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MCX investors band to oust promoter FTIL

Financial Technologies alleges hostile takeover 'in garb of minority shareholders'

Rajesh Bhayani  |  Mumbai 

To oust the promoter of Multi Commodity Exchange (MCX), the country’s largest in the segment, some institutional investors are together planning to approach the authorities to expedite the process.

Recently, these investors met the brass of the exchange and will hold a meeting of investors with one per cent or more stake in it — excluding the anchor investor, Financial Technologies (India) Ltd or FTIL — on Wednesday to discuss the strategy.

Meantime, MCX will discuss a proposal for auctioning preferential shares to an outside investor to counter FTIL, at a meeting of its board of directors on Thursday. It also proposes to amend the main objective of its articles of association, to include a provision to auction shares of investors declared unfit by the regulator. Both these proposals have to be approved by all shareholders in the general body meeting, which could take some time.

  • A group of institutional investors has called a meeting on Wednesday to discuss approaching Company Law Board for auctioning Financial Technologies’ shares
  • Plans to approach the markets regulator to protect the interests of minority investors
  • To urge the commodities markets regulator not to take any action against MCX that could hurt the exchange’s other shareholders

Investors have been gunning for FTIL since the Forward Markets Commission (FMC) declared the former “not fit and proper” to be an anchor investor and told MCX to ensure FTIL sold 24 per cent stake in the exchange before the end of next month.

The investors — including private equity firm Blackstone, a couple of government-owned development finance institutions and a few state-owned banks — will approach the Company Law Board (CLB), the Securities and Exchange Board of India (Sebi) and FMC.

Sources said these investors together hold around 40 per cent of MCX’s equity. Blackstone and the Sheths of Great Eastern Shipping have also asked FTIL to sell its MCX stake to a particular company.

Investors with more than 10 per cent equity together are allowed to approach CLB under Sections 397 and 398 of the Act for requesting removal of equity holders they hold responsible for mismanagement. These investors want CLB to take action against FTIL and auction its shares.

Sebi’s help will be sought under Section 11 to protect the interest of investors. FMC’s refusal to approve MCX’s contracts is hurting the exchange’s other investors that hold 74 per cent in total; FTIL has 26 per cent. The investors concerned want Sebi to protect their interest against such actions from any other agency. Besides, they also plan to write to FMC to not take any action that could harm the interests of those not at fault.

An FTIL spokesperson said the process for selling the stake in MCX was at an advanced stage and investment advisor JM Finance had received 10 offers from local and foreign investors, adding it was expected to be completed in six-seven weeks.

The spokesperson said, “The process has now entered the second phase, in which parties have to submit non-binding offers. This has been intimated to FMC and MCX. However, some other MCX shareholders are getting together to derail this transparent and democratic process. We are facing a non-democratic, arm-twisting harassment at FTIL, with a hostile takeoveragenda in the garb of minority shareholders. Such vindictive moves set wrong a corporate example. We are sure FMC and the MCX board will act by the law.”

While FTIL declined to divulge details, sources said the Kotak group, the BSE, the Chicago Mercantile Exchange and the Deutsche Borse, among others, were interested in buying a stake.

In yet another development MCX also proposes to issue preferential shares in favour of new investors that can counter FTIL through bidding. This proposal will come up for discussion in the exchange’s board meeting which is taking place on 3 April.

In the same board meeting the exchange also proposes to amend the main objective of the article of association to include a provision to auction shares of investor that has been declared not fit and proper by the regulator. However both these proposals have to be approved by all the shareholders of the MCX in general body and hence it could take some time.

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First Published: Mon, March 31 2014. 00:48 IST