Home >Market >Stock-market-news >Institutional shareholders’ stake in MCX declines

Mumbai: Multi Commodity Exchange of India Ltd (MCX), the country’s largest commodity trading platform that was promoted by Jignesh Shah-controlled Financial Technologies India Ltd (FTIL), has seen a steady exodus of institutional shareholders ever since the payments crisis at the National Spot Exchange Ltd (NSEL) emerged in July 2013.

According to the latest shareholding data disclosed by the company to stock exchanges, the total stake held by institutional shareholders has fallen to 36.89%, as on 30 June, from 58.38% on 30 June 2013.

FTIL cut its stake in MCX from 26% to 24% by selling 2% stake to billionaire investor Rakesh Jhunjhunwala last week. FTIL also owns 99.99% in NSEL.

According to the latest shareholding data of MCX, state-owned lenders including Union Bank of India, Bank of India, Bank of Baroda and Corporation Bank, along with entities such as Euronext, National Stock Exchange Ltd (NSE), Government of Singapore Investment Corp., Merrill Lynch and Fidelity Funds, no longer feature in the list of entities that own more than 1% equity stake in the bourse.

Stock exchange disclosures show that Bank of Baroda and Corporation Bank have completely sold their shares in MCX, the only listed bourse in the country.

Corporation Bank sold its last tranche of 58,053 shares on 1 July. NSE has also sold its entire chunk of MCX shares.

“There is no special reason behind this move. The market conditions were favourable and we wanted to get good valuations for our investment. This is not a sudden move; even last year we sold some stake," said a senior official from Corporation Bank, requesting anonymity as he is not authorized to speak on the matter.

MCX did not respond to an email query.

Market participants say that the fall in institutional holding is understandable as financial institutions typically stay away from stocks that are subject to negative news flows.

“Most of the domestic institutional shareholders bought the shares at face value and have booked profits to exit a controversial company," said Arun Kejriwal, founder, Kejriwal Research and Investment Services Pvt. Ltd.

Shares of MCX, which have seen significant volatility over the last one year, have gained 21% in the last three months. On Monday, MCX shares closed at 706.75 on BSE, up 3.57%. On 19 August 2013, the shares touched an intra-day low of 238.30.

Along with domestic institutions, foreign institutional investors (FIIs) have also been actively selling the stock. The number of FIIs holding shares of MCX has halved from 83 to 41 in the period between June 2013 and June 2014, though the stake has come down only marginally from 18.24% to 17.72% over the same period.

To be sure, the total holding of retail investors has increased, which market experts attribute to the fact that the listed bourse is in the midst of a stake sale process that could see the new entity making an open offer.

“Retail investors have jumped into the fray with expectations that some entity will have to make an open offer at an attractive price," said Kejriwal. The retail holding went up from 6.96% in June 2013 to 14.17% in June 2014.

On 17 December 2013, Forward Markets Commission (FMC) ruled that FTIL is not fit to hold shares in a commodity exchange and ordered it to sell its stake in MCX.

On 6 May, FMC, in a notification, said any entity found to be unfit to run a commodities exchange will have to sell its shareholding, and not have any voting rights till its shares are sold.

Separately, MCX is also in the process of appointing a new chief executive officer after Manoj Vaish resigned from the organization in May.

According to a 14 July report in The Hindu Business Line, a number of retired bankers and bureaucrats are in the race for the post. Ramesh Razdan, a former chief executive of Stock Holding Corp. of India Ltd (SCHIL), Subhash Chander Kalia, a former executive director of Union Bank of India, and Ajai Kumar, a former chairman and managing director of Corporation Bank, are in the running, added the report.

Vishwanath Nair contributed to this story.

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