MCX set to sever tech ties with its founder 63 Moons
MUMBAI : After a year of costly extensions, MCX, India’s largest commodity derivatives exchange, is preparing to part ways with 63 Moons Technologies Ltd, its former anchor shareholder. The separation involves a crucial technology platform necessary for running its operations, including trading, clearing and settlements.
On Monday, the MCX stock hit a 52-week high, as investors celebrated the news, anticipating significant cost savings.
The exchange said in a circular on 19 September that it proposes to migrate to the new commodity derivatives platform (CDP) developed by Tata Consultancy Services (TCS) by September-end, subject to necessary compliance and approvals. It said a separate circular would be issued on the actual “go-live date”.
Initially, the announcement did not have a significant impact, with the share rising a mere 2.2% over three sessions to ₹1,783.55. However, the markets reacted to the news on Monday with the stock rising 9.45% to a 52-week high of ₹1,952.20, before closing at ₹1902.30, up 6.7%.
“This was much-anticipated and much-awaited news,” said Siddhartha Khemka, head of research, retail, Motilal Oswal Financial Services. “Markets digested the development today to give the stock a 21-gun salute as the exchange transitions to a new technology partner and a new era of growth, with substantial cost savings.”
Indeed, the cost of extension had been a major pain-point for the exchange, with expenses of the current year alone at ₹412 crore ( ₹162 crore in H1 and ₹250 crore in H2) from around ₹60 crore per annum before the technology agreement with 63 Moons, formerly Financial Technologies India Ltd, ended in September 2022.
In the first quarter extension, from October to December 2022, MCX incurred a cost of ₹60 crore. The subsequent quarter saw this cost rise to ₹81 crore, and the most recent quarter reached ₹125 crore, with the full amount payable regardless of migration completion before December 2023. To put things in perspective, its net profit for FY23 was ₹149 crore while the total cost of extension was ₹472 crore.
“Trials have been successful and MCX is good to migrate to the new platform by the month end,” said Rajesh Palviya, derivatives and technical head of Axis Securities. “The stock looks good to test ₹2,100 in the short term because of the cost savings and an estimated rise in exchange turnover.”
MCX was founded by 63 Moons 20 years ago, and started operations in 2003. A few years later, it became India’s largest commodities exchange, specialized in offering metals and energy derivatives contracts. It was listed in 2012. The exchange was an associate company of 63 Moons, which held 26% of its equity.
63 Moons was forced to sell its stake in MCX following the scandal that surfaced at its subsidiary spot exchange NSEL in 2013. Part of its stake was sold to Kotak Mahindra Bank, which is its single largest shareholder with 15%.
MCX has a 96% share in the commodity derivatives segment with an average daily turnover of around ₹80,000 crore. It specializes in metals and energy commodity derivatives with companies like Titan Co. Ltd hedging its gold exposure on the bourse. Its rivals include NCDEX , a predominantly farm derivatives exchange, the NSE and the BSE. The exchange runs from 9 am to 11:30 pm.
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Updated: 25 Sep 2023, 11:08 PM IST
