Metropolitan Stock Exchange raises $32 mn, eyes more capital

By Ankit Doshi

  • 31 Oct 2017
Credit: Bhakti Nair/VCCircle

Metropolitan Stock Exchange of India (MSEI), the third national-level stock exchange in India, said on Tuesday it has raised Rs 209 crore ($32 million) from existing and new investors to meet regulatory requirements.

The amount includes Rs 112 crore raised via a rights issue and Rs 97 crore mobilised over the past year from existing shareholders IL&FS Trust Capital, Rosy Blue Securities, and ace stock market investors Radhakrishan Damani and Rakesh Jhunjhunwala, the exchange said in a statement.

VCCircle had reported in July that the exchange, formerly known as MCX Stock Exchange, had raised Rs 74 crore via a rights issue.

The exchange also said that Siddharth Balachandran, the India-born founder of Dubai’s Buimerc Corporation FZE, picked up a 5% stake in this round. Balchandran also holds a 2.02% stake in stock-exchange operator BSE Ltd, shareholding data for the three months through September showed.

Besides, the bourse said it has tied up with a few large investors and merchant bankers to raise another Rs 95 crore.

The fundraising will help the exchange increase its liquid net worth to Rs 300 crore, higher than the requirement of Rs 100 crore as per the Securities and Exchange Board of India’s regulations for stock exchanges. Liquid net worth comprises fixed deposits, investment in liquid mutual funds and government securities.

MSEI managing director and CEO Udai Kumar said the exchange hasn’t been able to launch new products as it fell short of meeting the regulator’s rules on net worth.

Chief operating officer Abhijit Chakraborty said the exchange now has a turnaround strategy put in place by its new management.

“We have been aggressive in putting together a sound business revival plan and in reaching out to existing and potential investors, results of which are now evident,” Chakraborty said.

The new management had taken over the exchange’s operations in 2016. In its earlier avatar, the exchange was promoted by Jignesh Shah of Financial Technologies India Ltd. Shah was arrested last year by the Central Bureau of Investigation for alleged cheating and flouting regulatory norms.

MSEI said it aims to increase its presence in segments that facilitate trading of fixed-income instruments, such as interest rate futures, and currency derivatives.

Besides, MSEI has received in-principle approval from the capital markets regulator Securities and Exchange Board of India (SEBI) to start a trading platform for small and medium enterprises. The exchange aims to launch the platform this year.

The exchange, under its earlier avatar, had begun operations in the currency derivatives segment in October 2008.

It began operating as a full-fledged bourse with the launch of equity trading in February 2013. The bourse had shown strong performance in initial months. But trading turnover plunged after a payment crisis at National Spot Exchange Ltd (NSEL), which was also promoted by Shah.

Subsequently, the capital markets regulator Securities and Exchange Board of India ruled that Shah was not ‘fit and proper’ to own stakes in any stock exchanges and market infrastructure companies.

MCX Stock Exchange was renamed as MSEI as part of a turnaround strategy to give the exchange a new identity, disassociate from its original promoters and revive growth.

CEO Kumar had previously told VCCircle that the successful listing of BSE in February had helped increase investors’ interest in MSEI. The company is also considering a potential listing once it achieves its profit target, he said.

In September 2016, Multi Commodity Exchange of India Ltd had increased its stake in MSEI to 13.46% stake to become its single-largest shareholder. Individual shareholders own about 36.20% of the bourse. These include Jhunjhunwala (4.83% stake), Damani (4.81%) and Nemish S Shah (3.95%).

Other major shareholders include Trust Capital (4.83%), IL&FS (4.83%), AADI Financial (3.95%) and Edelweiss (2.31%).

Lenders including State Bank of India, Union Bank of India, Bank of Baroda, Punjab National Bank, Bank of India, Allahabad Bank and Axis Bank owned 26.56% of MSEI as of March 2017.

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