Barely two months after Multi Commodity Exchange (MCX) turned the darling of the stock markets post-listing on the Bombay Stock Exchange (BSE) in March, have anchor investors hit the sell button, ask stock brokers.
As a consequence, the share price of the Rs 660-crore initial public offering (IPO) is now trading below its issue price of Rs 1,032. The MCX scrip is down over 20 per cent in over a month and was traded at Rs 1,009 last Friday. MCX was an offer for sale by promoters, including Financial Technologies, State Bank of India, GLG Financials Fund, Alexandra Mauritius Limited, Corporation Bank, ICICI Lombard General Insurance Company and Bank of Baroda.
However, analysts say in such a market scenario, institutions are not shying away from profit booking in most top companies. Rupee is on a downward spiral hurting foreign players the most and triggering their stop losses. The Indian currency has shed over 10 per cent against the dollar this year.
Also, delay of the proposed Forward Contract Regulation Act (FCRA) Amendment Bill has come as a bad news for MCX. A review of FCRA could have ensured more volumes in the commodity segment as it facilitates the entry of institutional investors and introduction of new products for trading, such as options and indices.
The concept of anchor investors was introduced by the Securities and Exchange Board of India in 2009 to bring in a class of investors with a slightly longer-term view to help the price discovery process and control listing day volatility. Anchor investors can subscribe up to 30 per cent of the portion reserved for qualified institutional buyers (QIB) in an IPO. In some cases, the QIB portion is 50-60 per cent of the book built.
However, in many past IPOs, it was noticed that anchor investors made a swift exit post their short one month lock-in period.
The MCX IPO had generated a huge frenzy just a couple of months ago since it was sold as a new concept stock in the domestic markets. Twelve anchor investors had bought around Rs 95 crore worth of MCX shares. Blackrock Global Funds, Deutsche Securities, Kuwait Investment Authority, Credit Suisse, Wellignton Management Company, Acacia Conservation Fund and GMO Emerging Domestic Opportunities Fund were the overseas anchors, while Tata AIG Life, Oriental Bank of Commerce, Life Insurance Corporation, ICICI Prudential, Birla Sun Life and Sundaram Mutual Fund were domestic investors.
Following anchor subscription, the IPO saw demand for Rs 36,000 crore worth of shares as it was oversubscribed 54 times.
In March, the euphoria to trade or own MCX shares was such that the National Stock Exchange had to allow its listing under the permitted category due to fear of losing volumes to rival BSE. MCX had decided to list only on the BSE as its group companies were involved in legal disputes with NSE. MCX shares rose nearly 40 per cent from its issue price to touch a high of Rs 1,426 post-listing. On the first day itself, about Rs 1,865 crore worth of MCX shares were traded on NSE and BSE together, of which the former's market share was 56 per cent.
During the MCX roadshow, V K Bansal, chairman of Morgan Stanley India had expressed a view that while listed global exchanges trade at 17-18 times earnings on average, Asian exchanges trade at an average price to earnings (PE) of 25. The MCX valuation is close to that of Hong Kong Exchanges and Clearing Ltd, which trades at 29 times historical earnings. Morgan Stanley was one of the lead managers.
Globally, the average PE for exchanges is around 18. The largest exchange in the world, CME Group Inc, which has a market capitalisation nearly 20 times higher than MCX, has a PE multiple of 11.