Kotak Mahindra Bank Ltd has entered into a share purchase agreement to acquire 15 per cent stake in Multi Commodity Exchange of India Ltd, from Financial Technologies (India) Ltd., for Rs 459 crore ($76.2 million), as per a stock market disclosure.
The deal has been struck at Rs 600 a share, a sharp discount of around 24 per cent on the last traded market price of MCX of Rs 786.25 a share on Friday.
The final closing is subject to certain conditions to be fulfilled including regulatory approvals. The deal would be particularly contingent on a regulatory relaxation as FTIL’s holding proposed to be sold to Kotak Mahindra is under a lock-in till March 7, 2015. MCX went public in 2012 and as per SEBI norms promoters need to maintain a minimum ownership for a period of three years after the public float.
Early this month FTIL had sold 6 per cent of MCX in two tranches which reduced its holding in the commodity bourse to around 20 per cent.
It sold 4 per cent through a market transaction after divesting 2 per cent stake to ace investor Rakesh Jhunjhunwala early this month. It sold the 4 per cent holding last week at Rs 753 a unit for around Rs 155 crore ($26 million). The stock price of MCX had spurted over the last two weeks when Jhunjhunwala picked stake at Rs 664 a share. It had sold 2 per cent to Jhunjhunwala for around Rs 66 crore ($11 million).
The firm had started the process to reduce holding in March 2014 for divesting its 24 per cent stake in MCX and had appointed JM Financial as an investment banker for the same.
Due to the delay in the divestment as a result of the publishing of revised norms by FMC and PwC’s special audit report, it has opted to part sell its stake to reduce holding through market transactions.
As many as nine bidders had evinced interest in buying 24 per cent stake in the country's largest commodity bourse. The deal worth over $110 million had missed its deadline of April 25.
Thereafter the sale process also faced roadblock as FTIL promoter Jignesh Shah was arrested and continues to remain in custody as the court has refused to grant him bail.
The development follows an order by FMC in December that declared FTIL and its promoter Shah unfit to operate an exchange in the country, in light of the National Spot Exchange Ltd (NSEL) scam. FMC also directed FTIL—which owns 26 per cent stake in MCX—and Shah to bring down their stake in the exchange to 2 per cent.
Following this, MCX board had also asked its promoter FTIL, which in turn is backed by private equity firm Blackstone, to cut its stake in line with the FMC order.
Early this year, MCX had scrapped a proposed preferential allotment which would have diluted the stake of FTIL by default.
Last month MCX shareholders had approved changes in the bylaws by empowering the bourse to take necessary steps to ensure FTIL reduces its stake including scrapping its voting rights.
(Edited by Joby Puthuparampil Johnson)