***

What is different about Reliance Spot Exchange? How do you see yourself bringing a change in the ecosystem?

By focusing on the spot market, we have started differently from other exchanges. We are not looking at a spot market because there is a futures market (that will come only later). I believe that a spot market is essential, and will create a stronger foundation for a vibrant futures market. I don’t think anybody has looked at it in this perspective. Ours will be an inclusive business model where all intermediaries are a part of the ecosystem, where they benefit by being with us. Our membership is only by invitation. In fact, my people visit the members, their facilities and conduct on-ground assessments. Only then do we enrol them.

How are you different from the rest of the competition?

You can’t be successful if you are doing spot market as a side business. You have to go the whole hog. To me, it’s a national infrastructure building project. The spot market needs to come out of its narrow-focus approach. There is a need to create a national spot exchange—where chilli from Hyderabad, turmeric from Sangli in Maharashtra and soya from Madhya Pradesh can be on a national platform.

What are the key linkages needed for running a national exchange like yours?

Linkages are complex and complicated. At every level, there are intermediaries and the market works in an informal over-the-counter way. Today, there is no base-level grading or any price discovery. In addition, you come across mandis, Agriculture Produce Market Committees (APMCs) and political interference at every level.

It’s like developing the Konkan Railway—you are dealing with varied geographical areas. From the point of origin to the destination, you have to build efficiency by becoming transparent as well as by having a nationwide reach—it has to go through a value chain. The whole challenge lies in how you bring this value chain on track and deliver efficiency at every place, so that the consumer pays less, the grower gets more and it makes economic sense for everybody.

On the underlying infrastructure side, you can create a standardised and scientific way of storage, inspection and delivery. Further, you can introduce structured low-cost funding into the trade. And, being an exchange, the financier too will be interested. In short, you bring in collateralised management of the commodity and link it to the exchange, thus covering the entire area in an efficient, transparent and credible manner. It’s a partnership model.

In this entire chain, where will your infrastructure begin and end?

For instance, even in logistics, we will work with the existing provider to ensure standardisation and nationalisation of costing, quality assurances and delivery timings. It’s a long-term process. We want like-minded people on board rather than people looking for high return on investment. This is not charity. It’s business but with a nationalistic approach. 
 
How do you see the mechanism working between the organised retail sector and the exchange?

We are in a learning curve as far as organised retail is concerned. As small cities are growing, aspiration levels are also on the rise—people want to have a mall in their city. That is where I see a perfect fit for the exchange. Be it a big national chain or a localised retail chain, I think they will benefit much more if they use this platform. Secondly, our efforts go a long way towards building the retail sector.
 
Will you be deciding prices? Are we going to see different rates for the same products sold in the market?

We will want APMCs to fix the price. Working within their framework, the price we decide is expected to be the benchmark price for the market.
 
What would be the strategy to grow the spot exchange business? How many APMC approvals have you received so far?

We have taken a focused approach. We don’t just choose products because they are currently in demand on the futures market. They must have real growth potential. We are in various stages of negotiations with three to four states. We start with metals and spices. So, we are doing agri and non-agri markets. For metal markets, we have tied up at Raipur, Ludhiana and Mandi Gobindgarh in Punjab. And, for spices, it’s Kerala. The warehouses are also situated in these places.
 
Can we expect the spot exchange to have a pan-India presence?

We will begin with 12 members for each commodity. We are already pan-India—I have people in Kerala, Chhattisgarh and Punjab. Another advantage is we have the Reliance Capital and Reliance Money network. So, servicing the client is a one-day job. If I get a member request, I can put an office there in two days. The soft launch of the exchange has already been on for two months now. The system has been tested and members have been explained the entire process. We aren’t dealing with HNIs or traders, but actual users. And those guys are real businessmen and real factory owners. We want to be there with them.

What synergies do you plan to derive from your 10% stake in National Multi Commodity Exchange (NMCE)?

We are looking at NMCE as a financial investment. We may consider that as our vehicle for our futures exchange or it can remain just a financial investment.
 
What happened to your plans of opening up a bullion spot exchange?

Reliance Money had incubated the idea of a bullion exchange, when Reliance ADAG wanted to enter the exchange business. But now everything falls under Reliance Exchange Next, which is a separate vertical under Reliance Capital. Reliance Exchange Next is a month-and-a-half-old entity. It will have exchange businesses, including exchange, warehouse, logistics and every related infrastructure of an exchange business. The business initiatives will originate from the spot exchange.

The next will be futures and capital markets. Internal and external stake in exchanges will come under Reliance Exchange Next. We have an understanding with Singapore’s CWT Commodities, which is the collateral management company.

Why are you venturing into the capital market segment? And how different will you be from the existing players?

Everybody is venturing into the business. I believe there is no sense in being a me-too. Yes, you have to offer vanilla products, but we will try to bring something different. We may come with a Blue Ocean Strategy—making the competition irrelevant. 
 
What benefits do you think you can derive from overseas exchanges?

Nigeria Exchange is under evaluation. Reliance has a 15% stake in the Hong Kong Mercantile Exchange. Hong Kong is our window to mainland China. 
 
What is your strategy to derive revenues from the spot exchange business? When will you break even?

We have two models. One is the e-auction and the other one is the order-matching system, which will be launched soon. We have introduced a concept of listing that is unique. We will list contracts on that and it is a revenue source. Then, we have transaction fees. Once you go into the logistics and infrastructure part, we see income there.

We will break even in the next two years. We aren’t going overboard. I have a team of less than 20 people. We are trying to run this as a lean and mean organisation. If I ensure process and people efficiency, then I can deliver efficiency to the market.  
 
How closely is Anil Ambani involved in the exchange. What is his vision for Reliance Exchange Next?

He is clued into Reliance Next. The important thing for him is to think out of the box and enhance the existing market. That is what he has done in all his enterprises. The other vision for Reliance Exchange Next is to be a global player. We are going out. We aren’t looking at FDI alone, but also eyeing outward investment.