BackFTIL appoints committee to look into restructuring plan
Revamp plan includes selling 'up to 24%' in MCX and identifying a strategic partner to drive growth at the firm
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Mumbai: Financial Technologies India Ltd (FTIL) on Thursday said it has appointed a committee to propose and oversee a restructuring plan for the company.
The components of this plan include selling “up to 24%" in Multi Commodity Exchange of India Ltd, or MCX, as ordered by the Forwards Market Commission (FMC), and identifying a strategic partner for FTIL to “help drive growth of the company". The panel would include two non-executive independent directors —Venkat Chary and S. Rajendran, legal adviser Berjis Desai and FTIL’s whole-time director Dewang Neralla.
The company will hire an investment bank to identify a strategic partner and sell the stake. This panel has been given 120 days to put this plan into action.
The panel may also consider divestment of FTIL’s investment in other exchanges as a part of the restructuring. “FTIL is left with no choice. This seems to be the only logical option at this point of time," said Arun Kejriwal, director of Kejriwal Research and Investment Services.
FTIL’s plan is in response to a 17 December FMC order declaring it unfit to run exchanges in the country. The order said FTIL could not hold more than 2% of the paid-up capital of MCX. FTIL currently holds a 26% stake in MCX. Following the FMC’s directive, the MCX board has asked FTIL to bring down its stake and had also moved to cap FTIL’s voting rights at 2%, in keeping with the FMC’s order.
The FMC’s order followed a probe into the operations of National Spot Exchange Ltd (NSEL), also promoted by FTIL, in connection with the ₹ 5,574.34 crore payments crisis at the commodities spot exchange. FTIL holds 99.9% stake in NSEL.
“Many such committees have been formed by FTIL and its promoter Jignesh Shah, including one on 5 August. Nothing came out of it. Hope this time around they are more earnest. As NSEL investors, we insist that our dues are a part of any restructuring/stake sale deal," said Ketan Shah, an aggrieved investor in NSEL, in response to FTIL’s decision to set up a committee to propose a restructuring plan.
The settlement crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. These, too, were suspended a week later. The closure of trading may have been prompted by an instruction from the ministry of consumer affairs to the exchange asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing that.
NSEL tried to implement the change, but because its appeal was to investors and members who were not interested in spot trades, it had to suspend all trading. It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity.
The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money. When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so. On 14 August, NSEL proposed a payout, but it has been unable to stick to schedule and has not made a single payout ever since.
khushboo.n@livemint.com
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