Financial Technologies selling entire stake in MCX-SX to Jhunjhunwala & others for $14M

Financial Technologies India Ltd (FTIL) has signed a deal with ace investor Rakesh Jhunjhunwala, Mumbai-based financial services major Edelweiss Financial Services Ltd and others to sell its entire 4.86 per cent stake in Multi Commodity Exchange Stock Exchange Ltd (MCX-SX) for Rs 88.4 crore ($14.3 million), the company said in a stock market disclosure. The deal is subject to fulfilment of certain condition precedents including regulatory approvals.

As of September 30, 2014, FTIL held 4.86 per cent stake in addition to 56.25 crore warrants in MCX-SX. However, the board of the stock exchange had in August extinguished the validity of the equity convertible warrants in the company. The cancellation of the warrants held by FTIL follows its inability to dilute its holding in the company as per regulatory dictat.

MCX, now no longer associated with FTIL, separately holds 63.41 crore warrants.

On a fully diluted basis FTIL's stake in MCX-SX is pegged at 2.28 per cent while that of MCX is 55.46 per cent. If its warrants are held valid, it would be owning around 49.27 per cent of the diluted capital base.

Meanwhile, FTIL said it has entered into a share and warrant purchase agreement with Rakesh Jhunjhunwala and separate warrant purchase agreements with Edelweiss Financial Services and a consortium of other investors to sell 2.7 crore equity shares and 56.24 crore warrants for an aggregate amount of Rs 88.42 crore.

The other investors include Trust Investment Advisors Pvt Ltd, Viral A. Parikh, Nemish S Shah HUF, Derive Investments, Kalpraj Dharamshi, Dhanesh Sumatilal Shah, Uday Shah, Madhuri Kela, Renuka Shah, SKS Capital & Research Pvt Ltd and Madhu Vadera Jayakumar.

“Post completion of the deal, the company would have completely exited MCX-SX,” FTIL said.

The development follows an order by FMC in December that declared FTIL and its promoter Jignesh Shah unfit to operate any exchange in the country, in light of the National Spot Exchange Ltd (NSEL) scam. FMC also directed FTIL—which once owned 26 per cent stake in MCX—and Shah to bring down their stake in the exchange to 2 per cent.

In March SEBI approved an order in which FTIL and Shah were asked to exit all stock exchanges and clearing corporations. In May also, the power sector regulator asked FTIL to exit the Indian Energy Exchange (IEX).

In August, FTIL sold 15 per cent equity stake in Multi Commodity Exchange of India Ltd (MCX) to Kotak Mahindra Bank for Rs 459 crore and coupled with other deals completely exited MCX. Jhunjhunwala was also among the buyers of some of its stake in MCX.

Post this, earlier this month, FTIL sold around 26 per cent stake in IEX to a clutch of investors led by Chennai-based private equity firm TVS Capital Funds for Rs 577 crore.

With deal to sell stake in MCX-SX it would completely disassociate ownership with all exchanges in India. FTIL has also exited some overseas bourses and is selling stake in Dubai Gold and Commodities Exchange (DGCX).

MCX-SX started operations in the Currency Derivatives (CD) Segment in October 2008 and started capital market segment, futures and options segment and flagship index trading from February 2013.

Blackstone-backed FTIL's share price rose over 4.5 per cent and ended the day at Rs 189.05 each on the BSE in a flat Mumbai market on Wednesday.

(Edited by Joby Puthuparampil Johnson)

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