Bombay Bullion Association eyes 5% stake in MCX
BBA joins hands with United Stock Exchange for the purchase; sents a letter of intent to FMC
Mumbai: The Bombay Bullion Association (BBA) is eyeing a 5% stake in Multi Commodity Exchange of India Ltd (MCX), a group company of Financial Technologies (India) Ltd (FTIL).
It has joined hands with United Stock Exchange (USE)—a strategic partner of BSE Ltd and one of India’s newest stock exchanges—for the purchase and sent a letter of intent to the commodity market regulator, the Forward Markets Commission (FMC).
“BBA intends to buy a 5% stake in MCX and has formed a consortium with United Stock Exchange for this. We have forwarded a letter of intent to FMC and shall look forward for its approval," said a spokesman for BBA.
The commercial aspects of acquiring the stake haven’t been worked out yet; BBA and USE are in process of valuing the exchange, the spokesman said.
FTIL is looking to reduce its stake in MCX.
MCX, in a statement to the BSE, had said on 26 December that it would ask its parent to reduce its stake in the exchange to 2% from 26% within one month, in accordance with FMC’s 17 December order which directed FTIL to lower its stake. The regulator said FTIL wasn’t “fit and proper" to run an exchange.
FTIL filed a plea in Bombay high court on 20 December, challenging FMC’s order. The high court will hear the plea on 6 January.
The suitors are expected to approach the MCX’s board after the high court’s decision on FMC’s order.
“FTIL, as the anchor investor in MCX, does not carry a good reputation and character, record of fairness, integrity or honesty to continue to be a shareholder," FMC said in its order, which specified that FTIL could not hold more than 2% of the paid-up capital of MCX.
The regulator also said National Spot Exchange Ltd (NSEL) made a profit of around ₹ 125 crore during fiscal year 2013. As a result of this profit, the value of its promoter Jignesh Shah’s shares in FTIL shot up manifold, giving him the “benefit of a spectacular market capitalization of his investment in FTIL running into thousand of crores of rupees", it said.
FMC’s order followed a probe into the operations of NSEL, also promoted by FTIL, in connection with the ₹ 5,574.34 crore payment crisis at the commodities spot exchange.
MCX shares gained 2.86% to close at ₹ 492.50 on Wednesday on the BSE. Shares of FTIL rose 1.48% to close at ₹ 188.15 even as the benchmark Sensex, dropped 0.14% to close at 21,140.48 points.
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