Sebi rejects MCX proposal to hold 15% stake in MSEI

MCX had proposed a few months back to convert warrants it was holding in that exchange in to an equity

The Securities and Exchange Board of India (Sebi) has rejected Multi Commodity Exchange (MCX)'s request to increase its stake in Metropolitan Stock Exchange of India (MSEI, formerly known as MCX-SX). A few months ago, MCX had proposed to convert the warrants it was holding in that exchange into equity, which would have allowed it to raise its stake to 15 per cent.

MCX received warrants when equity base of MCX-SX was restructured and its promoters - Financial Technologies and MCX - had converted their equities into warrants, which were to be disposed of in three years. That three-year period for MCX is expiring on June 19 as Sebi has also rejected MCX's request to extend the time limit.

ROAD BLOCK

• MCX proposed Sebi to convert the warrants it was holding in that exchange into equity
• This would have helped raise its stake to 15 per cent
• Sebi has also rejected MCX's request to extend its time limit for MCX-SX warrants
• MCX had sold some warrants to IL&FS earlier

“The Company's request for extension of time as well as to retain 15 per cent shareholding as applicable in case of a stock exchange has not been acceded to by Sebi,” MCX said in its filing to the BSE on Tuesday.

 

MCX had sold some warrants to IL&FS earlier. The value of the warrants would have been Rs 120 crore. According to sources, the exchange received offers to purchase warrants at Rs 1.50 per warrant but the Metropolitan Stock Exchange recently announced rights issue at a price even lower than that which has spoiled the chances of MCX selling warrants.

If MCX had been able to increase the stake to a maximum permissible level of 15 per cent, it would have been the single largest shareholder.

However, with warrants set to expire by the end of the month, Metropolitan stock exchange's net worth will go up to Rs 175 crore, a level much comfortable for the struggling stock exchange.