New Delhi: A unit of Goldman Sachs will have to dilute its stake by 2% in the National Commodity and Derivatives Exchange Ltd (NCDEX) to bring its holding to 5% by 30 June to meet India’s foreign investment requirements.
NCDEX is the country’s second biggest commodity bourse by trade turnover.
Goldman Sachs Investments (Mauritius) Ltd, a subsidiary of the US investment banker, recently sought ex-post facto approval, or a consent having retrospective effect, for acquisition of shares representing 7% of equity in NCDEX and divestment of excess investment by 2% by June from Foreign Investment Promotion Board (FIPB).
Officials said the company does not need FIPB approval as they do not violate any regulations as of now.
The government said it has noted Goldman Sachs’ proposal as the applicant had invested at a time when there was no policy on foreign direct investment (FDI) in commodity exchanges.
Goldman Sachs had acquired 7% stake, divested by ICICI Bank Ltd, in NCDEX for $23.1 million in 2006.
The policy on foreign stake in commodity exchanges was cleared in 2008. “As of now, there is no violation of FDI regulations. But the company has to dilute its shares by 2% by 30 June,” an official said.
According to guidelines issued by the department of industrial policy and promotion (DIPP), individual foreign companies holding stakes in Indian commodity exchanges in excess of the 5% cap will have to divest their holding to the required cap by end of June this year.
The guidelines, constituting part of Press Note II of 2008, also directed all commodity exchanges to divest foreign equity exceeding the permitted ceiling of 49% by 30 June.
In March last year, the Cabinet cleared a proposal allowing foreign firms to jointly invest up to 49% in commodity exchanges in line with similar holding pattern for stock exchanges.
More specifically, foreign institutional investors are permitted in aggregate to hold up to 23% stake in a commodity exchange, while FDI stake was capped at 26%.