Financial Technologies (FT) bucked the downtrend as news hit the market that Sebi has approved an initial public offer (IPO) for Multi Commodity Exchange (MCX), a company it has promoted.
The stock closed 1.38 percent higher over Friday’s close of Rs 776.30. FT touched a low of Rs 755 on Monday, but as the news hit the market, the stock shot up to a high of Rs 821.50 but closed lower at Rs 787. Against an average volume of two lakh shares, the stock witnessed nearly seven lakh shares of trading between the two exchanges.
Cumulative volumes on the two main stock exchanges - NSE and BSE - have increased from $4,791 billion to $7,424 billion. Reuters
Financial Technologies will benefit in two ways through this listing. As the IPO allows existing shareholders like FT, State Bank of India, GLG Financials Fund, Alexandra Mauritius, ICICI Lombard, Corporation Bank and Bank of Baroda a chance to exit, it is also an offer of sale.
Along with new shares that will be listed, existing shareholders are being allowed a chance to enchash on the offer. FT intends to sell 5.18 percent of its existing holdings of 31 percent, which will bring down its stake to 26 percent. FT will thus benefit from the cash that comes in by the sale of this stake.
FT will also benefit by listing of MCX, which is already the largest commodity exchange and growing rapidly, as the value of its residual 26 percent in the company will be reflected in the share price of FT.
Due to a drop in volumes on stock exchanges, FT’s performance has taken a beating. The company has posted a drop of 57 percent in its net profit in the first quarter of the current fiscal to Rs 38.26 crore, while its sales had dropped by 25 percent to Rs 65.74 crore.
Trading volumes on MCX have been increasing over the last couple of years. Volumes on the exchange, which trades in precious metals, base metals, agri products and energy, have shot up from $1,605 billion in financial year 2010 to $2,614.4 billion.
Cumulative volumes on the two main stock exchanges – NSE and BSE – have increased from $4,791 billion to $7,424 billion. This however, has been largely due to higher volumes in the derivatives segment as compared to the cash segment, which yields higher brokerage incomes. Cumulative volumes in the cash segment have come down from $1,140 billion to $1,023 billion. Thus brokers are earning less from the stock exchanges, though total volumes have increased.
The IPO of MCX, the only exchange to be listed, thus comes at a time when FT needs it most. MCX is expected to issue 62.47 lakh shares, which constitutes 12.6 percent of its equity. Though MCX will also be launching the SME (Small and Medium Enterprise) exchange, not many are bullish on the response given the past track record of OTCEI (Over The Counter Exchange of India).
