NSEL crisis: Who are IBMA’s clients, apart from Sahara Q Shop?
Moneylife Digital Team 13 September 2013

Indian Bullion Markets Association-IBMA, indirectly owned by Financial Technologies, is the biggest member-creditor in the NSEL system. Who were IBMA’s clients? The biggest was Sahara Q Shop (19%) followed by a large number of commodity brokers like KR Choksey Commodity, Almondz Commodities and Capital First Commodities etc. 

 

The Indian Bullion Markets Association (IBMA), promoted by Jignesh Shah-led Financial Technologies (India) Ltd, is supposed to receive a whopping Rs1,170 crore in settlement from National Spot Exchange Ltd (NSEL).  While we wrote about the complete list of NSEL members, nothing much was known about IBMA clients. The members of IBMA are some of the top names in commodities market and include Sahara Q Shop Unique Products Range Ltd, KR Choksey Commodity Brokers and Almondz Commodities to name a few. 

 

The top 20 members to whom IBMA owes money to are…

 

TM/ Client Name

Amount (Rs Cr )

Sahara Q Shop Unique Products Range Ltd

226.96

K R Choksey Commodity Brokers Pvt Ltd

97.25

Capital First Commodities Ltd

79.03

Javerilal Oswal Commodities Pvt Ltd

66.49

J.G.A. Shah Commodities

52.52

Mount Shikhar Commodities Pvt Ltd

39.67

Kunal Comtrade Private Limited

38.31

Natsons Securities

37.61

Lecmec Commodities Broking Pvt Ltd

35.71

AKC Financial Consultants (P) Ltd

34.27

Padmakshi Commodities Pvt Ltd

23.99

Classone Exports Pvt Ltd

22.92

Ray Trading Pvt Ltd

22.83

Prudent Comder Pvt Ltd

19.17

Sujash Enterprises Pvt Ltd

19.12

Almondz Commodities Pvt Ltd

16.98

Jade Commodities Pvt Ltd

16.72

Twenty20 Commodities Pvt Ltd

16.21

Vibrant Commodities Trading Pvt Ltd

15.79


IBMA, owes a total of Rs1,170 crore to as many as 108 members, some of whom are trading members and some are clients. It is surprising to see Sahara Q Shop right on top of the list, with a whopping Rs226 crore owed by NSEL. KR Choksey, a well known brokerage, is supposed to receive Rs97.25 crore. The full list of IBMA’s clients and monies outstanding in late August is given at the end of the piece. A small amount of money has been released to these clients proportionately, over the last three weeks.

 

Earlier, Moneylife had published a list of members with highest exposure in NSEL. Customers of some of the biggest names in the Indian broking fraternity who aggressively sold NSEL’s borrowing-lending racket are staring at large outstanding in NSEL. Clients of Anand Rathi Commodities stand exposed to over Rs600 crore while those of India Infoline stand to lose over Rs300 crore. So far, NSEL has hardly kept up with its payment schedule. This means there is a big risk that NSEL may not pay back its entire dues, including IBMA and its members. The piece can be accessed here: NSEL brokers with the highest exposures

 

Commodities market regulator Forward Markets Commission (FMC), which is charged with supervising the handling of payment crisis at NSEL, had found that IBMA reportedly invested Rs1,200 crore in the NSEL ready-forward product.

 

IBMA was set up to act as de facto association of bullion traders, mainly for price discovery on the lines of London Bullion Market Association (LBMA), according to NSEL. “Besides providing AM/PM price fixing, thus removing dependence on LBMA’s benchmark prices, IBMA would also try to remove inefficiencies in the Indian bullion market in a steady manner,” Anjani Sinha, the erstwhile managing director and chief executive, NSEL had said at the launch of IMBA.

 

Moneylife had sought clarity about the role of IBMA in an interview with the top brass of NSEL some time ago. We had asked how IBMA was called an association, a term used by trade and industry lobbies, usually conceived as societies or non-profit companies. NSEL had replied that IBMA was called an 'Association' because it was promoted by NSEL “in a cooperative structure along with various stakeholders such as small jewellers and bullion traders, with an aim to work as an aggregator.”

 

NSEL had argued that IBMA, a member of NSEL, “has around 130 bullion dealers and jewellers from across the country as its shareholders. In addition to making representations on behalf of physical market participants, policy makers and market linkages services, IBMA also offers various services to its members such as sourcing of material, clearing and forwarding (C&F)."

 

According to the top management, IMBA was setup to represent matters relating to bullion trade and industry on the physical side, before various authorities and ministries, who are involved in policy formulation. This role has now been extended to agriculture-based commodities. The futures market’s views regarding policy formulation are being represented by several national and regional level commodity exchanges. It, however, lacked adequate representation by physical market participants (to which futures market is an adjunct). Due to this gap, physical market participants did not have enough say in policies formed by state governments, warehousing regulators and ministries related to commodities.

 

Shreekant Javalgekar, managing director and chief executive of Multi-Commodity Exchange Ltd (MCX) was also on IBMA board until recently. NSEL holds a 74% stake in IBMA, while the remaining shares are held by bullion traders.

 

To understand more about how NSEL functions, and the role of IBMA in the commodities markets, Moneylife question and answer piece will be helpful

 

Since the middle of July 2013, trading in NSEL has been suspended. NSEL has failed to make payouts to investors and failed to recover money from those who were supposed to make pay-ins. It now appears that there is not enough stock of commodities in the warehouses of NSEL against which warehouse receipts were issues. In August 2013, trading in e-series was also suspended. This was of concern for large number of investors who had purchased e-series products like e-gold.

 

Comments
Amit Anam
8 years ago
Why Jignesh Shah is still out, why is he not arrested for one of the biggest fraud, who is backing him and why no action is being initiated against him????
rameshwar
Replied to Amit Anam comment 8 years ago
might be he has bribed the regulators and investigative agencies heavily.....so that still after 1.5 month down the line no action....
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