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FINANCIAL TECHNOLOGIES
RATING UNDER REVIEW (RS726, MCAP: RS33BN / US$736M)
• Financial Technologies (FTIL) is Asia’s largest exchange conglomerate, with five domestic exchanges (across
commodities, power, spot and currencies) and five international exchanges in under-penetrated regions (Dubai,
Singapore, Bahrain, Africa and Mauritius). FTIL also operates six ecosystem ventures flanking the exchanges
business across the agri warehousing, mobile trading and information dissemination spaces. FTIL stands to be the
only listed proxy to the potential US$10trn Indian exchange market.
• Domestic exchanges – in scale-up mode: FTIL entered the Indian exchange space with MCX (India’s largest
commodity exchange) in 2003. MCX today leads the US$2.5trn+ commodities market with an 85% market share.
Given the success of MCX, FTIL launched four more niche domestic exchanges in segments like spot (National Spot
Exchange), power (Indian Energy Exchange), currencies (MCX-Stock Exchange) and forex trading (IBS Forex). While
all these exchanges are a year old, MCX-SX has particularly garnered strong traction and clocks an average daily
turnover of US$3bn+. With respect to the other three, FTIL enjoys a market share of 90%+, with NSE-promoted
exchanges being the key competitors. However, these exchanges are yet to garner strong liquidity.
• International exchanges – in potentially under-penetrated geographies: FTIL currently operates exchanges in four
international markets, including Dubai (DGCX), Singapore (Singapore Mercantile Exchange – SMX), Mauritius
(Global Board of Trade – GBOT) and Bahrain (Bahrain Financial Exchange – BFX). Excluding DGCX, the other three
are multi-asset exchanges, and, being the first in the region, would enjoy first-mover advantage. FTIL is also looking
to set up an exchange in Botswana to cater to the African region. While the opportunity landscape on the
international front looks promising, execution will be the key monitorable.
• Entry into Indian equity markets: MCX-SX, which currently operates in the currency derivatives space, has the
license to operate the third equity exchange of the country. SEBI has rejected MCX-SX’s application for starting
trading in new products like equities, interest rate and debt. The rejection was based on two main grounds: 1) FTIL
and MCX are persons acting in concert and, hence, should be considered as a single promoter. This implies that the
FT Group (MCX + FTIL) cannot own more than 5% in aggregate. Currently, FTIL and MCX each own 5% equity
interest in MCX-SX. 2) SEBI has alleged that concentration of ownership in the form of warrants is not right in ‘spirit’.
FTIL has challenged SEBI’s order in the Bombay High Court.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FINANCIAL TECHNOLOGIES
RATING UNDER REVIEW (RS726, MCAP: RS33BN / US$736M)
• Financial Technologies (FTIL) is Asia’s largest exchange conglomerate, with five domestic exchanges (across
commodities, power, spot and currencies) and five international exchanges in under-penetrated regions (Dubai,
Singapore, Bahrain, Africa and Mauritius). FTIL also operates six ecosystem ventures flanking the exchanges
business across the agri warehousing, mobile trading and information dissemination spaces. FTIL stands to be the
only listed proxy to the potential US$10trn Indian exchange market.
• Domestic exchanges – in scale-up mode: FTIL entered the Indian exchange space with MCX (India’s largest
commodity exchange) in 2003. MCX today leads the US$2.5trn+ commodities market with an 85% market share.
Given the success of MCX, FTIL launched four more niche domestic exchanges in segments like spot (National Spot
Exchange), power (Indian Energy Exchange), currencies (MCX-Stock Exchange) and forex trading (IBS Forex). While
all these exchanges are a year old, MCX-SX has particularly garnered strong traction and clocks an average daily
turnover of US$3bn+. With respect to the other three, FTIL enjoys a market share of 90%+, with NSE-promoted
exchanges being the key competitors. However, these exchanges are yet to garner strong liquidity.
• International exchanges – in potentially under-penetrated geographies: FTIL currently operates exchanges in four
international markets, including Dubai (DGCX), Singapore (Singapore Mercantile Exchange – SMX), Mauritius
(Global Board of Trade – GBOT) and Bahrain (Bahrain Financial Exchange – BFX). Excluding DGCX, the other three
are multi-asset exchanges, and, being the first in the region, would enjoy first-mover advantage. FTIL is also looking
to set up an exchange in Botswana to cater to the African region. While the opportunity landscape on the
international front looks promising, execution will be the key monitorable.
• Entry into Indian equity markets: MCX-SX, which currently operates in the currency derivatives space, has the
license to operate the third equity exchange of the country. SEBI has rejected MCX-SX’s application for starting
trading in new products like equities, interest rate and debt. The rejection was based on two main grounds: 1) FTIL
and MCX are persons acting in concert and, hence, should be considered as a single promoter. This implies that the
FT Group (MCX + FTIL) cannot own more than 5% in aggregate. Currently, FTIL and MCX each own 5% equity
interest in MCX-SX. 2) SEBI has alleged that concentration of ownership in the form of warrants is not right in ‘spirit’.
FTIL has challenged SEBI’s order in the Bombay High Court.
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