FTIL stake sale in MCX reaches final lap

Multi Commodity Exchange's stock rises nearly 20% in a day in anticipation of the sale

The 24 per cent stake sale in the Multi Commodity Exchange (MCX), put up by anchor investor Financial Technologies (FTIL), which wishes to divest, is likely to take place soon.

Kotak Bank which can buy up to 15 per cent is said to be a front runner in the race. The BSE exchange and Reliance Capital are said to be out of the race, while an informal consortium led by US-based Chicago Mercantile Exchange is believed to have decided to send binding bids.

In anticipation, the MCX share price on Thursday increased 19.9 per cent to Rs 586.40 on the BSE, with a huge volume of 8.8 million shares traded. The shares of FTIL were locked after hitting the five per cent upper circuit, at Rs 244.75.

DEAL ACTION

• A 24 per cent stake in MCX has been put on the block by anchor investor Financial Technologies India Ltd
• Kotak Bank, which can buy up to 15 per cent, is said to be a front runner in the race
• The BSE and Reliance Capital are said to be out of the race
• An informal consortium led by US-based Chicago Mercantile Exchange is believed to have decided to send binding bids

FTIL had put its 24 per cent stake in the exchange on the block in the wake of the financial crisis at its subsidiary, National Spot Exchange. FTIL holds 26 per cent stake in MCX and was told by the Forward Markets Commission to bring this down to a maximum of two per cent.

According to a source, JM Finance has started getting binding offers for MCX stake. JM is the financial advisor for the stake sale, appointed in March by FTIL.

The source said two entities were very serious in bidding and the Kotak group, which already has a commodity exchange, ACE, had emerged as a serious contender after new norms on commodity exchange ownership which allowed a bank to hold up to 15 per cent, the highest holding any one entity could have in the comex. BSE was in the race earlier but FTIL is understood to have told the exchange that their price was the lowest among bidders. Sources said Deutsche Borse was also not in the race now.

Reliance Capital, a finance company in the Anil Ambani group, had also placed a non-binding bid for the 24 per cent stake at Rs 750 a share, the highest bid. However, with new ownership norms in place which don’t allow a corporate entity to hold more than five per cent, the company might have lost interest. The company already has interest in ICEX and NMCE, the two other exchanges.

Another player, CME, had placed a non-binding bid for five per cent. Tata Capital and Warburg Pincus and one member of the London Metal Exchange are understood to be supporting the CME bid.

The bidders are to give binding offers to JM Finance, which will send the proposals to a committee formed by FTIL, which will give its recommendation and the board of the company will clear it. Initial bids were placed in the first week of April but the Price Waterhouse audit report on the exchange and then the new ownership norms had delayed the final bidding.