MUMBAI (Reuters) - The government on Tuesday ordered trading software provider Financial Technologies (India) Ltd
With NSEL obligations running at close to $900 million, shares in Financial Tech fell by the maximum single-day limit of 20 percent in Mumbai after the government issued the order. Financial Tech's market value shrank to about $127.5 million.
Financial Tech already owned 99.9 percent of NSEL, which was wound down last year after defaulting on obligations to counter-parties amounting to around 55 billion rupees ($897 million). NSEL has since faced legal cases from traders in the exchange after failing to settle outstanding contracts.
The Ministry of Corporate Affairs argued merging the two companies would combine assets and capital and could allow the "satisfactory settlement of rights and liabilities of stakeholders and creditors of NSEL".
In a statement to the stock exchange, Financial Tech said it is "taking appropriate steps in the matter in consultation with the legal counsel of the company".
The government invoked a rarely used legal clause that allows it to order a merger between two companies if deemed in the public interest. Merging NSEL into Financial Tech would transfer any liabilities from the exchange to the trading software provider.
"It will be essential public interest to amalgamate NSEL and FTIL (Financial Tech)," the corporate affairs ministry said in the written order.
Financial Tech and its founder Jignesh Shah are being investigated by the Mumbai police's economic offences wing over its potential role in the defaults at NSEL.
Both the company and Shah have denied knowledge of any wrongdoing at NSEL.
The ministry asked the shareholders and creditors of NSEL and Financial Tech to respond within two months to any objections to the merger.
(1 US dollar = 61.2875 rupees)
(Reporting by Himank Sharma; Editing by Rafael Nam and Kenneth Maxwell)
