BSE calls off deal to buy NMCE stake

The Bombay Stock Exchange has called off its plan to acquire 26 per cent in the Ahmedabad-based National Multi Commodity Exchange. The deal was terminated just before the resignation of BSE Managing Director and CEO Rajnikant Patel.

Patel quit late on Thursday evening, citing personal reasons. A release issued by BSE today said that its present Chief Operating Officer Mahesh Soneji will look after the interests of the exchange until a new appointment is made in place of Patel.

NMCE Managing Director Kailash Gupta confirmed that the stake sale agreement with BSE has been terminated.

Patel was also on the NMCE board as an independent director, but Gupta said a further course of action relating to Patel's role in NMCE would be decided once the commodity exchange's board meets next month.

Reliance Capital had recently picked up 26 per cent stake in NMCE.

Sources familiar with the developments said the BSE board was split on the issue of picking up a stake in NMCE — a reason the BSE had held back the payment due to the commodity exchange even six months after signing a stake purchase agreement.

The sources said a section of the board was also not happy with some provisions of the contract awarded to OMX of Sweden.

Patel could not be reached for comments.

But the sources said the BSE is not in a position to backtrack on the contract with OMX as around $5 million has already been paid to the Swedish company. The total contract was worth $37.5 million. The BSE, however, has sought clarifications on some technical issues in the agreement.

Patel is the fourth person to resign from the top BSE management in the last couple of months. Shekhar Dutta, non-executive chairman, and shareholder-director Jamshyd Godrej resigned last month, followed by Ashok Raut, chief operating officer.

A BSE shareholder said that these resignations could delay some of the exchange's expansion and listing plans. "The annual general meeting of the exchange, which was to be conducted before August 20, could also be delayed. Also, there are some other major issues like audit of three stock brokers by the exchange."

The share value of the BSE has already declined from Rs 5,200 per share to as low as Rs 4,000. BSE now has 19 domestic and overseas institutional shareholders. These include Life Insurance Corporation, State Bank of India and the AV Birla group, among domestic players, and Deutsche Borse Group and Singapore Stock Exchange, which hold 5 per cent each.