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Home >Market >Mark-to-market >Investors welcome prospect of new anchor investor in MCX

Multi Commodity Exchange of India Ltd’s (MCX’s) investors appear to think that promoter Financial Technologies (India) Ltd’s (FTIL’s) likely exit from the company is a case of good riddance. The company’s shares rose by 10.8% after the Forward Markets Commission (FMC) ruled that FTIL, Jignesh Shah and two other erstwhile directors of MCX are unfit to run an exchange.

The shares were also helped by a simultaneous news release that private equity investor Blackstone has received permission from FMC to increase its stake from the current 2% to 5% in MCX.

But many investors believe the exchange’s future will be brighter with a new anchor investor. Much before FMC made its remarks about FTIL and Shah, users of MCX’s platform had reduced trading activity considerably, pointing again to concerns about trust. Not only trading volumes, but even the open interest on MCX has fallen considerably in the few months since the National Spot Exchange Ltd (NSEL) crisis erupted.

Meanwhile, rival exchanges such as National Commodity and Derivatives Exchange Ltd have launched new contracts to attract customers away from MCX—and have tasted some success. MCX’s investors will evidently hope that the transition to a new ownership happens quickly so that the drop in market share is arrested. However, needless to say, FTIL is likely to contest FMC’s findings and it may be a while before any transfer in ownership happens.

MCX shares have fallen by 70% this year owing largely to the double whammy of the NSEL scam and its related fallout on FTIL group companies, and the government’s decision to introduce a commodities transaction tax earlier this year. Although the shares had fallen to as low as 240 soon after news of the scam broke, it has recovered since and appears to have found a floor around the 400 levels. At current levels of 433, the exchange has a market capitalization of 2,200 crore. Once the cloud over the exchange’s ownership lifts, valuations are expected to improve.

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