MCX IPO to be announced soon

The largest commodity futures bourse in the country - Multi Commodity Exchange of India (MCX) - is all set to hit the primary market with an initial public offering (IPO). The commodity exchange is likely to announce its long-awaited IPO within a week. Sources said, MCX would sell 10% stake, through a mix of fresh shares and an offer for sale, to raise around Rs 500-600 crore.

According to sources, fresh shares will contribute the majority of the offering while the offer for sale will account for 2-3%. An offer for sale refers to the sale of promoter's existing equity to the public. The bourse has been valued at around $1.2-1.3 billion. The issue is being managed by DSP Merrill Lynch, Kotak Securities and Enam Financial. MCX has been mulling over listing on local bourses for the past two years.

Sources said, IPO would provide many of its Indian and foreign investors an exit route. Around 24% of MCX is owned by foreign investors. While Fidelity holds 9%, Merrill Lynch and Citi own 5% each. The other investors include US-based Passport Capital (3%) and the UK-based fund GLG (2%).

Few weeks ago, FTIL offloaded around 10% stake in MCX. ICICI, IL&FS and Kotak acquired 3.55%, 5% and 1% stakes respectively at an enterprise value of $1.1 billion (around Rs 4,400 crore). ET had reported two weeks ago that New York Stock Exchange (NYSE) and the New York Mercantile Exchange (NYMEX) are awaiting policy guidelines on foreign direct investment (FDI) in commodity exchanges to pick up minority stake in MCX. The guidelines are expected to be cleared by the cabinet committee on external affairs (CCEA).

According to sources, post IPO, FTIL's stake in MCX would go down to 34-35% from the existing 37.5%. On BSE, FTIL's stock price has gone up about 11% in the past one month. It closed at Rs 2,577, up 7% on Friday, three times the weekly average volume at BSE.

According to market sources, the primary market is expected to hot up once again in the first half of 2008 as other large issues like that of Reliance Power and SBI's rights issue among others are set to raise money from the market. As per some estimates, about 175 companies are expected to enter the capital market and could raise up to Rs 60,000 crore in 2008.