We see it as a good investment: Kotak

Price it paid for exchange's share is 'fair'

Kotak Mahindra Bank becomes the largest investor in Multi Commodity Exchange (MCX) after buying 15 per cent stake in the latter. Yet, its head of group strategy, Paul Parambi, says: "For us, this is a pure investment; we got the opportunity in the exchange we like." He told Business Standard the price of purchase "is a fair one, according to us, and we see tremendous scope for the exchange to grow".

The bank, he said, would have no special rights in MCX and the exchange would be run as its board of directors decided. Nor did the decision to invest in MCX have anything to do with ACE, the commodity exchange in which Kotak Mahindra is an anchor investor.

ACE, he said, would be run as usual. Its presence was mostly in agricultural commodities, noted Parambi; MCX is an exchange for metals and energy. MCX has had several challenges in the past year. A year before, the Union government imposed tax on transactions on non-agricultural commodities traded on commodity exchanges; then, there were all the issued related to FTIL, its anchor investor.

However, Parambi says, the scope for the exchange to grow is enormous; even in the past year, its market share wasn't much affected. The exchange space, he said, was also likely to see permission for new instruments such as options and entry of new entities, such as banks. This meant a lot of growth for the commodity exchange segment and MCX was well placed to benefit.