Shareholders favour a cut in MCX-SX rights issue pricing

May have to cut the prices of the 1:1 rights issue

The MCX Stock Exchange (MCX-SX) is reviewing the pricing of its proposed rights issue. If some shareholders prevail, it may have to cut the price of its 1:1 issue. The exchange is planning to raise up to Rs 500 crore and is making efforts to convince them on the pricing of Rs 10 a share of Rs 1 face value.

Its equity base is Rs 54 crore. Some are understood to have said the pricing needed to be lowered because the exchange had not broken even and volumes in currencies were down a lot. Also, it was yet to establish itself in the equity segment.

The exchange wants all shareholders to participate in the issue as at present it has an advantage of being demutualised, with 80 per cent equity held by public sector institutions and banks. A spokesperson said, “In consultation and with the approval of institutional shareholders, the board has decided to raise capital through a rights issue. The exchange is looking to raise Rs 500 crore. The issue is expected to be completed next month.”

The exchange said once the regulator lifted restrictions on currency futures, it could see a volume pick-up.  

A source said Infrastructure Leasing & Financial Services Limited (IL&FS) had objected to the issue.

A month ago, IL&FS had written to the MCX-SX asking not to go ahead with the issue. It was holding shares in MCX and after selling those it purchased shares in MCX-SX at Rs 36 a share from the MCX. When the MCX-SX’s equity was restructured later to comply with the capital markets regulator Securities and Exchange Board of India’s norms, IL&FS equity holding increased beyond five per cent and for the additional holding over five per cent it was issued warrants. The warrants allotted to IL&FS were bought back by the MCX at 15 per cent IRR in 2010. IL&FS demanded further comfort which MCX gave. La-Fin, promoter of the Financial Technologies (India) Limited, or FTIL, (which promoted the MCX) issued a comfort letter to IL&FS for this on the request of the MCX.

The MCX-SX clarified, “IL&FS had made some observations which have been clarified by the exchange.”

The exchange spokesperson said, “The FTIL and MCX are not considered promoters and their shareholdings have been classified as public.”