FT may opt out of rights issue to cut stake in MCX-SX

To approach Sebi on the matter soon

Financial Technologies India Limited (FT) might seek an extension on the January 18 deadline for reduction of promoter stake in the MCX Stock Exchange to meet regulatory guidelines.

An extension is one of three suggestions the company plans to approach the Securities and Exchange Board of India (Sebi) with, according to a source. The others are opting out of a rights issue or going the buyback route, said the person.

The Stock Exchanges and Clearing Corporations (SECC) Regulations, 2012, require the two promoters, Multi Commodity Exchange (MCX) and FT, to reduce their stake to five per cent; they jointly hold 10 per cent now and this could go up to 71.84 per cent if one takes into account the warrants the two hold in the exchange. Alternatively, MCX and FT could opt out of a planned 1:1 rights issue.

TOP Shareholders In MCX-SX
Shareholder	Stake
MCX	4.99
FTIL	4.99
IFCI	13.2
Union Bank of India	11.47
Punjab National Bank	9.18
Shareholding Pattern as of September 2013

Spokespersons for MCX Stock Exchange, MCX and FT declined to comment. Sebi had granted the exchange approval in July 2012 to offer new asset classes such as equity, subject to MCX and FT bringing their stake in the exchange down to five per cent within 18 months. The deadline expires January 18.

A bench of the high court here had stated on Thursday that Sebi could be informed of the pending litigation in the light of the deadline drawing near. Sebi has also asked that the two reduce the warrants held by the promoters, to meet the SECC regulations, within three years.

MCX-SX had previously announced it would be holding discussions with its institutional shareholders on January 13 to get a nod for a rights issue. IFCI (13.2 per cent), Union Bank of India(11.47 per cent) and IL&FS Financial Services, which holds 9.18 per cent stake in the exchange, are the major stakeholders.

The board of MCX-SX had also decided to review and renegotiate existing contracts and agreements including one for technology provided by FT. The exchange has also appointed a firm of chartered accountants to conduct an audit of its functioning from inception.

These decisions followed a Sebi notice to FT, on why recognition of its suitability to run an exchange should not be withdrawn. Sebi issued the notice in December following a similar notice from the commodities regulator, the Forward Markets Commission.

The latter had issued a note that FT, the former managing directors of MCX, Joseph Massey and Shreekant Javalgekar, and chairman Jignesh Shah did not meet the criteria to be declared 'fit and proper' for the charge. This was after a probe to establish responsibility for the payment crises at National Spot Exchange, in which FT held a 99 per cent stake. The payment crisis involved a sum of Rs 5,600 crore.

Sebi had renewed the recognition of MCX-SX earlier in the year but subject to the condition that no other regulator passed an adverse order against it.

FT’s scrip was up 10 per cent on Thursday, even as the Sensex dropped 0.08 per cent. MCX was down 1.6 per cent.