FTIL hires investment bankers for restructuring
3 min read . Updated: 08 Nov 2014, 12:36 AM IST
PremiumFTIL is looking at carving out the software solutions segment into a separate unit to attract a strategic partner
Mumbai: The board of Financial Technologies (India) Ltd (FTIL) has appointed investment bankers to restructure the company and carve out the core segment of software solutions into a separate business unit to attract a strategic partner or investor.
The development comes at a time when revenue from the core business of FTIL is on the decline as an increasing number of market intermediaries move towards proprietary solutions. The company is battling the aftermath of a ₹ 5,574.34 crore fraud that surfaced last year at its unit National Spot Exchange Ltd (NSEL).
“The board took note of the appointment of a global and an Indian investment banker for the purpose of attracting majority strategic partner/investor into FTIL’s Member Technology business...and the creation of a separate subsidiary for the same, if required," said a statement by FTIL, released on Friday.
The company didn’t name the bankers. A spokesperson reached for comment said he would call back, but hadn’t done so as of press time.
Recurring revenue that FTIL used to earn from exchanges promoted by the group is likely to fall as software contracts are being revisited in light of stake sales in Multi Commodity Exchange of India Ltd (MCX) and Indian Energy Exchange Ltd (IEX). On Wednesday, FTIL sold its near 25% stake in IEX, after announcing the sale of a 26% stake in MCX in three tranches earlier this year.
The stake sales were prompted by regulatory orders that found FTIL unfit to hold stakes in exchanges after the emergence of the fraud at NSEL.
According to FTIL’s financial statements, revenue from software solutions and services was pegged at ₹ 37.23 crore in the quarter ended 30 June. This was much lower than ₹ 93.30 crore reported in the year-ago period.
The fall in revenue from the software solutions and services business raises concerns because it forms the bulk of the company’s income. In fiscal 2014, out of revenue of ₹ 334.72 crore, income from software products and services was ₹ 303 crore.
According to experts, the idea behind the restructuring may be to ring-fence the core business in the event of a merger with NSEL. On 21 October, the government proposed that NSEL be merged with FTIL in light of the fraud, which emerged in July last year. FTIL holds a 99.99% stake in NSEL.
Following the fraud that surfaced as a payments crisis at the spot exchange, regulators including the Forward Markets Commission, the Securities and Exchange Board of India and the Central Electricity Regulatory Commission declared FTIL unfit to hold a stake in any exchange.
“The move is aimed at ring-fencing the cash cow of the company, but is likely that it could face hurdles as such schemes of demergers have to be approved by the courts as well. The investors could challenge this," said Rajnikant Patel, former head of BSE Ltd.
Meanwhile, FTIL inducted Berjis Desai and Anil Singhvi as non-independent, non-executive directors on its board while appointing Prashant Desai an executive director.
Berjis Desai is the managing partner of J Sagar Associates, a law firm that has been advising FTIL in the ongoing NSEL crisis. Singhvi, a chartered accountant (CA) by training, is chairman of Ican Investments Advisors Pvt. Ltd.
Prashant Desai, also a CA by qualification, has represented FTIL earlier in his capacity as founder of Seagull IR Solutions Pvt. Ltd, a firm managing investor relations.
FTIL’s statement on Friday added that the company is also in the process of appointing an industry advisory board and a consulting firm to help it plan and execute the transformation process towards its so-called FT 3.0 and Digital India@2025 strategy.
FT 3.0 refers to the company’s objective of becoming a powered by technology partner to create and develop ecosystems of at least 100 new digital entities from India in 10 key sectors such as retail, education, healthcare, agriculture, environment and infrastructure by 2025.
“These new digital disruptors will be the bellwether of inclusive development and growth besides creating a domino effect in the ecosystem that will be breeding ground to more new entrepreneurs, start-ups and job creation and will become the showcase of digital India by 2025," the statement quoted FTIL founder and managing director Jignesh Shah as saying.
The FTIL board also reiterated that it would support all efforts being put in by the management to resolve the NSEL crisis in a manner that is “fair, just and equitable to all stakeholders".
Open Dealer Integrated Network is FTIL’s flagship product used by brokerage firms to connect their dealer terminals to equity and commodity exchange systems.
