MCX, FTIL edge lower as MCX board directs FTIL to reduce stake

Shares of Multi Commodity Exchange of India and Financial Technologies (India) were off 2.43% to 3.59% at 10:44 IST on BSE after MCX said its board has advised FTIL to implement FMC's order by reducing its stake in MCX.

Multi Commodity Exchange of India (MCX) made the announcement after market hours on Thursday, 26 December 2013.

MCX (down 3.59% at Rs 455.65) and Financial Technologies (India) (FTIL) (down 2.43% at Rs 168.85) edged lower.

Meanwhile, the S&P BSE Sensex was up 98.69 points or 0.47% at 21,173.28.

MCX had underperformed the market over the past one month till 26 December 2013, advancing 1.57% compared with the Sensex's 3.18% rise. The scrip had, however, outperformed the market in past one quarter, jumping 15.51% as against Sensex's 5.94% rise.

FTIL had underperformed the market over the past one month till 26 December 2013, advancing 2.43% compared with the Sensex's 3.18% rise. The scrip had, however, outperformed the market in past one quarter, jumping 9.63% as against Sensex's 5.94% rise.

MCX's board of directors at a meeting held on Thursday, 26 December 2013, inter alia, decided to advise FTIL to implement the Forward Markets Commission's (FMC) order dated 17 December 2013 by reducing its stake in the company from 26% to 2% or below, within a period of 1 month hereof. The board also advised to withdraw the representation of FTIL -- Mr. Miten Mehta, on MCX Board in view of FMC letter dated 26 December 2013.

FMC in its order dated 17 December 2013 said that FTIL, the promoter and anchor share-holder holding 26% of the paid-up capital of MCX, is not 'fit and proper person' to continue to be a shareholder of 2% or more of the paid-up equity capital of MCX as prescribed under the guidelines issued by the Government of India (GoI) for capital structure of commodity exchanges post 5-years of operation.

The FMC order of 17 December also stated that Mr. Jignesh Shah, Ex- Director, Mr. Joseph Massey, Ex-Director and Mr. Shreekant Javalgekar, Ex-Managing Director & CEO of MCX, are not 'fit and proper person' in terms of the directions issued under the Board Composition Guidelines issued by the Commission and as amended from time to time.

FTIL had on 19 December 2013 said that the company had received FMC's order dated 17 December 2013, on the status of "Fit and Proper Person". FTIL had said that it is examining the order and will take appropriate steps in due course of time.

Jignesh Shah is currently the chairman of FTIL which owns and runs National Spot Exchange (NSEL) where a Rs 5600 crore payment crisis is being probed by multiple agencies.

FTIL's net profit fell 61.2% to Rs 27.02 crore on 12.8% decline in total income to Rs 128.93 crore in Q2 September 2013 over Q2 September 2012.

FTIL is among the global leaders in offering technology IP (Intellectual Property) and domain expertise to create and trade on next generation financial markets.

MCX's net profit fell 66.8% to Rs 27.05 crore on 38% decline in net sales to Rs 81.23 crore in Q2 September 2013 over Q2 September 2012.

MCX is a dominant player in commodity exchanges in India. Its market share stood at 89% in the first half of the fiscal year ending 31 March 2014.