Mutual Funds
The list of Indian mutual funds looking to exit the business is getting longer

After IDFC Mutual Fund has decided to exit the fund business, even if partially, Reliance Mutual is actively scouting for a strategic investor. Several others are in the queue

Reliance Capital, which had sold 5% of its stake in Reliance Capital Asset Management to Eton Park in what has been the highest-ever valuation for a mutual fund's assets, is now looking to sell a bigger chunk of its equity in what it terms as a strategic alliance. This comes close on the heels of the Moneylife article last Friday (see: that IDFC Mutual Fund was exiting the fund business. IDFC officials attempted to deny it orally (no official denial has come so far) but on Monday, a senior official has been quoted in a business paper that it is looking for a strategic alliance. In fact, according to reliable sources, IDFC officials are actively pursing discussions regarding valuation of the fund management business which manages almost Rs27,000 crore in assets.

In October last year, Cholamandalam exited the mutual fund business by selling its stake to L&T Finance, an associate of engineering giant Larsen & Toubro.

According to our sources, sponsors of at least 10 asset management companies (AMCs) are mulling whether to continue in this business. This includes later entrants, especially those started by broking houses which have a very low tolerance for losses and low patience for long-term investment.

In December 2007, at the height of the global bull market, Eton Park had paid Rs500 crore for its 5% stake in Reliance Asset Management, which valued the mutual fund business of Reliance at a mind-boggling 13% of assets under management. Reliance will get much lower valuation for its stake now.

Eton Park is a hedge fund founded by former Goldman Sachs Group partner Eric Mindich. At the time Eton Park acquired the stake, Mr Mindich had said: "We share Reliance Capital's excitement on the growth prospects of the industry." But soon after Eton Park bought the stake, the global markets went through huge turmoil, bringing the world to the brink of the 1930s style Depression. While the world has recovered from that crisis and the Indian economy has done exceptionally well, the Indian fund businesses have suffered a series of blows, including frequent and stricter regulations, most notably the abolition of entry load and tighter rules for paying commissions to distributors. In January this year, T Rowe Price acquired a 26% stake in UTI Asset Management for $142.4 million (Rs650 crore), or just 3.2% of assets under management (around Rs79,000 crore) at that time. L&T took over the loss-making Cholamandalam AMC for just 1.5% of assets under management.

This shows that while the sponsors may be wanting to exit based on certain expectations of sunk costs, there is bound to be huge disparity in valuation depending on the size of the fund. Simply put, smaller funds would have to take a loss to get out of the business.



Lalit Verma

6 years ago

I liked the comments made by Sachin. He is bang on target. I have many friends working in the pharma industry, I get to listen everything that Sachin has told in his comments about doctors and hospitals. The patient is at the mercy of the doctors and hospitals and lot of them just play with the miseries of the patient to earn easy money through their commission tie- ups with chemist, medical labs, pharma companies etc. They frequently subject their patients to unnecessary tests, medicines and check-ups. But it is also a fact that some of doctors and hospitals; although not available in great numbers; do provide only what is required and do not indulge in unethical practices. These doctors might not be earning crores, fancy gifts or foreign trips but still makes decent money as patients value their services and the pricesless things they earn is the blessing and heartfelt gratitude from their patients, which no amount of money can earn.

Now coming back to the mutual funds, It is an unpleasant fact that in India retail participation is miniscule and the FIs and large ticket investors call the shots. Even AMCs are more into the business of placating these large ticket customers just to mislead the public that they have large AUMs. FIs and other big and institutional investors frequently churn out their money, while it is only the small retails investors who provide AMCs with stable, long term money. Some big investors also indulge in unethical practices e.g. investing in liquid funds at the close of the business hours on friday through local clearing cheque, and redeeimg after 3 days on monday, thereby getting their money back on tuesday with 3 days interest while parting with the money only for one day as the cheque gets cleared only on monday. i.e. If a liquid scheme provides 5% p.a. return, the FIs or big investors get a return of 15% p.a. for a single day because they get the interest for three days while parting with their money only for a day. The result is that they earn quick money at the cost of the retail investors who keep their money for relatively longer duration. These practices are oftenly well known to the AMCs but they encourage the same just to inflate their AUMs and present a misleading picture to the public.

Investor education is still lacking in India and definitely there is a strong need for the Regulators, Government, AMCs and we distributors to educate the poeple on large scale on how they can maximise their earnings by starting investments early in a systematic manner, how and why they should not club their insurance needs with investments, how they can actually get their insurance covers at a fraction of cost through term plans instead of getting the same through traditional insurance plans and ULIPs and ending up having heavily commission loaded products in their portfolio. How mutual fund is the best way for an investor to beat the inflation in the longer run and how to make best use of it to create a large corpus by investing in small amounts regularly.

Here is a good news for investors and IFAs.

CAMS, the country's largest service provider to the mutual fund industry and serving millions of Indian investors over the past two decades has started an investor educaton series "MONEY MANTRA" for tier-II and tier-III towns and it will be conducted in vernacular languages. It aims at enhancing investors' education and awareness about financial planning, need of savings, impact of inflation, power of compounding, various assets classes covering the spectrum of risk and benefits of investing in mutual funds. The initiative will also benefit the mutual fund industry in enhancing market penetration and in bringing in additional retail investors to invest in mutual funds.
Now as far as SEBI is concerned, its moves in bringing transparency to the system has been welcomed by the investors esp. informed retail investors. But it has erred in moving on its own without first compelling the Government and Ministry of Finance to support it in its endeavor by ensuring a level playing field. While SEBI came down heavily on its own children who were already doing a much neat and clean work as compared to the insurnce sector, IRDA, instead of being proactive and work in the interest of investors, in unduly protecting the insurance sector and its heavy commission structure at the cost of poor customers.

It is a plain fact that whosoever is dealing with the stock market, has to be regulated by the SEBI. Sometime ago, IRDA raised its objections when some mutual fund schemes began to offer pure risk covers along with mutual fund investments. Pure Risk covers, as in the case of term plans, come at a very low cost. These mutual fund scheme were providing the insurance covers only to the long term investors, the covers were not huge and costs the companies less than 0.2% of the investment which they can easily meet as the investors stay with
them for a longer time. But insurance companies got afraid that this move may increase the awareness about insurance and that real, useful insurance covers can be acquired at a very low cost and one need not go for traditional insurance plans or ULIPs.

Now SEBI, has righfully asked the insurance players that they must also exhibit the same level of transparency and disclosures which mutual fund industy is required to do if they want to deal with the stock markets through ULIPs.

What's wrong in that. Actually, it should have been IRDA, who is to ensure the same level of transparency and disclosures as are now there for mutual funds. But instead of working in investors' interest and cooperating with SEBI, IRDA defended the insurance player like some parents defending their children without caring two hoots what they are actually upto.

As if it was not enough IRDA released advertisement in media advising investors that ULIPs are good produts and they should invest into them. Now, this is the height....a regulator advertising the products for the field it is supposed to control and regulate. Has any body seen SEBI advertising that Equity or Debt funds are good products and investors should invest into them?

The IRDA has for the time being got a favourable decision from the government. We are not surprized, as we know the clout enjoyed by insurance industry due to its sheer size and the income involved for all dealing with it except for sure, the poor customers. Our government always go with the powerful unless it is under tremendous public or media pressure.
Well, our public is by and large still financially illiterate and I do not even expect the media to intervene because it is there for everyone to see the level of advertisements given to it by insurance companies.

Now, SEBI must launch the investor information campaign to apprise the investors about the current and emerging situation in the financial sector. In the interest of the public and mutual fund industry, it should also fight its case about ULIPs tooth and nail, when it comes up for hearing in the Supreme Court in July. If it succeeds it should feel proud to bring more transparency and professionalism in the system and for serving the common man. If it doesn't it has only itself to blame.


6 years ago

n this debate generally examples of Doctors and lawyers are given..........

ground reality of doctors:

have heard that its open secret that most of the doctors apart from the fees get

-some sort of commission on sales by nearby medical store (on mediciens recommended by them)

-some sort of comsission on their patients admitted in the hospitals

--some sort of commission from various pathology labs on all kinds of medical tests

-foriegn/local trips trips by medical companies

no wonder that doctors are generally among reachest in our country

aand we shall not forget that we go to the doctor and not vice a versa..........

only 5% of indians are investing in MF....need of the hour is how rest 95% of our people benefit from MF as well in healthy way ensuring wealth creation for all.....

in my opinion investor education, regulator who takes every body togeather forward in positive manner and open market forces (which includes more amcs, more products,much much large number of distributors, atleast multiplied by a factor of 100) can do it in healthy way.......

-in the developed world 50-90% people invest in india only 5 %.....alas.....and by recent actions even this 5% will either reduce or is happening for last one year.....


6 years ago

due to these reasons Germany and some other european countries have banned Naked short selling-these are all new techniques of making people move to gambling practices and people have forgotten basic principles of investing(dividend and profit)-now stock prices move as per capability of future's opeartor-some stock rises best today and next day it performs worst-is this basic of investing?
this is all gamble and operator's game-these all new techniques are making more and more people trade without any fundamenatlity


6 years ago

Mr LV -please realsie the ground reality that a investor does not need a CFP for investing in bank deposits or PPF-so if he intends to put money there(which is best option preferred by most indians)they will never consult CFP-
in name of CFP this international organisation is looting people by charging undue fees and again they charge heavily for renewal of badge-these charges are artificially high which a normal hard working well serving IFA will not bear-so CFP is just new way of fooling people to promote complex products which have led to all this international turmoil


6 years ago

Mr Lalit Verma,i appreciate all your good intentions but in practicality and with my seventh year of MF selling-i can say that MF selling is not advisory as comparable to a doctor or lawyer bcos the doctor business is expertise business with so many medicines and diseases and most important is URGENCY and one more point one cant treat his disease bcos it is always risky-but in financial world there is rarely urgency -people have ample time to plan about investment and they can consult so many advisors-and also they can make a bargain-bcos they have long time to plan-you are lucky to get fees but most of clients even dont pay fees to CA's then who will agree to pay a CFP?why some one will go to MD doctor or surgeon if he has mild cold or mild cut on skin?same way no client will pay if he wants to make SIP in index fund -IFA get commission not only for advisory but they are paid for services they render before and after investmenst-which is different from doctor-
so i firmly believe that commisssion model is best for MF then this fees based model-and that too 2% for 5000 rs is nothing big-now no IFA is ready to serve 5000 Rs fom or 500 Rs SIP-
did these steps helped retail investor?


6 years ago

in every business it is the consumer who pays.......!!!!

so whats wrong if the consumer of Mutual fund industry i.e. investor also pays.....?????

and in almost all industries the price is also inbuilt....????

so whats wrong if the price of Mutual fund industry is also inbuilt.......???

in its "quick to get fame" attitude and so called "utopian principals" (which sebi itself ignores conveniently in case of stock brokers, who are also regulated by SEBI) SEBI has forgotton basic practical business and life principle ..........and has practically destroyed mf industry...

kudos to mr hari narayan.......he rightly fought for the insurance industry and has saved insurance industry from destruction........and is taking everystakeholder in insurance industry togeather forward in positive manner....... and therby will help create wealth for the nation and all stakeholders with healthy GROWTH and REACH of insurance in india.....

with rigid and dictatorial attitude of fund industry seems to be on the verge of death by starvation....very sad......

hopefully some hari narayan (surprisingly....if comes as lord vishnu, ........the saviour) is the need of the hour for MF industry as well.......


6 years ago

Mr Roop Singh - please do not get upset and annoyed with Mr. Lalit Verma. It could be posible that you are a professional in this trade but for laymen what Mr. LV has written is very interesting. Let everyone know in simple language what the whole episode is about as such I appreciate Mr. VK's article even though it is lenghty.


Lalit Verma

In Reply to S.Amin 6 years ago

Dear Amin Sahab!

Thanks for your comments. I am sorry for the my long comments which must be difficult to read as the font being provide is quite small. I am not a master in using the language skillfully and as such I request you to kindly bear with me. I hope that points made by me will be of some good value to you.



In Reply to Lalit Verma 6 years ago

Dear mr LV-i appreciate your lenghty comment which is very descriptive to all readers and which carries lot of facts-only point i disliked was protecting the SEBI for some utopian changes-may be Mr Bhave could have left his salary for benifit of investors then i could have surely believed his all acts-but he acted dictatorily and his acts have destroyed MF industry which was one of least expensive and most transparent then all other investment options-even GOI gives4% commission for post office deposits-then why this 2% was removed?and regarding churning i can say profit booking and churning is part of any trading cycle-some times it pays soem time it gives loss-but that was to be left as a matter between investor and broker and investor was always free to change his broker for his new investmenst-if he finds his broker not compatible or misguiding-


6 years ago



6 years ago

We also heard abt JM also want to exit....from the AMC business ,,,very strong rumour in d mkt......abt selling of amc business to very close freind and business group of india.....

Lalit Verma

6 years ago

Whose loss will it be anyway? Surely, it's the investors. Sebi was right in its intent to abolish the commission paid on MF products. This step should have had benefited the investors but the result is just opposite as now most of the MF distributors are just not interested in selling mutual funds.
The SEBI and the mutual fund industry have been completely let down by the government which seems to be unduly favouring the IRDA and life insurance industry while overlooking the rampant malpractices and miss-selling in insurance industry.
After abolition of commissions in MFs, most of the distributors have shifted their business to selling life insurance products which still provide huge commissions at the cost of investors. Most of the investors are sold investment products in the name of insurance. Till date, I have not found a single insurance agent suggesting TERM LIFE plans to the customers (which is the real insurance and what exactly the customers esp. those below 50 years need) just because it comes very cheep and thereby doesn't allow agents to earn good commissions, although it is a must have for almost every individual. The customers are generally offered ULIPs,ULPPs, Moneyback and Endowment policies, by be-fooling them that they are getting insurance cover and will alos get their money back. They also make false promises about returns which in reality don't come anywhere near to inflation in case of moneyback and endowment policies. As far as ULIPs and ULPPs are concerned, the risk factors are not explained to customers, false return projections are shown and even verbal assurances are given to multiply the money within a short period. The Customers are never told about the charges and commission involved, even told that they have to and should pay the premium for the first three years only(because maximum charges and commission are paid for the first three years). Even the cases of selling annual plans in the name of lump sum investment are not rare esp. in case of UNIT LINKED PENSION PLANS(ULPPs) because charges commission for the annual plan is 4-5 times higher than that for lump sum investment and generally the customer are retirees, who don't know much about these technical products.

Earlier, Mutual Funds Distributors also used to indulge in miss-selling, when commissions used to be quite handsome. Most of the time, New Fund Offers(NFOs) were used to be sold to retail investors just because commission used to be higher for NFOs than for existing funds, although it is a widely known fact that investing in existing funds with proven track record ensures safety and returns, while investing in a oriented NFOs is a big gamble, not at all suitable for retail investors. The investments in NFOs should be only by the FIs, FIIs and Big investors who have the expertise to check, test and judge the NFOs on various parameters.
Whether one is a mutual fund distributor or insurance advisor, the main motive for majority is to get good money by selling these. As far as the field of personal finance is concerned, most of the people are still financially illiterate. That's why they were ignorantly paying huge charges and commissions earlier while buying MF products and still are paying the same while insurance products are sold to them or better to say investment products are sold in the name of insurance while not telling the customers the inbuilt charges and commissions.

Now, the entry load have been abolished by SEBI, the MF distributors have to generate the income to survive. When they ask the customer to pay them a little fee for advising and selling mutual funds, most of the customers are not ready to pay although they were comfortable when they had to pay inbuilt entry loads earlier. This shows that we still belong to a third world society, where we are ready to be cheated and looted at our back but not ready to pay for the transparent, professional, commission free services.
SEBI has already done what it was supposed to and Mr. Bhave deserves accolades for that. But will the Government, the IRDA and the PFRDA ensure the same kind of reforms in insurance and pension sectors?

The UK has decided to implement a commission free structure in every field of personal finance by the year 2012, where no inbuilt commission will be charged from customers and they will be paying the fee to the service provider based on the quality of service they get. Most of the others countries including USA, Canada, Australia, European countries and several others intend to do the same. Will our Government, IRDA, PFRDA and the other authorities in financial sector show the will and guts and remove the commissions from finacial products,bring more transparency to the system, encourage fee based services and bring more efficiency and professionalism to the field of personal finance. Well if they do, they will be doing a real and rare service to the masses of this country. If they don't, all the good work done by SEBI will go down the drain, Mutual Funds Advsiors will stop dealing with MF products(although with the removal of entry loads MFs have become attractive for investors) and will move to insurance sector where easy money is still being generated at the cost of investors. The end result will be that AMCs will have to sell or close down their businesses, we won't be having a large variety of mutual funds schemes. We would then find more insurance products in our portfolio along with Bank FDs and gold in physical form, none of which can beat the inflation in the longer run. The end result will be that we won't be able to fulfill our financial goals and at the time of our retirement from active life, our corpus will be much less than what we actually need.

Remember, equity market is one of the few things which beat inflation substantially in the longer run, generate real returns for the prudent, long term, systematic investors and mutual funds is the best way to generate the wealth, meet your financial objectives and have a large and sound corpus at the time of your retirement. Investing in individual stock is more costly, needs more expertise and you don't really know which stock will become SATYAM.

What we actually do with mutual funds is that we indirectly invest into a basket of 30-40 odd stocks, which are managed by mutual funds managers who are thorough professionals, possess much more knowledge than us and manage our money at a fraction of a cost; as compared to what we have to pay while buying and selling individual stocks; because they have the economies of scale. They enter and exit the stocks efficiently in a timely manner, which is difficult for an individual to simulate because of the lack of expertise, time and volume of money. So, it would be better for an individual investor choose a knowledgeable MF advisor, ask him to invest your money in the existing schemes with a proven track record of at least 3 years, invest regulary through SIPs, diversify your portfolio by allocating your investment among equity, balanced and conservative funds and invest for the long term at least for 5 years. The world over, it's a known fact that if you invest into equity market over a 12 year+ period, you always beat inflation and your likely returns are :

1. Rate of Growth of Economy
2. Rate of inflation
3. Volatility/Error factor
+- 2%

i.e. In case of India our growth is likley to remain aroung 7-8 % p.a for the coming 15-20 years. and suppose inflation is at 7% p.a. , we will be getting

8+7+-2 = 13-17% p.a.

If we invest systematically into the MFs with a good track records, we are likely at get a return of 15%+ p.a over a period of 12 years and more.

So, let us pray that our Government and various regulators won't let us down, ensure a level playing field for Mutual Funds, Insurance and Pension Funds industry and bring transparency and professionalism by removing commissions altogether, so the people are benefited the most, wealth is created efficiently and that AMCs don't have to sell and exit their businesses and MF advisors don't need to sell the investments through insurance and can earn a their justified fees from the clients providing them with good, honest and professional services.



In Reply to Lalit Verma 6 years ago

we never heard u earlier-it looks u have soft corner for Mr Bhave who was worried about 2% hard earned commission by Mf distributors but who never bothered about churnings in stock exchanges-your so long comment points to only one thing that commission in Mf was unjustified-if it was really unjustified for mere 2% then why removal of this 2% a real benifit o clients is not pulling investors to invest?dont u see ads worth Rs crores just to pull people-why dont u go and ask those cos not to make ad expanses and reduce the cost in same proportion-
why every one pulling for this 2% commission?dont they see sweat and expanses of IFA who did pioneering work to establish MF industry?
i am sure some hidden agenda still working against IFA community

Lalit Verma

In Reply to Roopsingh 6 years ago

Thanks for your comments.

It is clear for your comments that you are a MF distributor and feeling angry that commissions have been abolished while nothing is being done about the rampant miss-selling and huge commissions given by insurance industry. But I can also realize from your comments that you have not read my comments thoroughly where in I have come down heavily on the malpractices in insurance industry else you would not have told me to ask the insurance people not to indulge in high arm tactics.
Well my dear friend! I am a CFPcm(CERTIFIED FINANCIAL PLANNERcm) and as such I welcome any move by the regulators which brings more transparency and professionalism and reduces the cost for the investors. We can compare the Financial Planner - Client relationship to a Doctor - Patient relationship. As a patient would you like to to go a doctor who diagnoses your problems properly, suggests you the line of treatment and prescribes medicines accordingly with alternatives while letting you purchase the medicines from wherever you like or will you go to a doctor who can't diagnose the problems accurately and is interested only in selling free samples that he gets from pharma companies telling you that he is giving discount to you on these and prescribes medicines on which he gets the maximum commissions from chemists? Same is the case for Financial Planners and other people involved in selling financial products.

The present phase is a difficult one for the Mutual Fund Distributors. I am also a MF distributor for the last two years and after the abolition of entry loads, I am getting more clients and continuously increasing funds under management. Most of my clients are ready to pay the fee and very soon I will be moving over to online platform being provided by CAMS and KARVY and will charge my clients accordingly. Almost all my clientèle is life time clientele and I have been able to generate the consistent return, beating the relative indices most of the time by following simple rules of investing like investing for long time in funds with proven track records, regularly, not try to time the market and above all investing only after ascertaining the risk profile and time horizon of the investors.
The problems you have been facing are being faced by all of us in the mutual fund industry but the only way out is to think long term. There is dislocation in the business for the time being, but we must realise that people have not stopped and will not stop investing their savings even if we MF distributors stop working, but the result will be that we will go out of business and leave investors at the mercy of commission based agent in insurance and other areas.
Let me tell you another fact that I had entered the life insurance industry some time ago and told clearly to the company that I was interested only in getting TERM LIFE policies for my clients. But after looking at the disgusting ways the investors were being cheated there, I decided not to have any tie up with any company in the insurance industry. After eight months I left working when I was indirectly asked by the higher ups to sell traditional plans and ULIPs which bring more premiums and commissions. Since then, I have decided not the enter the insurance industry till the time the commission are abolished altogether and we are allowed to work for any company ; just like in mutual funds ; so that we can offer a wide range of plans with alternatives to our clients. Till that time I will go on suggesting best possible and cheapest term plans to my clients allowing them to get the insurance covers from wherever they like and i encourage them to get the online term life polices; if possible; which are cheapest at present as these do not contain the commission portion. I am happy to do this because I realize that insurance is a matter of life and death and forgoing some income in the interest of the clients is no big deal, as it brings much more benefits to my clients than the income I am loosing.

I will advise you and all my colleagues in the mutual fund industry to persevere in your efforts, upgrade skills knowledgewise and technologically to cater to more customers efficiently in a low cost and less time consuming manner, provide transparent and professional services and see it yourself that the day is not far when most of the people will realize that they are getting much more cost efficient and professional services in the fee based model.

Moreover, earning with the clients and not at their cost will be more satisfying and fulfilling for the financial planning fraternity than pocketing huge commission at the cost of the clients and finally watching them leaving us with curses. Selling Financial products, which have inbuilt commission, by luring the investors with sharing of commissions is not at all a respectable thing to do. If we call our self professionals, we must ensure a great degree of transparency and ethical behavior in our dealings with our clients.

For the time being, we must accept that the steps taken by SEBI are in the interest of the investors. Instead of asking it to reverse its decisions we must try to form a public opinion by educating people about the benefits of mutual funds esp. the low cost structure and flexibility in investing. We also must make the people realize the need to bring more reforms in the entire financial sector and how they will benefit when the same reforms are carried out in the insurance industry and in all other areas. Whatever is in the interest of public, is in the interest of all of us, the sooner we realize it the better it will be for us and only this will prevail in the time to come.

If our government had to bring and pass an act like RTI despite the opposition from seemingly strong vested interests , how long can it stop the reforms in the entire financial sector? We must contribute towards it in whatever way we can.


Tushar Choksi

6 years ago

Well one is not surprised as SEBIs revolutionary market reforms have taken a toll of distributors and now its turn of the fund houses to feel the heat.In the name of investor education
markets reforms were too severe & too sudden for death knell of the Industry.


6 years ago

The key role award of this whole ''episode''is won by non other then only one Mr BHAVE of SEBI who acted his role very well.

Wise Investor

6 years ago

This part of the Programme is Sponsored by SEBI.


6 years ago

According to our sources, sponsors of at least 10 asset management companies (AMCs) are mulling whether to continue in this business. This includes later entrants, especially those started by broking houses which have a very low tolerance for losses and low patience for long-term investment.



6 years ago

Thanks to Sebi.

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ACE in process to become national commodity bourse

ACE has been given time till 13th August by commodity market regulator Forward Markets Commission (FMC) to meet the guidelines to become a national exchange that includes demutualisation and a total net worth of Rs100 crore

Kotak Group-promoted Ahmedabad Commodity Exchange (ACE) today said it would complete all the necessary formalities to transform into a national bourse before its 13th August deadline expires, reports PTI.

Regional exchange ACE has been given time till 13th August by commodity market regulator Forward Markets Commission (FMC) to meet the guidelines to become a national exchange that includes demutualisation and a total net worth of Rs100 crore.

"We are in the advanced stage of completing necessary formalities required for final recognition. We will surely complete well before the deadline," Kotak group head of strategy T Raghunath said when asked whether it would be able to meet the guidelines this time.

ACE had missed the earlier deadline of 13th May, however, FMC gave it a three-month extension to complete the process. The country at present has four national exchanges-Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange of India (NCDEX), National Multi Commodity Exchange (NMCE) and Indian Commodity Exchange (ICEX)-and 19 regional bourses.

In 2009, the Kotak Group became an anchor investor by picking up 51% stake in ACE. It is helping in upgradation of the regional castor exchange to a national multi-commodity bourse.

"The exchange is in the advanced stage of raising its net worth to Rs100 crore, which is one of the requirements to become a national bourse," he said. Last week, state-run procurement agency Haryana State Cooperative Supply & Marketing Federation Ltd (HAFED) had said it has bought 15% stake in ACE.

Asked about HAFED's stake in the exchange, Mr Raghunath declined to comment: "The exchange has signed a non-disclosure agreement with the stake holders."

Commodity market regulator FMC has set up guidelines for national exchanges, which include demutualisation, raising net capital to Rs100 crore, setting up of infrastructure for conducting online trading and delivery centres, across the country for various commodities.

According to FMC guidelines, the proposed national exchange should have a demutualised structure, which means the share holders of the exchange should not have any trading interest either as a trading member or client at the exchange.


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