Merrill Lynch, Citi pick up 5% each in MCX

MUMBAI: Global financial institutions Merrill Lynch and Citigroup have picked up 5% stake each in the country’s largest commodity exchange MCX. The transaction puts the total valuation of MCX at over $1 billion. According to a communique to BSE, Financial Technologies (FTIL), the majority stakeholder in MCX, has sold the stake. While Merrill has paid $50 million, the deal with Citi has been at a slightly higher price, sources said.

FTIL has also entered into agreements to offload 3% and 2% stake to two foreign funds — Passport India Investment (Mauritius) and GLG Financials Fund. With the sale, FTIL’s shareholding in MCX will come down to 49%.

“These investments from strategic international partners will provide Indian commodity markets and MCX access to global know how, best practices, domain knowledge and technology,” said the FTIL statement. “The transactions have been done with the prior approval of Forward Markets Commission,” MCX deputy MD Joseph Massey said. A total 49% foreign holding — 26% FDI and 23% FII — similar to stock exchanges, has been proposed for commodity exchanges.

With the completion of all the announced transactions, foreign holding in MCX will be 24%. US fund, Fidelity International, already owns 9% in MCX. Fidelity International had picked up the stake through its associate company FID Fund (Mauritius) for $49 million in February 2006.

Another foreign investor Goldman Sachs had acquired 7% stake in NCDEX, the other commodity exchange. MCX already had a consortium of stakeholders including HDFC Bank, State Bank of India and its associate banks, Canara Bank, Bank of India, Union Bank and Bank of Baroda, accounting for about 27%.