Geojit to shut down commodity broking

Equity and commodity brokerage firm Geojit Financial Services
is likely to start a separate commodity broking company in the coming
months to translocate over 17,000 commodity clients, sources said.

The Kochi-based broking firm announced on Friday that it would shut
down its commodity business, and has accordingly informed the
commodity exchanges. French Bank, BNP Paribas, that holds a 27% stake
in the brokerage would pay Rs 40 crore in compensation for shutting
down the commodity subsidiary.

CJ George, MD of Geojit Financial said, "We are shutting down the
commodity business but we have not reached a decision on what we will
do with our existing clients."

Commodity exchanges declined to comment on the development. Commodity
markets regulator Forward Markets Commission (FMC), indicated that
this has not been brought to the FMC's notice as yet. "In such a
case, the brokerage should duly inform exchanges and the regulator
would not step in unless required," officials said.

The move would enable BNP Paribas to raise its stake in Geojit
Financial Services. As per existing guidelines, banks are not yet
permitted to enter commodity trading. Therefore, RBI had refused to
clear the proposal of the bank since the brokerage also ran a
commodity trading business. In case BNP Paribas did not obtain
regulatory approval, it would have to reduce its stake to 15% and
thereby avoid the mandatory open offer.

The turnover of commodity broking of Geojit has declined to Rs 13
crore for the year ending March 2008, compared with Rs 17 crore last
financial year. The decline is attributed to the dwindling volumes in
commodities due to various clamp-downs on agri-commodity futures by
the government. Geojit Commodities, a subsidiary of the Kochi-based
broking firm, conducts majority trading in agricultural commodities.

Geojit Financial Services announced that its net profits for the
January-March 2008 quarter had doubled to Rs 11.8 crore, from Rs 5.7
crore. The total revenues for the period rose to Rs 64.3 crore
compared with 36.1 crore in the comparable quarter last year. Geojit
Financial shares ended Friday 5.7% lower at Rs 57.35 on the BSE,
while the benchmark sensex closed 1.52% down at 16,649.64.