Home / Companies / News /  FTIL plans to sell part of IEX stake for `72.89 cr

Mumbai: Financial Technologies (India) Ltd (FTIL) said on Monday that it plans to sell a part of its stake in Indian Energy Exchange Ltd (IEX) for 72.89 crore.

FTIL has entered an agreement with Golden Oak (Mauritius) Ltd to sell 1.36 million shares, or 5%, of lEX, FTIL said in its filing with the stock exchanges.

FTIL’s shareholding in IEX will be at 28.49%, and on a fully diluted basis at 25.64%, after the transaction is completed.

FTIL, promoted by entrepreneur Jignesh Shah, said it was doing so because India’s power sector regulator Central Electricity Regulatory Commission (CERC) has asked the company to cut its stake in IEX to 25%.

FTIL, which is under investigation by multiple agencies after a 5,574.35 crore payment crisis surfaced in end-July at National Spot Exchange Ltd (NSEL), has been raising funds by selling stakes in some of its existing ventures over the last few months. FTIL holds a 99.99% stake in NSEL.

In November, FTIL sold its subsidiary Singapore Mercantile Exchange to IntercontinentalExchange Group Inc. for $150 million. FTIL had said in a statement that it will use the proceeds to repay foreign currency loans.

The company also sold its warehousing subsidiary, National Bulk Handling Corp. Ltd (NBHC), to IVF Trustee Co. Pvt. Ltd, the sole trustee of private equity firm India Value Fund (IVF) IV, for 241.74 crore, on 14 March. NBHC manages at least 1,140 warehouses across India, which are used for storage of various commodities on behalf of its clients.

“These are strategic move to be compliant with regulatory diktat," said Rajnikant Patel, former managing director and chief executive of BSE Ltd. “FTIL has been focusing on the capital markets business, but its core competence lies in technology. It is moving in the right direction by offloading its stake in exchanges."

FTIL, however, is still to make progress in reducing its holding in the group’s commodity futures exchange, Multi Commodity Exchange of India Ltd (MCX), and its stock exchange venture MCX Stock Exchange Ltd (MCX-SX). FTIL holds 26% in MCX and 5% equity directly in MCX-SX, along with convertible warrants.

On 19 March, the Securities and Exchange Board of India (Sebi) declared that FTIL was unfit to hold a stake in any stock exchange or clearing corporation and gave it 90 days to divest its holdings in such entities.

Since the Sebi order also bars entities related to FTIL from holding any stake in any exchange, MCX will also have to divest its entire holding in MCX-SX. According to the Sebi order, FTIL and MCX can neither hold the equity shares nor the convertible warrants any more.

Sebi’s order followed a 17 December order by commodities futures market regulator Forward Markets Commission (FMC) whereby FTIL, Shah and two other entities were termed not fit and proper to be shareholders in any exchange. As part of the order, FMC asked FTIL to reduce its holding to less than 2% in any regulated commodity exchange.

Sebi’s order, however, is unlikely to impact FTIL’s remaining holding in IEX. “Sebi’s order will not impact in areas which is not in jurisdiction of Sebi," said J.N. Gupta, managing director at SES Governance, a corporate governance advisory firm.

“Sebi order is not applicable to IEX at all," confirmed a spokesperson for FTIL.

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.

Shares of FTIL dropped 3.98% to 358.35 on Monday on the BSE, while the exchange’s benchmark Sensex gained 1.38% to 22,055.48 points.

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