BackFTIL shortlists the bidders for its stake sale
FTIL says the restructuring committee will finalise the bidder(s) by 25 April and recommend the same to the board
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Mumbai: Financial Technologies (India) Ltd (FTIL), on Saturday, said that it has received 9 non binding bids for it’s stake in the Multi Commodity Exchange of India Ltd (MCX) and its restructuring committee which met on Friday has completed the process of shortlisting the interested parties . FTIL did not name who these parties are. FTIL also said JM Financial Institutional Securities Pvt. Ltd, which is advising it on a stake sale will take the discussion with these parties forward and the restructuring committee will finalise the bidder(s) by 25 April and recommend the same to the board.
On 27 February, FTIL had announced the appointment of a committee to propose and oversee a restructuring plan for FTIL, which included selling a stake in MCX and identifying a strategic partner to “help drive growth of the company". The committee comprises two non-executive independent directors—Venkat Chary and S. Rajendran—besides legal adviser Berjis Desai and FTIL’s whole-time director Dewang Neralla.
FTIL also said it will seek cooperation from MCX to enable the shortlisted biddders to meet its management and for customary due diligence. FTIL has called for the meeting of its board of directors on 25 April to select the final bidder.
FTIL had invited expressions of interest from interested parties till 10 April. This followed a decision in February, by the MCX board, which had asked FTIL to cut its current holding in the commodities exchange following an order by the Forward Markets Commission (FMC).
The commodity futures market regulator on 17 December said FTIL was unfit to run any exchange and asked it to reduce its stake in MCX to 2%, after an inquiry into the operations of National Spot Exchange Ltd (NSEL), also promoted by FTIL. NSEL is facing a Rs5,574.34 crore payments crisis that surfaced at the end of July last year.
Since then, MCX had failed to take substantial actions to comply with FMC’s order, which prompted the regulator to write to the exchange a second time on 21 March, Mint reported on 10 April.
In its letter, FMC sought a timeline on FTIL’s plan to sell its stake, and a report on action taken on financial irregularities that had been highlighted by the MCX board’s oversight committee in December-January 2013, and a special audit report submitted by audit firm PricewaterhouseCoopers, Mint had reported.
At a board meet earlier this week, the MCX board had decided not to go ahead with a preferential allotment of shares, a move that had aroused the ire of its parent Financial Technologies (India) Ltd (FTIL), which is in the process of cutting its stake in MCX.
“Such a move is vindictive in nature to support certain vested interest and deprive FTIL of its level-playing field to sell its shares," FTIL had said a statement on 31 March.
A preferential allotment of shares would have led to a dilution of equity held by FTIL, and could have hurt its attempt to reduce its stake in the exchange from 26% to 2%.
Seperately, on 4 April, the MCX board had approved the amendment of rules and processes for divestment of stakes held by shareholders who have been declared unfit by any government, regulatory or a legal body.
If such a shareholder fails to do so, he is obliged to transfer excess shares to an escrow account, MCX said.
FTIL responded that it was surprised by the proposal.
“We fail to understand the agenda or the intent of the MCX board, as some of the best global and local names have expressed their interest to become the “anchor" for MCX and are seeking cooperation from the exchange to carry out basic due diligence," said an FTIL spokesperson.
Irregularities 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 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 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.
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