Indian commodity mkt up on IT appetite

PUNE, INDIA: They might have appeared to be lagging behind international players, but the immediate future could tip the scales other way when it comes to adoption of software for handling business in the commodity space in India.

Companies are opening up and the likes of commodity market software specialists like Eka Software Solutions are upbeat to buck the trend. As Manav Garg, founder and CEO tells, companies are open to talks and a lot of interest in form of enquiries is being seen. 

“Companies like Sterlite for example are in the interest stage now. As they scale up, they are getting open to the idea of appropriate IT support.”

This is quite a change, he adds, from the times so far when Indian commodity player, is in particular, were not so open to spending on software. “Now they want to learn and benchmark against international players.”

Specialized towards the Agriculture and Metals verticals of the commodity market and now entering the energy segment, Eka has over 15 global customers that include Noble Group, Louis Dreyfus, AWB and CHS.

He adds that companies whether from commodities like coffee or areas like virtual exchanges, are waking up and smelling the coffee that spreadsheet era can no longer serve current needs.

A view that is seconded by another player.

Triple Point Technology, a global provider of multi-market commodity and enterprise risk management software solutions, showed in a recent survey of energy and commodity executives, that 70 per cent of companies are using spreadsheets or internally assembled systems to manage counter-party credit risk. 

In recent years companies have put off investing IT dollars in credit risk technology in favor of front-office systems. However, with the global credit crisis, commodity price volatility and an increased focus on liquidity management, companies are re-evaluating their credit risk systems and processes. 

Dan Reid, vice president, credit risk solutions, Triple Point Technology points in a press note. "That 60 per cent of the companies surveyed acknowledge the need to invest in a robust enterprise system to manage counter-party risk is a great step in the right direction."

Companies using spreadsheets and disparate in-house systems find it difficult, if not impossible, to accurately measure portfolio exposure and manage credit limits across multiple business lines and commodities. Manual processes are labor-intensive and error-prone, leaving little time to focus on critical credit activities.

Another key reason companies are looking to upgrade their current system is to improve their ability to manage master netting agreements and margining. There has been significant growth in the application and complexity of master netting agreements making it difficult to manage margin activity in a spreadsheet. 

Companies are looking to automate their ability to monitor inbound and outbound collateral obligations and utilize best-practice workflows to manage daily margin calls and disputes, adds Triple Point.

Triple Point has clients like Kotak Mahindra Bank, SBI, UTI Bank, ICICI Bank in Precious Metals category; Reliance and Bharat Petroleum in Oil category, IFFCI in agriculture category etc from India amongst a spate of international clients.  

So far it serves clients in Asia, Africa, Australia, Europe, North America and South America and is used by 3,000 traders to manage more than $3.5 trillion in risk.

The impact made by MCX (Multi-commodity Exchange) is another driver. According to Garg, the traction and awareness triggered by MCX is putting forth knowledge about various imperatives and tools for risk management. “Though MCX is at a nascent stage, industry is going to get serious in spending in about 18 to 24 months here.” Garg opines.

Our products are specifically designed to streamline both virtual and physical commodity trading. This process is very complicated and requires extensive documentation. To better manage and leverage the market, a trader needs access to real time information, which we offer.”

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