Crisil assigns top rating for proposed MCX share sale

The proposed initial share sale of leading commodity exchange MCX has been given a top rating by Crisil, which has said the IPO has strong fundamentals.

Multi Commodity Exchange of India (MCX) has filed initial papers for the IPO with capital market regulator Sebi.

The initial public offering of MCX, which is the leader in the Indian commodity futures market, is expected to mop up about Rs 800 crore, as per market sources.

Ratings agency Crisil has assigned a "five on five" IPO grade for MCX.

"This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India," the ratings agency has said.

MCX had an 82% share of the overall traded turnover in FY10.

"With a strong technology-backed trading platform and infrastructure... MCX is able to provide high liquidity and low impact cost of transactions; key criteria for the success of any exchange," Crisil has said.

"While new commodity exchanges have been set up over the past couple of years, they have not been able to nudge MCX from the top. However... We expect competition could intensify in the future," it said.

According to Crisil, over 85% of MCX's turnover is through metal and energy commodities, which are benchmarked to international prices.

"Not only do these commodities have higher volumes, but they also have higher turnover, which generates higher transaction fees compared to agricultural commodities," it added.

MCX's operating income increased at a CAGR (Compound Annual Growth Rate) of 18.3% between FY08 and FY10.