INDIAN COMMODITIES MARKET March 14, 2007

2 NCDEX – 6 th largest commodity exchange in the world Source: UNCTAD, SFOA “ The world’s commodity exchanges – September 2006

3 NCDEX- 3 rd largest agro-commodity exchange in the world Source: UNCTAD, SFOA “ The world’s commodity exchanges – September 2006

4 Market growth of 265% over FY05 volumes; 56% growth over FY06 Unlike developed markets, participation in Indian market is more retail & individual and not institutional

5 Current physical volumes Value chain Futures Traded Volumes , ,065 * Bullion Metals etc Agriculture Energy Total Farmers Agents Wholesalers Processors Retailers Present volumes a fraction of the potential USD Bn Source: NCDEX

6 Present legal & regulatory environment

7 Market Structure- Futures and Spot Spot markets Futures Market Forward Markets Commission Forward Markets Commission Ministry of consumer Affairs Ministry of consumer Affairs Unlike Forex and Stock markets; Spot markets in commodities are not within the purview of the Exchanges/Regulators State Government

8 Regulatory Structure in India Banking / NBFCs RBI Ministry of Finance SEBI Capital Markets NABARD Co-operative Banks & Regional Rural Banks Ministry of Consumer Affairs FMC Commodity Exchanges Insurance Regulatory Development Authority (IRDA) Insurance Pension Funds SIDBI State Financial Institutions National Housing Bank Housing Finance Companies Company Law Board Corporates Pension Funds Regulatory Development Authority (PFRDA)

9 20 Other Regional Exchanges NMCENMCE Commodity Exchanges MCXMCX Structure of Indian Commodity Futures Exchanges National exchanges Regional exchanges FMCFMC NBOTNBOTNCDEXNCDEX

10 Going forward …

11 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

12 Instrumentsto 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

13 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

14 Risk Mitigation: Pre-harvest Small Farmers Aggregators Banks Insurance NCDEX NCMSL Banks Insurance NCDEX NCMSL Future price ensured Liquidity enhanced Weather derivatives /Crop Insurance Bank lending Large Farmers

15 Risk Mitigation: Post-harvest Small Farmers Sell forward Storage facility Assaying & grading Commodity backed bank finance (WR) Large Farmers Banks NCDEX NCMSL Banks NCDEX NCMSL

16 Survey carried out by A C Nielsen Wide Area Sample, Sample Size Narrow Area Sample, Sample Size  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

17 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

18 Increased bank participation on the exchange platform farmer Bank branch Banks takes consolidated position on behalf of its customers Bank branch Exchange farmer Bank to also take proprietary positions

19 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% % Number of defaults so far: NIL

20 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

21 Foreign Access Foreign access permitted in securities market- equities & 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

22 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… RBI/SEBI notification dated

23 Regulatory Action in Jan-Feb 2007

24 Sudden delisting of important cereals & pulses - Jan-Feb 2007 Delisting of Urad & Tur contracts – Jan 07 Suspension of Rice & Wheat contracts – Feb 07 Future Prices as of Jan 23Spot Prices as of Jan 23 Spot Price as of Mar 06 Feb Expiry March Expiry May Expiry Urad Tur (USD/Quintal) Urad: Crop arrivals from Andhra & Burma expected in Feb-March Tur: Arrivals in March; 30-40% expected production shortage

25 NCDEX wheat price movements Temporary ban on wheat imposed Temporary ban; expected to be lifted soon…

26 Innovations by NCDEX

27 Spot price polling CommissionAgentsCommissionAgents ManufacturersManufacturers RefinerRefiner Mill owners TradersTraders MandiMandi StatisticalCleansingof raw data StatisticalCleansingof Polled Prices Exchange Website Trading Terminals Info-vendor terminals Media– electronic & print Near real-time nationwide prices Polling done independently by CMIE & Crisil MW

28 Dematerialized holding of commodity balances CLIENTDPNSDLR&T AGENT 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

29 Collateral management Set up National Collateral Management Services Ltd. (NCMSL) Warehousing, assaying Collateral Management Commodity backed financing Food procurement for FCI Paddy procurement project 1.2 lakh MTs paddy from MP, Orissa Paddy project 80,000 farmers involved 600,000 MTs of paddy

30 Price Dissemination ELECTRONICPRINT TV and radio News agencies Mobile phones Integrated kiosk Kisan (farmer) Call centres Regional newspapers Training material Agri-journals TICKER BOARDSFuture plans Member offices Mandis Bank’s rural branches Rural warehouses Bus stations Abidjan- Cote D’Ivoire Singapore- View Terminal Rural Post offices Railway platforms Co-operative offices Panchayat offices

31 Automatic weather stations Cabled Vantage Pro 2 Plus Collecting & disseminating data over multiple weather parameters

32 About NCDEX

33 Our Shareholders InstitutionShareDomain Expertise NABARD15 %Apex bank for agricultural lending ICICI Bank8 %Largest private sector bank in India. Listed on NYSE NSE15 %Largest stock exchange in India. Highest volume in single stock futures in world. LIC15 %Largest life insurance company in India CRISIL12%India’s first & largest credit rating agency. Now a Standard & Poor company IFFCO12%Largest farmer cooperative with affiliation of 36,000 cooperatives PNB8%Large public sector bank with strong rural reach specially in North India Canara Bank8%Large public sector bank with strong rural reach specially in South India Goldman Sachs 7%Global Expertise in commodity markets

34 Ncdex’ market share in total volumes of key agri-commodities (April Jan 2007) Cereals & Pulses Chana\Gram87% Wheat98% Maize99% Barley100% Guar Seeds85% Urad87% Tur91% Processed agri-products Guar Gum99% Sugar83% Gur75% Mentha oil15% Fiber Medium Staple Cotton100% Kapas50% Indian 28 MM Cotton100% Spices Pepper85% Chilli98% Turmeric100% Jeera95% Oil & Oil seed complex Rape/Mustard Seed98% Soyabean Seeds99% Refined Soya Oil27% Soya_Meal86% Castor100% Groundnut (IN SHELL)100% Rape Mustard Oilcake100%

35 Exchange Profile NumberRemarks Products5141 agro, 2 bullion, 2 energy and 6 metals Members852Spread across India Terminals18,500Accessible from 700 centres Delivery Centres550All over the country Depository Participants59 Clearing Banks12 Weather Stations194By associate company NCMSL

36 Thank You

37 Market Share – Agri. Commodities Exchange Share (%) NCDEX85.0 MCX11.0 Others

38 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 ,000 MT per month Exchange’s are a platform for better prices discovery PeriodDeliveries (MT) Q4' FY Q1 ‘FY Q2 FY Q3 FY Q4 FY Q1 FY07103,444 Q2 FY07125,989 Q3 FY0794,128 Jan-Feb FY0737,136

39 Strategic Partners GlobalGlobal BusinessBusiness Warehouse & others Grading & Standards Tokyo Grain Exchange (TGE) Dalian Commodity Exchange (DCE) Intercontinental Exchange (ICE) Bharat Petroleum Gas Authority of India Ltd (GAIL) Bombay Bullion Association (BBA) Central Institute for Research on Cotton Technology (CIRCOT) Indian Agriculture Research Institute (IARI) Food Corporation of India (FCI) CRIDA Punjab State Cooperative Supply & Marketing Federation

40 Number of contracts traded - Economic Survey Exchange / Year NCDEX Others % market share in India In millions