National Spot Exchange ltd (NSEl) has an uphill task to finish in the coming 15 days as the company needs to payout a sum of nearly Rs 5,500 crores to its investors in order to avoid default.
The company has been saying that they will have no problem in doing so as they already have physical stock worth Rs 6,200 crore which is stacked up in numerous warehouses across the country.
But is the said stock actually present or there was simply pair trading happening in the backIJ The Pioneer tried to find out whether the stock actually exists in some warehouse. The said stock worth Rs 6,200 crore is being kept in with warehouse companies which themselves are very small but surprisingly are holding huge proportion of stock of worth much more than the company itself.
One such example is of ARK Imports, a small ludhian-based Rs 1 crore company, holds nearly 11,190 tonnes of raw wool stock for NSEl. The interesting fact is that this small company has nearly a quarter of the country’s annual wool produce in its warehouses. Another such example is the Kadi, Gujarat warehouse of NSEl which as of July 13 had 1.09 lakh MT of castor seed stored. Solvent Extractor’s Association of India (SEA), came out with a study and said that castor seed production in 2013 is expected to be on the lines of 11.43 lakh MT. This means that NSEl’s Kadi unit is housing at least 10 per cent of the country’s castor seed.
The same story is happening with cotton as well. As per NSEl records, a company named KK Finecot has nearly 4,137 MT of cotton stored with it. So, it’s a Rs 50 crore company from a small district named Khargone in Madhya Pradesh holding 4,317 MT of stock which is worth much more than the company’s networth. Some of the other companies which the NSEl has stated to be official warehouses include Rama Cold Storage which holds red chilly. It is a Rs 5 crore company which has a stock of 2512 MT.
It seems, NSEl has been putting too much faith on companies which seem to lack the basic funds to create infrastructure to properly store physical stocks or the figures which NSEl is giving out on its website are just a bunch of numbers to blindfold the small investors so that they don’t question the pair trade practices which the big players are using and making heaps of profits.