TVS Capital Funds-led group in race for FTIL’s stake in IEX3 min read . Updated: 26 Sep 2014, 12:31 AM IST
FTIL has been looking to pare its stake after the power sector regulator asked it to divest its shareholding
New Delhi: A consortium led by Chennai-based private equity firm TVS Capital Funds Ltd is among the entities competing to buy the stake of around 25% that entrepreneur Jignesh Shah’s Financial Technologies (India) Ltd (FTIL) owns in Indian Energy Exchange Ltd (IEX).
“The TVS-led consortium is one of the bidders. Significant bids have come in for IEX stake sale. The top bid is in the region of around ₹ 300 crore," said a person aware of the development, requesting anonymity. Mint couldn’t ascertain which other entities are in the running for the stake.
IEX is valued at around ₹ 1,700 crore. FTIL has been looking to pare its stake in the power exchange against the backdrop of the power sector regulator, Central Electricity Regulatory Commission (CERC), asking it to divest its shareholding. The CERC order in May was reported by PTI.
IEX is one of India’s two operating electricity exchanges. Power exchanges provide a platform for buyers, sellers and traders of electricity to enter spot and forward contracts, besides enabling trading of renewable energy certificates. They also provide a payment security mechanism to buyers and sellers. These exchanges primarily serve to discover the price for the day ahead, which is the electricity sector’s equivalent for a spot price.
CERC issued its directive to FTIL after a March order passed by the Securities and Exchange Board of India (Sebi), the capital market regulator, which declared it unfit to hold a stake in any stock exchange or clearing corporation and asked it to divest its holdings in such entities.
In December, commodities futures market regulator Forward Markets Commission asked FTIL to reduce its holding to less than 2% in an regulated commodity exchange. Shah and Joseph Massey, former chief executive officer and managing director of group company MCX Stock Exchange Ltd, were found not “fit and proper" to hold any management position in any exchange in India.
Market regulators acted against FTIL after a ₹ 5,574.35 crore payment crisis—which investigations later determined to be a fraud—surfaced last year at National Spot Exchange Ltd (NSEL), in which FTIL has a 99.99% stake.
In April, FTIL founder Shah stepped down from IEX’s board after CERC proposed a new regulation that would have resulted in an effective censure of his appointment on the board of the power exchange. The regulation stated that if any person is found unfit to head an exchange by any regulatory agency, he or she will not be entitled to hold any position on the board of power exchanges.
FTIL is trying to sell its stake in IEX at a time when the electricity trading market is not buoyant, partly due to the inability of state electricity boards (SEBs) to buy costly power. While competition is increasing between electricity suppliers, the demand for traded power is faltering as SEBs across India are saddled with losses because of power theft, technical losses during transmission and distribution, and billing inefficiencies.
“The regulator is keen that the exchange has a very important role to play in the Indian power sector," said a second person aware of the impending deal, requesting anonymity.
Queries emailed to TVS Capital Funds remained unanswered. An IEX spokesperson said in an emailed response: “We are unable to comment to your questions below since we have no formal word available with us so far."
“FTIL does not comment on market rumours and speculation. As has been indicated to the exchanges, FTIL is exiting exchanges/regulated businesses and any development on the subject will be intimated to the markets through notification to the Exchanges," an FTIL spokesperson said in an emailed response.
In March, FTIL announced the sale of a 5% stake in IEX for ₹ 72.89 crore as part of efforts to comply with the regulatory norms. Recently, FTIL completed its exit from Multi Commodity Exchange of India Ltd by selling its residual 5% stake in the exchange in the open market.