INDIAN COMMODITIES MARKET

March 14, 2007

NCDEX 6th largest commodity exchange in the world

180,000 160,000

169,213

in '000s

140,000 120,000

99,175
100,000 80,000 60,000 40,000 20,000 0
NYMEX Dalian

93,138 78,629 61,814 50,698 42,055 33,790 33,150 28,473

CBOT

LME

TOCOM

NCDEX

ICE

Shanghai Futures

NYBOT

Zhengzhou

Source: UNCTAD, SFOA The worlds commodity exchanges September 2006

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NCDEXNCDEX- 3rd largest agro-commodity exchange agroin the world

99,175
100,000 90,000 80,000 70,000

91,872

in '000s

60,000 50,000 40,000 30,000 20,000 10,000 0

Dalian Commodity Exchange CBOT NCDEX NYBOT Zhenzhou Commodity Exchange Tokyo Grain Exchange Chicago Mercantile Exchange Shangai Futures Exchange Euronext LIFFE Tokya Commodity Exchange

43,287 33,149 28,473

25,575 12,501 9,503 8,499

7,156

Source: UNCTAD, SFOA The worlds commodity exchanges September 2006

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Market growth of 265% over FY05 volumes; 56% growth over FY06
1000 900 800 700 600 500 400 300 200 100 0 127 14.77 FY03 29 FY04 FY05 FY06 April-Feb 2007

739.2

USD Billion

474.33

Unlike developed markets, participation in Indian market is more retail & individual and not institutional
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Present volumes a fraction of the potential

USD Bn

Current physical volumes 17.5 48.0 175

Value chain

Futures Traded Volumes 175 239 1,225

Bullion Metals etc Agriculture Energy Total

Source: NCDEX

Farmers Agents Wholesalers Processors Retailers

85 325

426 2,065

Present legal & regulatory environment

Market Structure- Futures and Spot StructureMinistry of consumer State Government Affairs

Spot markets

Forward Markets Commission

Futures Market

Unlike Forex and Stock markets; Spot markets in commodities are not within the purview of the Exchanges/Regulators
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Regulatory Structure in India

Ministry of Finance Ministry of Consumer Affairs

National Housing Bank

Insurance Regulatory Pension Funds Regulatory Development Authority Development Authority (IRDA) (PFRDA)

Company Law Board

FMC

Housing Finance Companies

Insurance

Pension Funds

Corporates

Commodity Exchanges

SIDBI

RBI

SEBI

NABARD

State Financial Institutions

Banking / NBFCs

Capital Markets

Co-operative Banks & Regional Rural Banks

Structure of Indian Commodity Futures Exchanges

FMC
Commodity Exchanges National exchanges

Regional exchanges

NCDEX

NMCE

MCX

NBOT

20 Other Regional Exchanges

Going forward

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New Products
Market would move towards trading more exotic products  Index based products


Commodity Indices  Rainfall & other weather indices



Spread Trading  Electricity  Real Estate  Emission Credits



..Idea will be to forge closer links with global commodities

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Instruments to be introduced


Options
Provide up-side benefits to the market participants  Offer a market driven MSP to the farmers


Indices


Built-in diversification

Exchange for Physicals (EFPs)



Easy of trade for hedgers who would like to take or make deliveries

..new instruments to attract new market participants

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Attracting new participants



Farmers
Offering them pre & post harvest risk mitigation platform  Ease of trade through aggregators


Banks
Role of aggregators  Proprietary trade


Mutual Funds


Attracting retail trade to the commodity exchanges

FIIs  FDIs


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Risk Mitigation: Pre-harvest PreSmall Farmers Small Farmers Large Farmers

Aggregators Future price ensured Liquidity enhanced Banks Insurance NCDEX NCMSL Weather derivatives /Crop Insurance Bank lending

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Risk Mitigation: Post-harvest PostSmall Farmers Large Farmers

Sell forward Banks NCDEX NCMSL Assaying & grading Storage facility

Commodity backed bank finance (WR)

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Survey carried out by A C Nielsen

Yes 12%

No 22%

No 88%

Yes 78%

Wide Area Sample, Sample Size - 255

Narrow Area Sample, Sample Size - 473

 Over 78 % of farmers from NAS & 12 % of WAS agreed that they have
benefited out of the price discovery taking place through commodity exchanges

 As NAS respondents are well aware of market dynamics ( including futures

market, they are able benefit through better price realization)

 Increase in awareness level in interior areas about commodity futures will help
the farmers

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Typical farmers awareness programmes

A large number of participants
Alwar, Rajasthan on 27 February 2007

Speakers include the regulators FMC; key officials of NCDEX; important officials of the government machinery

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Increased bank participation on the exchange platform

farmer farmer farmer farmer farmer
Bank branch Bank branch Banks takes consolidated position on behalf of its customers

Exchange

Bank to also take proprietary positions

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Facilitating lending against commodities

Banks lending against commodities in FY06 was USD 1,334 million  NCMSL facilitated finance against commodities to the tune of about USD 80 million as on 31st March, 2006


ICICI Bank: USD 50 million  HDFC Bank: USD 22 million

 

Other banks: USD 8 million

Average Interest rate charged: 9.5% - 10.5%  Number of defaults so far: NIL


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Facilitation required


RBI Working Group Recommendations



Banks to be allowed to have proprietary positions in agricultural commodity derivatives Evolution of a system for warehouse receipts which would be freely transferable Banks to be granted general permission to become PCMs of commodity exchanges

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Foreign Access


Foreign access permitted in securities marketequities & bonds under regulation Currently can access commodity markets by setting up a domestic entity for broking & investment
 

Require prior approval from FIPB Precedents: Permission granted for Proprietary trade only No precedents for Client trade

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RBI/SEBI notification dated 22.12.2006

Permits Foreign Investment in infrastructure companies in Indian Stock Exchange to the tune of 49%, of which


26% - FDI (Foreign Direct Investment) o With specific prior approval of FIPB 23% - FII (Foreign Institutional Investment) o FII will be allowed purchases in secondary market o FII shall not seek & will not get representation on the Board No foreign investor, including persons acting in concert, will hold more than 5% of the equity capital

Similar notification expected for commodity markets

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Regulatory Action in Jan-Feb 2007 Jan-

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Sudden delisting of important cereals & pulses - Jan-Feb 2007 Jan

Delisting of Urad & Tur contracts Jan 07 Suspension of Rice & Wheat contracts Feb 07
Urad

Future Prices as of Jan 23

Spot Prices as of Jan 23

Spot Price as of Mar 06

Feb Expiry 71.86

March Expiry 69.88

May Expiry 65.31 78.88 71.88

Tur

50.68

55.04

56.95

51.93

49.24

(USD/Quintal)

Urad: Crop arrivals from Andhra & Burma expected in Feb-March Tur: Arrivals in March; 30-40% expected production shortage

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25

Rs/quintal

1,000

1,050

1,100

1,150

800

850

900

950

Temporary ban; expected to be lifted soon

NCDEX wheat price movements NCDEX wheat price movements

01/02/2007 02/02/2007

Spot F-May-07 F-Feb-07 F-Jun-07 F-Mar-07 F-Jul-07 F-Apr-07 F-Aug-07

03/02/2007 05/02/2007 06/02/2007 07/02/2007 08/02/2007 09/02/2007 10/02/2007 12/02/2007 13/02/2007 14/02/2007 15/02/2007 16/02/2007 17/02/2007 19/02/2007 20/02/2007 21/02/2007 22/02/2007 23/02/2007 24/02/2007 26/02/2007 27/02/2007 28/02/2007 01/03/2007
Temporary ban on wheat imposed

Innovations by NCDEX

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Spot price polling

Mandi Traders Mill owners Statistical Cleansing of raw data Commission Agents Manufacturers
Media Media electronic & print Trading Terminals Exchange Website

Refiner Polled Prices

Near real-time realnationwide prices

InfoInfo-vendor terminals

Polling done independently by CMIE & Crisil MW

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Dematerialized holding of commodity balances

WH

WH CLIENT DP NSDL R&T AGENT WH

WH

- Open Demat a/c With DP Gets goods to the WH, fills in Demat Request form for Demat credit

Empanelled DPs in which members/clients open Demat account

-Holds commodity balances in electronic form Facilitates transactions in commodities

Link between the warehouse and the Depository. Standardized Screens

Accepts goods for storage/ delivery Assaying done and information given to NSDL via R&T

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Collateral management


Set up National Collateral Management Services Ltd. (NCMSL)  Warehousing, assaying  Collateral Management  Commodity backed financing  Food procurement for FCI


2005-06 Paddy procurement project  1.2 lakh MTs paddy from MP, Orissa 2006-07 Paddy project  80,000 farmers involved  600,000 MTs of paddy

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Price Dissemination
ELECTRONIC
 TV and radio
   

PRINT
 Regional newspapers
 

News agencies Mobile phones Integrated kiosk Kisan (farmer) Call centres

Training material Agri-journals

TICKER BOARDS
 Member offices
     
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Future plans
 Rural Post offices
  

Mandis Banks rural branches Rural warehouses Bus stations Abidjan- Cote DIvoire Singapore- View Terminal

Railway platforms Co-operative offices Panchayat offices

Automatic weather stations



Cabled Vantage Pro 2 Plus

Collecting & disseminating data over multiple weather parameters

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About NCDEX

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Our Shareholders
Institution NABARD Share 15 % Domain Expertise Apex bank for agricultural lending ICICI Bank 8% Largest private sector bank in India. Listed on NYSE

NSE

15 %

Largest stock exchange in India. Highest volume in single stock futures in world. Largest life insurance company in India

LIC

15 %

CRISIL

12%

Indias first & largest credit rating agency. Now a Standard & Poor company Largest farmer cooperative with affiliation of 36,000 cooperatives Large public sector bank with strong rural reach specially in North India Large public sector bank with strong rural reach specially in South India Global Expertise in commodity markets

IFFCO

12%

PNB

8%

Canara Bank

8%

Goldman Sachs

7%

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Ncdex market share in total volumes of key agri-commodities (April 2006 -Jan 2007)
Cereals & Pulses Chana\Gram Wheat Maize Barley Guar Seeds Urad Tur 87% 98% 99% 100% 85% 87% 91% Oil & Oil seed complex Processed agri-products Guar Gum Sugar Gur Mentha oil 99% 83% 75% 15% Castor Fiber Medium Staple Cotton Kapas Indian 28 MM Cotton 100% 50% 100% Groundnut (IN SHELL) Rape Mustard Oilcake 100% 100% 100% Rape/Mustard Seed Soyabean Seeds Refined Soya Oil Soya_Meal 98% 99% 27% 86% Spices Pepper Chilli Turmeric Jeera 85% 98% 100% 95%

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Exchange Profile
Number Products Members Terminals Delivery Centres Depository Participants Clearing Banks Weather Stations 51 852 18,500 550 59 12 194 By associate company NCMSL Remarks 41 agro, 2 bullion, 2 energy and 6 metals Spread across India Accessible from 700 centres All over the country

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Thank You

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Market Share Agri. Commodities

MCX

Other NCDEX

Share Exchange (%) NCDEX MCX Others 85.0 11.0 4.0 100

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Large number of Physical Deliveries taking place on NCDEX Platform



  

Globally less than 2% volumes result in deliveries Physical deliveries are incidental Exchanges not delivery platform However, NCDEX has seen an average delivery of 4050,000 MT per month

Period Q4' FY05 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY06 Q1 FY07 Q2 FY07 Q3 FY07 Jan-Feb FY07

Deliveries (MT) 43214 109562 83081 77160 134260 103,444 125,989 94,128 37,136

Exchanges are a platform for better prices discovery

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Strategic Partners
Global
Tokyo Grain Exchange (TGE) Dalian Commodity Exchange (DCE) Intercontinental Exchange (ICE)

Business

Bharat Petroleum Gas Authority of India Ltd (GAIL) Bombay Bullion Association (BBA)

Grading & Standards

Central Institute for Research on Cotton Technology (CIRCOT) Indian Agriculture Research Institute (IARI)

Warehouse & others

Food Corporation of India (FCI) CRIDA Punjab State Cooperative Supply & Marketing Federation

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Number of contracts traded - Economic Survey

In millions
Exchange / Year NCDEX 2004-05 2005-06 2006-07

11

27.42

23.65

Others

4.3

16.3

28.38

% market share in India

71.90

63

45.45

40