Giant NSEL payment blues hamper FT

As trouble brewed at Financial Technologies (FT)-promoted National Spot Exchange Limited (NSEL), the FT stock came under pressure, falling from Rs 730 in mid-July to recent lows of Rs 105.45. FT owns 99 per cent in NSEL. Though the FT stock has recovered to Rs 141 levels, in no way does it suggest that optimism is returning.

Experts say the overhang remains because of a lack of clarity on the payment crisis at the NSEL. As a part of the initiatives to resolve the issue, NSEL had proposed to pay Rs 174 crore as a first pay-out on Tuesday. However, the exchange has received and disbursed just Rs 92.13 crore on the payout day, indicating a shortfall of 47 per cent. As a result, the Street is worried as there is a shortfall of funds in the first instalment itself. Against this backdrop, experts believe investors should stay away from FT stock, as there could be more downside from the current levels.

"I do not think the investors should jump in at this point in time. One should wait for more clarity, specially how credibly they can resolve this (NSEL payment crisis) issue. Then only the trust of investors would come back and that would be the time to consider buying the stock," said Deven Choksey, managing director, KR Choksey Securities.

Though there are a few experts who believe there is value in the FT stock, it is better to be safe than sorry in the current market environment. Most also believe the situation at NSEL could worsen further before improving. Hence, the FT stock could remain volatile.

"I believe there is a high probability of shortfall in payments, in which case we do not know how the liability is going to be fixed. Will it have an impact on FT and its promoters? That time will only tell. In case of a shortfall, there could be a haircut in payments. That also we would have to see how much it is going to be," said an analyst who tracks the company with a leading broking house.

While the NSEL payment issue would remain a key overhang for FT stock, analysts suggests that investment in the Multi Commodity Exchange (MCX) could be less risky because there is no direct link of MCX with the crisis. Also, FT holds a minority stake in MCX.

Because of the crisis at NSEL, the initial fear was that this would also engulf the other promoter group exchanges in terms of a fall in business. However, volumes at MCX, MCX-SX and Indian Energy Exchange have been good over the last few days.

At Rs 269 a share, there is value in MCX's stock. At the current level, its market capitalisation is Rs 1,300 crore, or 1.7 times the cash and equivalent on the company's books (net Rs 750 crore) after adjusting for the Rs 450 crore margin money (belonging to customers and broking members).