).

Early this week, NSE released its September quarter earnings, posting a 57% on a year-on-year rise in its consolidated net profit at ₹3,137 crores as compared to ₹1,999 crore in the corresponding period of the previous fiscal. The net profit margin for the second quarter ended September 30, 2024, stood at 62%.

The domestic bourse posted consolidated total income of ₹5,023 crores for Q2 FY25, registering a growth 25% on a year-on-year basis, aided by rise in trading revenue. Apart from trading revenue, the revenue from operations was also supported by other revenue lines, including clearing services, data centre & connectivity charges, listing services, index services and data services.