MCX to exit MCX-SX, Dubai commex

Multi Commodity Exchange (MCX) has decided to exit from its stock exchange venture here and one abroad, the Dubai Gold and Commodities Exchange (DGCX).

As the stake held by MCX in both these is not much, it seems it have no strategic interest in these. While the process of a final exit could take time, the exchange has invited bids for appointing investment advisors.

MCX was co-promoter in both these exchanges, along with the Jignesh Shah’s Financial Technologies (FTIL). DGCX was set up a decade earlier; MCX-SX, a stock exchange, was promoted five years before. FTIL is in trouble due to its scam-ridden spot exchange, NSEL. FTIL holds 26 per cent in MCX and, in the wake of the NSEL probes, it was directed by the regulator to reduce this below two per cent. FTIL has challenged this move in the high court but MCX is anyway moving to exit from the ventures it had co-promoted with FTIL.

MCX holds five per cent equity and warrants with no dividend or voting rights but the buyer of those warrants will have a right to convert these into equities. MCX has to cut its holding in the SX in line with a court court ruling, which said the 10 per cent combined stake of both FTIL and MCX must be reduced to a combined five per cent. Both have approached the Securities and Exchange Board (Sebi) on this.

Meanwhile, MCX invited bids on Thursday for selecting investment bankers. A private company inviting such a bid is not usual. However, the exchange’s new chairman, Satyananda Mishra, is insisting on proper procedures.

MCX-SX’s valuation, going by the rights issue it had planned at Rs 10 a share, is seen as 10 times its equity, as the face value of each share is Rs 1. However, MCX’s costing could be different, as it had sold five per cent in the SX to IL&FS at Rs 36 a share. Later, to meet Sebi norms on dilution, FTIL restructured equities and IL&FS’ holding went up to nine per cent. It was allowed to hold only five per cent and the additional equity was converted into warrants, bought back by MCX, giving a 15 per cent return to IL&FS. Its holding in DGCX is only four per cent but the bourse is doing very well and, hence, the valuation could be high.

However, the Dubai government fund owns it and equations among shareholders are not good. So, getting a real valuation could be an issue.