Commodity bourse MCX drops preferential issue plan
MCX finds itself in a bind over ensuring that its promoter FTIL cuts its stake to 2% from 26% after having been declared not ‘fit & proper’ by FMC.
By ET Bureau | Updated:
MUMBAI The country’s largest commodity bourse and its only listed one, MCX, finds itself in a bind over ensuring that its promoter, Financial Technologies (India) (FTIL), cuts its stake to 2 per cent from 26 per cent after having been declared not ‘fit and proper’ by commodity market regulator Forward Markets Commission in December.
On Wednesday, MCX said it would not go ahead with a preferential allotment for accomplishing the regulatory diktat; this possibly follows resistance from certain institutional shareholders opposing stake dilution. The present management is awaiting the outcome of FTIL’s move to divest stake in MCX. However, according to a source familiar with the developments, MCX is exploring another option if FTIL fails to divest.
MCX sought the finance ministry’s permission on amending its articles which will allow it to place FTIL’s shares in an escrow account in case the promoter does not find buyers for its stake in the bourse by the month’s end. If it tries to place FTIL’s share in an escrow account right away, MCX’s decision could legally be challenged by the promoter.
The bourse is, therefore, learnt to be awaiting directions from the government in this regard. The finance ministry, under section 10 (1) of the Forward Contracts Regulation Act, 1952, can by a written order direct a bourse to make any rules or amend any rules made by it in a specified period.
Once this happens, the bourse, it’s felt, can amend its articles under which 24 per cent of FTIL’s stake can be placed in an escrow account and the same could be auctioned if the promoter fails to find buyers. If FTIL goes ahead with the stake sale, it would pre-empt the bourse from amending its articles.
The MCX management is also expected to take action based on the findings of the PwC special audit of the bourse and observations of the board’s oversight committee. This could put some pressure on FTIL to quicken the divestment, said another source. MCX chairman Satyananda Mishra was not available for comment despite several attempts.
FTIL was asked to cut its stake in the bourse to 2 per cent after a Rs 5,500 crore payment scandal rocked its subsidiary, NSEL, in July last year. FMC found FTIL not fit and proper to hold more than 2 per cent equity capital in MCX after the scam.
The onus of implementing the FMC order lies with MCX. If the bourse fails to implement the FMC order by April-end, it risks not being allowed by FMC to launch fresh contracts, a serious potential blow for it.
On Wednesday, MCX said it would not go ahead with a preferential allotment for accomplishing the regulatory diktat; this possibly follows resistance from certain institutional shareholders opposing stake dilution. The present management is awaiting the outcome of FTIL’s move to divest stake in MCX. However, according to a source familiar with the developments, MCX is exploring another option if FTIL fails to divest.
MCX sought the finance ministry’s permission on amending its articles which will allow it to place FTIL’s shares in an escrow account in case the promoter does not find buyers for its stake in the bourse by the month’s end. If it tries to place FTIL’s share in an escrow account right away, MCX’s decision could legally be challenged by the promoter.
The bourse is, therefore, learnt to be awaiting directions from the government in this regard. The finance ministry, under section 10 (1) of the Forward Contracts Regulation Act, 1952, can by a written order direct a bourse to make any rules or amend any rules made by it in a specified period.
Once this happens, the bourse, it’s felt, can amend its articles under which 24 per cent of FTIL’s stake can be placed in an escrow account and the same could be auctioned if the promoter fails to find buyers. If FTIL goes ahead with the stake sale, it would pre-empt the bourse from amending its articles.
The MCX management is also expected to take action based on the findings of the PwC special audit of the bourse and observations of the board’s oversight committee. This could put some pressure on FTIL to quicken the divestment, said another source. MCX chairman Satyananda Mishra was not available for comment despite several attempts.ADVERTISEMENT
FTIL was asked to cut its stake in the bourse to 2 per cent after a Rs 5,500 crore payment scandal rocked its subsidiary, NSEL, in July last year. FMC found FTIL not fit and proper to hold more than 2 per cent equity capital in MCX after the scam.
The onus of implementing the FMC order lies with MCX. If the bourse fails to implement the FMC order by April-end, it risks not being allowed by FMC to launch fresh contracts, a serious potential blow for it.
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