Home / Companies / Financial Technologies net profit declines 61.5% in Dec quarter

Mumbai: Financial Technologies (India) Ltd. (FTIL) reported a 61.5% decline in its December quarter net profit to Rs34.5 crore, and declared an interim dividend of Rs2 per share.

The parent of National Spot Exchange Ltd (NSEL) which is embroiled in a Rs5,574.34-crore payment crisis, said its total income in the quarter ended December declined to Rs104.4 crore from Rs174.5 crore a year before.

Last week, FTIL’s group company Multi Commodity Exchange of India Ltd (MCX), which is also the country’s largest commodity exchange by market share, reported a 71% fall in net profit for the December quarter as trading volumes declined due to a new tax on commodity transactions and the ongoing payment crisis at NSEL. FTIL, which owns 26% in MCX, holds a 99.9% stake in NSEL.

In a note to the result, FTIL said it has outstanding loans and interest thereon totaling Rs216.7 crore as at 31 December 2013 receivable from NSEL, and added that no provision has been made for such outstanding amount, the realization of which is dependent significantly on the recovery by NSEL of its dues from its defaulting members.

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 payout since.

MCX fell 4.43% to Rs475.50 a share on BSE on Thursday while benchmark Sensex lost 1.25% to close at 20,193.35 points.

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