NSEL to pay-out Rs 177cr via loan; FMC calls it a 'default'

The National Spot Exchange (NSEL) on Tuesday said that it will pay-out Rs 177.23 crores to small investors immediately. The total pay-out will be about Rs 190 crores.

Considering the interests of small investors NSEL decided to make immediate payments to 608 small investors who were to receive amounts up to Rs.2,00,000 as of  July 31, 2013, will receive 100 percent payment with this disbursement, said a release from the exchange.

The commodity stock exchange availed a bridge loan from Financial Technologies (FTIL) to make payments aggregating to Rs 177.23 crores. 

Also Read: Mayaram-led panel of secretaries to look into NSEL issue However, Forward Markets Commission (FMC) says that the bourse had defaulted as it failed to comply with the schedule drawn for payout. In an interview to CNBC-TV18, Ramesh Abhishek, chairman of FMC says that as per the payout plan supervised by the regulator, NSEL has only managed to pay Rs 12 crore. So, it has defaulted in its second round, he clarifies. Reacting to the move, Motilal Oswal, CMD, Motilal Oswal Financial Services told CNBC-TV18 that the move by the exchange to pay small investors is not transparent. Payment should be proportionate to the capital rather then being discriminated on the basis of small or big investors, he adds. "The small investor does not mean that put in small money into NSEL because there are big customers who have put in small money and so this is not fair; this is not transparent and leading to a lot of litigation."

Meanwhie, IIFL chairman Nirmal Jain feels that people's expectations had were so low that the announcement has actually relieved of the fact that at least small investors are taken care of. "I do not know why only 608 investors have been taken care of. Five percent of the total money would have taken care of 50 percent of investors," Jain adds. Priti Gupta, director of Anand Rathi Commodities says that it would be good if FTIL continued payout for the entire money owed to investors. At the end of the day FTIL is the promoter of NSEL. However, Alok Churiwala, vice chairman of BSE Brokers' Forum expressed mixed reaction on the move saying that though he is happy that some money is finally coming through, yet the distribution model raises concerns. According to him, NSEL has played a master stroke by attempting to create a rift between the investor classes. Any distribution had to be equitable, fair and just and by playing the emotional card of small investors, NSEL is unfair and the FMC should look into it.

The bourse also appointed Grant Thornton as the forensic auditors. This is in addition to the internal investigation already initiated against the management team. Watch the accompanying video for more expert comments.