Financial Tech on high-growth path

The stock of Financial Technologies (FT), the technology company which owns 65 per cent in Multi Commodity Exchange, has been on fire.

The stock surged 10.72 per cent on the Bombay Stock Exchange today to close at Rs 652.80, clocking an intra-day 52-week high of Rs 690. It has risen 10 times in the past year, and more than 125 per cent in the past two months alone.

FT has been taking rapid strides in growing its stake in the commodities exchange business. With alliances with new exchanges in place, the company is likely to be on a firm growth trajectory, analysts say. Currently, the company commands a market-capitalisation of Rs 2,872 crore.

FT provides transaction automation technologies for equities, derivatives, and forex and commodity markets. It also offers market infrastructure based 'shared services' involving sophisticated exchange operations and technology infrastructure. The company has a state-of-the-art technology development centre in Mumbai.

Apart from its 65 per cent stake in MCX, the company also has other alliances which are set to boost its bottomline. During the March quarter, the company acquired a controlling stake of 76 per cent in IBS Forex Ltd, which is engaged in the business of B2B e-commerce platform for inter-bank forex trading.

It runs FX DIRECT, a currency trading platform for inter-bank foreign exchange trading.

Recently, FT along with MCX joined hands with the Dubai Metals and Commodities Center (DMCC) to form the Dubai Gold and Commodity Exchange (DGCX). FT holds a 40 per cent in DGCX while MCX owns 10 per cent.

The other half is held by DMCC. DGCX is the first borderless commodities exchange which offer bullion trading initially and eventually will offer other commodities. It is expected to be operational by November, 2005.

FT and Multi Commodity Exchange (MCX) have also signed an MOU with the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) for setting-up of India's first electronic exchange for agricultural products linking all agricultural produce marketing committees with consumers and producers.

The main product of FT, ODIN, is one of the highest selling financial software products and is being used by most of the exchanges including NCDEX, which is the competitor of MCX.

Analysts note that the exchanges, including MCX, DGCX and NSEAP, are going to contribute to the bottomline of the company and would be the main revenue drivers going forward.

Besides, analysts say the commodities market in India has just developed and hence there is huge opportunity for growth.

With the government planning to modify the current norms regarding options (currently options trading is not allowed in the commodity market), MCX's growth potential could only get better, said an analyst.

FT also has strategic and technical alliances with some of the top companies like Microsoft, Intel and Omgeo. The company has recorded impressive growth in financial performances in FY05, with net sales going up by 172 per cent to Rs 62.78 crore, while net profit advanced 336 per cent to Rs 20.24 crore.

During the March quarter, FIIs, T Rowe Price International Inc and Goldman Sachs Investments (Mauritius), picked up 6.5 per cent stake in the company at Rs 262 a share.