ICICI, IL&FS, Kotak Pick Up 9.55% Stake In MCX

MUMBAI: Leading financial services groups ICICI, IL&FS and Kotak have bought a combined 9.55% stake in Multi Commodity Exchange of India (MCX), India’s largest commodity derivatives exchange. The transactions put the valuation of MCX at over $1 billion.

ICICI Venture has picked up 3.55% stake, while IL&FS and Kotak bought 5% and 1% respectively. This brings down promoter Financial Technologies's (FT) holding in MCX to 37.5%. The compelling valuation story in exchanges — as earlier reflected in institutional interest in leading bourses like NSE and BSE — has been the driver behind these investments.

“We are currently not looking at any further dilution of stake. The equity from the current stake sale will be deployed in improving the exchange infrastructure,” said MCX MD and CEO Jignesh Shah.

Earlier during the year, FT had sold 5% stake each to Citi and Merrill Lynch at similar valuations. The comex, it may be mentioned, has already expressed its intention to go for an IPO.

According to ICICI Bank CEO KV Kamath, it is the bank’s “philosophy to partner with growth-oriented companies which seek to leverage technology and the power of markets for economic transformation”.

Headquartered in Mumbai, MCX started operations in November 2003, and commands close to 70% market share for the quarter ended June 30, 2007. MCX offers futures trading in 56 commodities, defined in terms of the type of contracts offered from various market segments. They include bullion, energy, ferrous and non-ferrous metals, oil and oilseeds, cereals, pulses, plantations, spices, plastics and fibres.

At present, FID Fund (Mauritus) — an affiliate of Fidelity International — has a 9% stake in MCX, Passport India Investment (Mauritius) has 3% stake and GLG Financials Fund has another 2% stake.

Other MCX stakeholders include HDFC Bank with 2%, SBI and its associates (State Banks of Travencore, Hyderabad, Saurashtra, Patiala, Mysore, Indore, Jaipur, Bikaner and SBI Life) with 18% and other public sector banks, including Union Bank of India, Bank of India, Canara Bank, Corporation Bank and Bank of Baroda, with about 5%. Nabard has a 3% stake, while NSE holds 2.5%.

Commodity exchanges are currently awaiting final guidelines on foreign holding. These are expected to be on the lines of foreign investment rules in stock exchanges, where foreign holding is stipulated at 49%. Of this, there is a 26% cap on FDI and 23% cap on FII as per RBI guidelines. Besides, no single entity can hold more than 5%.

Commenting on the investment, Kotak Mahindra Bank vice-chairman & MD Uday Kotak said: “Over the past few years, the commodities futures market in India has experienced an unprecedented growth in terms of the number of modern exchanges, commodities allowed for derivatives trading and the value of futures traded. MCX has demonstrated leadership by creating a scalable and technologically-sound commodities trading exchange.”