Home / Companies / News /  Financial Technologies not averse to stake sale: Jignesh Shah

Chennai/Mumbai: Financial Technologies (India) Ltd (FTIL), which is embroiled in a 5,574.34 crore payment crisis at its unit National Spot Exchange Ltd (NSEL), is open to selling a stake in itself, chairman Jignesh Shah said on Friday.

“We are not averse to a stake sale. However, we will not be able to comment on who we would want to sell to," Shah told reporters on the sidelines of the company’s 25th annual general meeting in Chennai.

“We do not require funds but a strategic partner will help in growth," Shah added.

He declined to comment on the firms FTIL is in talks with for the stake sale.

On 19 February, The Economic Times reported that FTIL and Tech Mahindra Ltd were in talks for a possible stake sale. Tech Mahindra termed such reports as speculative.

Shah also said FTIL plans to retire its entire outstanding debt and become debt-free.

The firm’s total outstanding debt aggregates to $66 million of external commercial borrowings, and this will be paid from the funds it received from the stake sale in its Singapore subsidiary, Singapore Mercantile Exchange (SMX).

FTIL shares have gained by more than three-fourth in value so far in 2014 over speculation of a possible stake sale. The shares, which closed down 4.37% at 325.70 apiece on BSE on Friday, have risen 75.7% in 2014, and have rebounded nearly three times from the all-time low of 108.93 seen on 3 September.

“We should not read too much into the share price rise," said Arun Kejriwal, director of Kejriwal Research and Investment Services. “It has moved up purely on speculation, and no concrete steps have been taken as yet by the company to come out of the crisis."

FTIL shares had tumbled 79.3% since 31 July to an all-time low on 3 September after the settlement crisis at NSEL came to light. On 31 July, the commodity spot 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 asking the exchange 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 eventually had to suspend all trading. It later emerged that all the 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 that 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 plan, but it has been unable to stick to the schedule and has not made a single successful payout since.

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