Rating agency Crisil today said the proposed initial share sale of Multi Commodity Exchange of India (MCX) has strong fundamentals, especially reflecting its leadership position in the Indian commodity futures market.
MCX filed draft papers for the IPO with capital market regulator Sebi on March 31.
The share sale is expected to raise an estimated Rs 800 crore, according to market sources.
Crisil has given "five on five" IPO grade for MCX, which is promoted by Financial Technologies India.
"This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India," the rating agency said in a statement.
According to Crisil, the grade also reflects MCX's leadership position in the Indian commodity futures market over the past four years. The entity had an 82% share of the overall traded turnover in fiscal year 2010.
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"It is a leader in the trading of bullion, crude oil, copper and natural gas," the statement noted.
"With a strong technology-backed trading platform and infrastructure, MCX is able to provide high liquidity and low impact cost of transactions – key criteria for the success of any exchange," it added.
Crisil pointed out that the rating also considered the benefits that MCX would derive from amendments to the Forward Contracts (Regulation) Act -- that would allow trading of options and indices as well as participation by institutional investors. This would in turn increase the traded turnover on commodity exchanges.
"While new commodity exchanges have been set up over the past couple of years, they have not been able to nudge MCX from the top. However, we expect competition could intensify in the future," it said.
MCX's operating income has increased at a CAGR (Compound Annual Growth Rate) of 18.3% over FY08-10.