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Business News/ Companies / News/  FTIL denies allegations in PwC audit report, questions timing of disclosure
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FTIL denies allegations in PwC audit report, questions timing of disclosure

The company questioned MCX's move on deleting certain names and facts from the summary, while retaining some including that of FTIL

FTIL is selling a 24% stake in MCX as directed by the Forward Markets Commission (FMC), which said on 17 December that the Jignesh Shah-led company was unfit to run an exchange. Photo: Abhijit Bhatlekar/MintPremium
FTIL is selling a 24% stake in MCX as directed by the Forward Markets Commission (FMC), which said on 17 December that the Jignesh Shah-led company was unfit to run an exchange. Photo: Abhijit Bhatlekar/Mint

Mumbai: Financial Technologies (India) Ltd (FTIL) denied allegations contained in the executive summary of the PricewaterhouseCoopers (PwC) report of the special audit of Multi Commodity Exchange of India Ltd (MCX) and blamed the commodity exchange for a “half-baked" disclosure.

In a 5 May letter to MCX, FTIL blamed MCX for disclosing this report to BSE out of mala fide intention, and questioned their move on deleting certain names and facts from the summary, while retaining some including that of FTIL.

The PwC report said MCX and the Financial Technologies (FT) Group had about 235 related parties and around 676 additional entities either directly or indirectly related to MCX or the FT Group, FTIL’s key management personnel or their immediate family members by virtue of being common directors or shareholders.

“Retaining only the name of FTIL, which is a listed company itself, is done with view only to destroy its share value and frustrate the sale transaction," FTIL told MCX in the letter, which was disclosed in an announcement on the BSE.

FTIL is selling a 24% stake in MCX as directed by the Forward Markets Commission (FMC), which said on 17 December that the Jignesh Shah-led company was unfit to run an exchange. The order followed an inquiry into the 5,574.34 crore payments crisis at National Spot Exchange Ltd (NSEL), which is 99.99% owned by FTIL.

FMC had called for a forensic audit of MCX by PwC, extracts of which were disclosed by MCX on 29 April. The regulator is set to meet on Tuesday to review the progress made by MCX in complying with its order that FTIL cut its stake in the company to 2% from 26%.

In the letter on Monday, FTIL clarified that the related-party transactions between the company and MCX were disclosed in the annual report, and the red herring prospectus of MCX during its initial public offer (IPO). It added that the same were also kept open for inspection during the IPO period and were reviewed and cleared by all bankers, investors and regulator FMC, Securities and Exchange Board of India (Sebi).

FTIL told MCX that it had through a letter dated 23 April, requested the latter to refrain from finalizing the report without first taking FTIL’s clarifications on any adverse comments against it in any of the finding of the PwC report, but the request was ignored.

FTIL also blamed PwC along with MCX and said they both overlooked the principles of natural justice by not giving it an opportunity to give clarification despite being asked for at regular intervals, even during the preparatory stage.

“PwC needs to clarify whether this is a standard process followed by PwC in such special audits whereby it does not talk to the people to whom they accuse, and if not, why this process was followed," FTIL said in the letter.

The company also questioned the timing of the publicizing the report, and alleged that MCX had intentions of causing damage to FTIL’s interests and that it led to uncertainty in the minds of all stakeholders of FTIL and MCX in general and the bidders in particular.

“It appears to (be) aimed at derailing the divestment process initiated by FTIL and may further be detrimental to the interest of the shareholders of both FTIL and MCX," FTIL said in the letter.

The PwC report had stated MCX incurred a net expenditure of about 649 crore over several years, for services stipulated to have been rendered by FTIL. MCX also incurred expenditure of 42 crore for facilities provided by National Bulk Handling Corporation. The total amount paid by MCX to related parties was about 709 crore, the PwC report said.

To this, FTIL alleged that PwC was “conveniently misguiding" by stating that MCX incurred net expenditure of approximately 649 crore over the years for services rendered by FTIL under various agreement, but did not mention the break-up of revenue and capital expenditure and the total period covered.

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Published: 06 May 2014, 01:45 PM IST
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