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Home >Market >Stock-market-news >FTIL continues to hold 10,000 shares of NSE

Mumbai: As an entrepreneur eyeing a share of the businesses dominated by his arch-rival, National Stock Exchange of India Ltd (NSE), Jignesh Shah fought protracted battles during his entry into stock and currency derivatives. Long after his fall following the blow-up of a 5,574.35 crore fraud at the National Spot Exchange Ltd (NSEL), promoted by his enterprise Financial Technologies India Ltd (FTIL), and its subsequent banishment from all exchanges, FTIL continues to hold 10,000 shares of NSE, India’s largest stock exchange in terms of volumes.

Documents filed by NSE with the Registrar of Companies (RoC) mention the shares, which FTIL had acquired while it was planning to take on NSE with its MCX Stock Exchange Ltd (MCX-SX). Though the value of shares is not substantial, the stakeholding gives FTIL access to NSE’s corporate and strategic decisions.

On 19 March, the Securities and Exchange Board of India (Sebi) had ordered FTIL, among others, to sell its stakes in all exchanges. However, FTIL, which has completely exited all other bourses, including Multi Commodity Exchange of India Ltd (MCX), MCX-SX and Indian Energy Exchange Ltd, is yet to sell its NSE stake. FTIL has also exited most of its overseas bourses in Mauritius and Singapore.

FTIL’s continued stakeholding in NSE assumes significance, since even though NSE is unlisted, its shares are traded between institutions in so-called off-market transactions, or trades not executed on an exchange platform.

According to a 10 July 2012 report in Business Standard, Infrastructure Development Finance Co. Ltd (IDFC) sold a part of its holding in NSE in 2012 after the exchange decided against getting listed. IDFC sold a total of 600,000 shares, the report said. The numbers could not be independently verified.

In 2007, Corporation Bank sold 119,000 shares to Citigroup Strategic Holdings Mauritius for more than $6 million. Earlier, the foreign entity had bought 400,000 shares from Bank of Baroda at 2,281.01 per share.

In June 2007, Industrial Development Bank of India Ltd sold 2% in NSE to MS Strategic (Mauritius) Ltd for $50 million.

While it could not be independently verified, it is believed, according to market participants, that NSE shares are currently valued around 4,200, giving the exchange a valuation of over $3 billion, or nearly 19,000 crore.

A 13 February 2013 report in The Economic Times pegged the valuation of NSE at 20,000 crore according to market estimates.

Deven Choksey, managing director at KR Choksey Securities, says FTIL may be finding it difficult to get a buyer as not all institutional entities, especially overseas firms, would have the clearance by their investment committees for buying shares of unlisted companies.

An FTIL spokesperson confirmed the company holds 10,000 NSE shares, adding FTIL had sought certain information from NSE to initiate the sale process. The spokesperson declined to comment on a time-frame for the sale.

An NSE spokesperson said after the Sebi order, the exchange had sent several reminders to FTIL to sell its stake. “We have been providing them with whatever information they have been seeking," said the NSE spokesperson.

The Sebi order declaring FTIL unfit to hold stakes in any stock exchange or clearing corporation had given it 90 days to sell its holdings in all such entities, including NSE, MCX Stock Exchange (MCX-SX), MCX-SX Clearing Corporation, Delhi Stock Exchange and Vadodara Stock Exchange.

FTIL appealed the Sebi order before the Securities Appellate Tribunal (SAT), which, on 9 July, upheld the ruling and gave the company and its affiliates four weeks to comply. That deadline ended on 7 August.

The Sebi direction came in the wake of an order by the Forward Markets Commission (FMC), which, in December 2013, ruled that FTIL is not fit to hold shares in any commodity exchange and ordered it to sell its stake in MCX.

The order declared Shah and FTIL unfit to hold equity in any stock exchange following the fraud at NSEL, in which FTIL holds 99.9% stake.

NSE and MCX-SX have a history of bitter rivalry in the equity and the currency derivatives segments. When MCX-SX launched its equity segment in February 2013, it announced an aggressive membership drive with lower fees, which forced NSE to lower its charges.

Last month, FTIL sold its entire stake in MCX-SX to a clutch of investors, including Rakesh Jhunjhunwala, Trust Investment Advisors Pvt. Ltd and Edelweiss Commodities Services Ltd.

In the currency segment, the battle between MCX-SX and NSE reached the Competition Commission of India (CCI) when the former alleged that NSE was hindering competition by offering currency trading free of cost.

In June 2011, CCI passed an order, which said NSE was following an unfair pricing policy and was using its dominant position to attract more business, thereby hurting its peers. NSE challenged the order at the Competition Appellate Tribunal (Compat) but failed to get relief. It has filed an appeal before the Supreme Court.

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