NSEL settlement hopes propel FT stock

Shares double from August lows on talks of settlement plan backed by Shah's own holding, stake sale in NK Proteins

Financial Technologies (India) Ltd (FTIL), promoter of the crisis-ridden National Spot Exchange Ltd (NSEL), has gained around 115 per cent since August 30 amid expectations that the group could get some relief from the speculated sale of NK Proteins, a borrower company.

The stock, which had touched a low of Rs 102 amid the Rs 5,600-crore payment crisis at NSEL, closed at Rs 217.40, up 18.25 per cent over its previous close, on the BSE on Thursday. While the reversal in broader market trend has helped the rise, brokers attribute the spike in the last two-three sessions to the deal talks.

There is talk of negotiations between Jignesh Shah, promoter of FTIL and NSEL, and investors in the exchange. “There are negotiations with Shah on a daily basis. Top brokers and investors are trying to convince Shah to put in part of his promoter holding in FT in an escrow account as a guarantee and then go about the recovery. That will boost the confidence of investors,” said a large investor of NSEL, who was part of the negotiations.

A senior official with a large brokerage, which has exposure to NSEL, also said a securitisation plan that involves Shah’s personal stakes in FTIL is being chalked out to settle dues to investors.

A committee appointed by the finance ministry was also expected to submit its reports on the crisis by September 12. There are other deal talks, too.

“That trade is because of rumours that one of the troubled borrowers will be sold off and the proceeds will give some cushion to the group,” said Arun Kejriwal of Kejriwal Research and Investment Services. “That will also help secure part of the bridge loan by FT given to NSEL.”  

Market circles and social media were abuzz with the deal and even proposed valuations. Deena Mehta, senior broker and managing director of Asit C Mehta, tweeted: “Cargill India may acquire 57 per cent stake in NK Proteins, valuation of NK at 1,150 crore relief for NSEL investors?”

However, some dismissed these speculations as a two-year old news and Minneapolis-based firm may not be interested in the Ahmedabad-based cooking oil maker given its contingent liabilities of over Rs 929 crore to NSEL.

In March 2011, Mint had reported Cargill India was in advanced talks with NK Protein for a 57 per cent stake sale. NK Proteins is one of the portfolio companies of Brand Capital, the investment arm of Bennett, Coleman Co, the leading publishing house in the country.

Kejriwal also pointed out speculators are running amok in the stock though it is in the futures and options ban list due to heavy positions. “Though in the ban list, brokers are allowed to trade by paying a fine of Rs 1 lakh. That is also driving speculative positions,” he said.

Though the stock has run up by 115 per cent from its lows in the last 10 days, that amounts to a recovery of 14 per cent for large institutions such as Blackstone who had entered the stock at Rs 810 levels. For those who entered at peak prices of over Rs 1,223, that is an even smaller consolation.