If everyone joins, NSEL crisis can be solved: Prashant Desai

Q&A with Managing Director, FTIL

Financial Technologies (India) has proposed a settlement plan for the payments default in 2013 at its subsidiary, National Spot Exchange Ltd (NSEL). Prashant Desai, managing director and chief executive officer of FTIL, explains the details to Rajesh Bhayani. Edited excerpts:

Why settlement talks at a time when several cases are going on in the courts against FTIL?

We thought if everyone comes to the table with a positive mindset to resolve the matter, the NSEL payment default can be resolved. At present, the defaulters to whom all the money has been traced are scot-free. Someone had to take a first step, which FTIL has taken, proposing to pay Rs 500 crore, of which Rs 180 crore was already paid by us in 2013 and with the brokers also contributing equally. With this money, all those trading clients having exposure up to Rs 1 crore, which are 11,954 (of the total 12,735) in numbers, will get at least half their dues. The rest of the money can be paid when recovered from the borrowers.

Why should the brokers pay?

First, the privity of contract with the trading clients is with the brokers. Second, in any exchange business, brokers make multi-times more money than the exchange. And, not only brokers, all parties should contribute and have a resolution mindset. Only then can this be resolved. Everybody benefits if it is resolved. If 95 per cent of the trading clients receiving between 50 and 100 per cent of the payout is unacceptable to some, it clearly indicates their vendetta against FTIL.  FTIL, in that case, will do everything under the ambit of law to protect the interest of its own 63,000 shareholders.

A year before, FTIL had proposed to pay Rs 1,100 crore to NSEL investor-clients. Why only Rs 320 crore now?

There might have been some discussions in the past which I am not aware of. As of now, we have made a goodwill gesture in good faith, taken the first step to resolve the issue. The conflict route is anyway being pursued by all. In that case, let’s all be patient and let the judiciary process be followed.

Have you approached brokers for a settlement? Why directly approach the government?

We have made a goodwill gesture, not approached anyone. We believe if everyone comes with a positive mind to resolve, this can be solved. We need support of the state machinery to hasten the recovery. Eleven defaulters have admitted liability of Rs 2,000 crore and a court has issued decrees for Rs 513 crore. Other orders are in process. So, this Rs 2,000 crore can be recovered and out of that, two public sector units can be paid fully and all trading clients of NSEL with dues above Rs 1 crore can be paid 50 per cent.  More important, all of us -- FTIL, brokers, trading clients and government -- can come together to focus on recovering the money from the defaulters and 80 per cent of the recovery can be done by focusing only on 10 defaulters.

Brokers say it is the exchange's duty to recover money. Why should they make payments on its behalf?

The exchange provided the trading platform. NSEL, so far as we know, is doing its best to recover they money and will continue relentlessly.

What is your defence against the government move to supersede FTIL's board of directors?

The entire current board is new and had nothing to do with the NSEL payment default. Eight of the 12 members joined recently. In the NSEL case, the only decision they have taken is to oppose the proposed merger (of NSEL with FTIL, proposed by the government), to protect the interest of 63,000 shareholders.

The second charge is that FTIL incurred a loss of Rs 290 crore in the sale of (our shares in) Multi Commodity Exchange (MCX). We say we were under a regulatory order to sell MCX and as the process was on, new norms were introduced -- the Forward Markets Commission did not allow MCX to launch new contracts and MCX threatened to put in escrow our shares, that could have been sold at a throwaway price. We sold because of FMC and now, we are accused. The charge of misappropriating funds is baseless; all the money is in banks and safe.