Multi Commodity Exchange (Update) : Still a lot to play for. Maintain BUY :: HDFC Sec

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Multi Commodity Exchange (Initiating Coverage) : Crouching tiger. BUY :: HDFC Sec, report

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Why I Still Don’t Like MCX : Prof. Sanjay Bakshi, MDI Gurgaon

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Why I Still Don’t Like MCX : Prof. Sanjay Bakshi, MDI Gurgaon
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NSEL: Anatomy of a trade gone sour (BS)

NSEL: Anatomy of a trade gone sour

Like many small investors, P Dharnidharka, 54, invested in the commodity trades on the National Spot Exchange Ltd.  Dharnidharka was promised hefty returns by his broker at a time when stockmarket was volatile and fixed deposit returns were not very attractive.

 

It looked too good to be true. Thousands of investors like Dharnidharka were lured into trading what looked like exotic derivative contracts on the National Spot Exchange Ltd (NSEL) that promised an assured return of anywhere between 15 and 18% per annum. Every trade would result in earnings of 1-2% in a month or so - guaranteed. 

 

Dharnidharka was delighted at the prospect of earning business income from trading in commodities. No trade could go wrong. Investors and brokers flocked in droves to a well-crafted commodities-trading strategy that was simple to execute and immensely profitable. In the end, it turned out too good to be true. 

 

Nobody asked crucial questions. How can commodities traded on an exchange always turn a profit for investors? How did the trade work? Who were the commodity traders? Where were the warehouses? Nobody knew that one day the music will stop. And it did.

 

Looking back, when the NSEL commenced operations in October 2008, it started as an exchange to facilitate commodity producers to find buyers for their products. Spot exchanges normally offer T+2 or T+3 delivery. Any buy or sell transaction should be settled within a few days. If you purchased on the exchange, you paid your dues in two or three days and took delivery the next day of whatever you had bought whether castorseed or wool. 

Buy Multi Commodity Exchange (MCX) TP: INR860 : Motilal Oswal

 MCX’s 1QFY14 revenue at INR1.23b (flat YoY, 1.8% QoQ) was in line with our

estimate. EBITDA margin at 51.5% was below our estimate of 56.2% due to higher

staff and admin costs. PAT at INR601.2m (-7.1% YoY and -21.5% QoQ) was lower

than our estimate of INR635.4m, driven by lower operating profit.

 Flattish revenue YoY and marginal growth QoQ was on the back of total volumes

value of INR37.5t, growth of 4% QoQ and 3% YoY.

 Volumes were driven by contrasting trends in gold and silver during the quarter.

Volumes in gold were up 20% QoQ and 15% YoY, while silver volumes declined

13% QoQ and 25% YoY.  Gold and silver together contributed 51% to overall

volumes on the exchange, down ~5pp YoY. Crude oil (21% concentration)

volumes were up 20.5% QoQ and 19.5% YoY.

 CTT became effective from July 1st and hence the impact of the same does not

reflect in 1QFY14. However, going forward, we expect MCX’s volumes to be

severely impacted (ADV down ~43% in July v/s 1HCY13).

 Following the imposition of CTT, average daily volumes in July fell ~43%,

compared to the average daily volumes in the first six months of CY13. We factor

this as the trend in volumes going forward; our current estimates for FY14E and

FY15E do not assume any benefits from factors such as FCRA.

 Earnings are expected to decline significantly going forward and we estimate 40%

decline in FY14E EPS, corresponding to a 30% decline in FY14E volumes. We value

MCX using the SOTP method  – adding the potential value from sale of stake

through direct holding and warrants in MCX-SX, to the exchange’s business.

 We value the exchange at 20x FY15E EPS  – arriving at INR750 per share, and

another INR110 per share from stake in SX (valued at INR15b, ~37% of that

accruing to MCX). Maintain Buy.

Technicals- TRF, Indian Bank, Ingersoll Rand, OnMobile, MCX, BGR Energy Systems :: Business Line

NSE tops stock exchange CEO salary chart; MCX for commexes: Business Line

Chiefs of leading stock exchange NSE and the top commodity bourse MCX have topped the executive salary charts of their businesses, getting a hike of nearly 6 per cent in last fiscal.

Among the stock exchanges, the net pay package of National Stock Exchange (NSE) Managing Director and CEO Ravi Narain rose to Rs 4.1 crore in 2011-12, from Rs 3.85 crore in the previous fiscal, as per the bourse’s latest annual report.

In comparison, the remuneration of BSE’s then chief Madhu Kannan stood at Rs 1.69 crore last fiscal, down from Rs 2.04 crore in 2010-11. Earlier this year, Kannan left the exchange.

NSE’s another rival MCX-SX, which is present only in currency derivatives segment and is gearing up to launch equity and other trading platforms, paid its MD and CEO Joseph Massey a total remuneration of Rs 1.8 crore in 2011-12, unchanged from the previous year.

The gross remuneration of NSE’s Narain stood at Rs 7.88 crore in 2011-12, up from Rs 7.35 crore in the previous year.

NSE’s Joint Managing Director Chitra Ramakrishna’s gross remuneration in 2011-12 stood at Rs 5.64 crore, while her net remuneration was Rs 2.93 crore.

Among the commodity exchanges, MCX’s Lamon Rutten was the top-paid executive in 2011-12 with a pay package of Rs 1.76 crore, up from Rs 1.07 crore in the previous fiscal. Rutten recently resigned as MD and CEO of the exchange, but remains on its board.

MCX chief is followed by NCDEX’s MD & CEO R. Ramaseshan with remuneration of Rs 1.55 crore in 2011-12, up from Rs 1.3 crore in the previous fiscal.

Across the stock and commodity exchanges, the pay package of only the BSE chief fell in the last fiscal, while it remained unchanged for MCX—SX (MCX Stock Exchange).

Interestingly, only BSE witnessed a decline in its net profit during 2011-12, while NSE, MCX and NCDEX saw their profits rise during the fiscal. For MCX-SX, the losses narrowed down sharply in 2011—12.

However, the revenues rose for all the three stock exchanges and the two commodity bourses.

NSE’s revenue rose from Rs 1,047 crore to Rs 1,080 crore in 2011-12, BSE’s from Rs 538 crore to Rs 578 crore and MCX-SX’s from Rs 39 crore to Rs 88 crore.

MCX and NCDEX also saw their revenues rise from Rs 447 crore to Rs 629 crore and from Rs 119 crore to Rs 139 crore, respectively.

In terms of profitability, NSE recorded net profit of Rs 705 crore in 2011-12, up from Rs 637 crore in the last fiscal.

BSE’s net profit fell from Rs 232 crore to Rs 205 crore; MCX-SX losses narrowed from Rs 58 crore to nearly Rs 3 crore; MCX’s profit rose from Rs 173 crore to Rs 286 crore, and NCDEX saw its profits rise from Rs 31 crore to Rs 35 crore.

Sizzling Stocks: Multi Commodity Exchange of India and Essar Oil :: Business Line

MCX- Opportunity abound:: IIFL research

Opportunity abound
Financial Technologies promoted Multi Commodity Exchange is a market
leader in India’s burgeoning commodity derivatives market. Its journey of
becoming a dominant commodity exchange with 86% market share has been
fascinating. Interestingly, the next largest player has only 10% market share.

NSE counters MCX-SX membership price war with Alpha class:Moneycontrol

It is felt that there is a need to encourage smaller and nimbler firms that may not have the financial wherewithal to meet the stringent capital and networth requirements, but can bring in innovative trading ideas and strategies that could add to the liquidity of the trading platform, the NSE said while justifying the move

Multi Commodity Exchange of India (MCX) Monopolistic. Cutting-edge. Xciting!:: Motilal Oswal

Monopolistic. Cutting-edge. Xciting!
Dominant share; future ready; high growth potential
 Multi Commodity Exchange of India (MCX) is a state-of-the-art electronic commodities
futures exchange, with near monopolistic market share (86% in FY12).
 Our expectation of sustained market leadership stems from its technological edge
and future readiness.
 MCX's volumes have grown at a CAGR of 47% over FY07-12. Future potential remains
exciting given: [1] likelihood of new products and participants with the FCRA Bill, [2]
with 2m client accounts as compared with 19-20m demat accounts, the industry has
only scratched the surface with respect to potential volumes.
 We believe value from MCX-SX (Stock exchange promoted by MCX and FTECH in
2008) is more definite than merely option value. Policy to maintain ~50% payout ratio
is a key valuation positive. Our target price of INR1,440 implies 23% upside. We
initiate coverage with a Buy rating.

MCX stock exchange along with NSE and BSE to benefit investors ::ET

Securities and Exchange Board of India's (Sebi) green signal this week to MCX to start a stock exchange has elicited the standard response from experts that competition to the National Stock Exchange and Bombay Stock Exchange will mean downward pressure on brokerage rates and benefit investors.

A look at history suggests otherwise. Investors, especially institutional, which do the bulk of trades, are drawn to a bourse not by the desire to save a few pennies on brokerage but by its ability to provide a very deep market that can absorb big trades without it moving stock rates against them.

MCX-SX gets Sebi approval to operate as full-fledged bourse :Moneycontrol

Market regulator Sebi today granted permission to MCX-SX to operate as a full-fledged stock exchange, a development that ends nearly four-year-long wait of the bourse and will bring in more competition in markets.

MCX Stock Exchange (MCX-SX) was first granted recognition by Sebi in September 2008, but it was allowed to conduct trading only in the currency derivatives segment. With today's approval, MCX-SX would be able to offer additional asset classes such as equity and equity F&O
(Futures and Options), interest rate futures and wholesale debt segments.

Multi Commodity Exchange -CEO Stepping Down, Turnover Stepping Up  Citi Research

Multi Commodity Exchange Ltd. (MCEI.BO)
CEO Stepping Down, Turnover Stepping Up
 CEO stepping down end on June 12, replacement soon — MCX’s current CEO, Mr
Lamon Rutten, will not seek an extension to his current term (ending June 2012) due to
family reasons; however, will continue to be present on its Board (as a non-executive
director). We believe the company is operationally stable and is expected to announce
a replacement soon, which will need the regulator’s (FMC) approval as well.

Technical QUERY CORNER -Opto Circuits, MCX, Rashtriya Chemicals, HDFC, Glenmark, Page Industries ::Business Line

I am a long-term investor, holding shares of Opto Circuits at Rs 250 and Multi Commodity Exchange of India (MCX) at Rs 1,280. Kindly advise the prospects and future growth of these shares.

V.Rajaiah

Opto Circuits India (Rs 154.4): The stock peaked out around your buy price at Rs 252 in September 2010. Since then, it has been on a long-term downtrend. In February 2012, the stock encountered resistance around Rs 220 and continued its long-term downtrend.

Medium-term trend is down for the stock since this February. As long as the stock trades above the key long-term support band between Rs 140 and Rs 150, long-term investors can hold the stock with stop at Rs 140. A fall below this band will reinforce the bearish momentum and pull the stock down to Rs 120 and then to Rs 100 in the forthcoming months.

An upward reversal from the aforesaid support range will lift the stock higher to Rs 175 levels and then to Rs 190. Only a strong rally above the Rs 210 and Rs 220 zone will alter the stock's downtrend and take it higher to Rs 260 in the long-term.

Multi Commodity Exchange - A rare commodity; initiating coverage; Buy: Edelweiss, PDF link

Multi Commodity exchange Multiple Growth drivers ahead, initiate Coverage with Buy "Sunidhi

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Exchanges globally have been businesses with strong monopoly status, robust EBIDTA margins, low capex requirements, negative working capital cycle which enable high free cash flow generation and robust dividend payout ratios. MCX, India’s first listed exchange is the largest commodity exchange with 87% market share appears to have multiple triggers for its business growth predominantly driven by regulatory outcomes. Though the exchange is the largest commodity exchange in India and the third largest in the world in terms of volumes of contracts traded, its breadth has been shallow with four commodities (gold, silver, crude, copper) together accounting to 90% of the total turnover value. MCX has benefited from the appreciation of commodity prices during (FY09-FY12) as its revenue model is depended on the value of the contracts traded. We believe that going forward there are multiple triggers on the volume growth front depending on the regulatory outcomes which include Introduction of options and indices trading in commodities, allowing banks, mutual funds and foreign institutional investors to trade in commodity exchanges etc. Global exchanges have been trading at wide P/E bands (15x-23x on forward earnings) depending on the exchange portfolio mix, revenues, margins and profits trends. Considering growth triggers we value MCX at P/E of 20x on FY14E EPS which yields a TP of `1320/Share. Initiate with Buy.
Options and commodity indices introduction could boost volumes
FCRA bill which allows introduction of commodity options, commodity indices and Institutional participation in commodity exchanges is awaiting the parliament approval. We believe that MCX’s strong parentage in technology (MCX is promoted by FT) would enable quicker launch of new product portfolio post the regulatory outcomes which could act as growth driver for volumes. Globally options account 17%-25% of the total transaction volumes in commodities and introduction of options and indices at MCX could act as substantial volume booster for the exchange. Further MCX is likely to introduce new products like Real estate indices, Rain indices etc which could act as growth drivers. FCRA bill clearance would also allow banks, institutions and FII’s to participate in commodity trading which could boost the exchange turnover.
Non linearity enables sustaining the robust EBIDTA margins
MCX has seen solid EBIDTA margin expansion with current EBIDTA margin at over 65% for nine months ended Dec 2011 driven by non linearity in the model up from 36% registered in FY09. MCX pays software & support charges (`one hundred and Twenty million + 12.5% of its gross transaction revenues) to Financial Technologies Ltd (which provides platforms), which is the only variable cost. The remaining cost structure includes salary and other administrative costs and hence inducing non linearity to the margin structure.
Multiple catalysts to drive the stock performance going ahead
MCX has 5% stake in MCX-SX as well as 634mn warrants and holding structure is under litigation with SEBI. FCRA bill approval, outcome of MCX-SX litigation could be the key catalysts which should drive stock performance going ahead.

Bajaj Holdings takes 3% in MCX

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Rahul Bajaj-promoted Bajaj Holdings and Investment Ltd has picked a 3.06 per cent stake in the listing-bound Multi Commodity Exchange (MCX). In a notice to investors, MCX indicated Bajaj purchased 1.56 million MCX shares from Passport Capital LLC. The deal would lead to a change in the list of top 10 shareholders in the prospectus, the company added. Passport Capital, which operates as a hedge fund, was the fourth largest shareholder in the company with 2.5 million shares or 4.9 per cent stake as on February 10, when the company filed a draft red herring prospectus. After this deal, Bajaj Holdings will take a joint ninth slot in the top shareholders list, holding an identical number of shares as Nabard. Passport Capital, with less than one million shares, will drop out of that list. According to sources, transfer agreement between Passport and Bajaj Holdings was struck at Rs 800 per share, a fews days before the MCX offering opened for subscription. The source added the Forward Markets Commission (FMC) is set to clear the share transfer. Passport Capital had acquired these MCX shares in two tranches in the past, at Rs 860 and Rs 1,155 per share. Thereafter, MCX had issued bonus shares in the ratio of 1:4 to shareholders. After adjusting for the bonus issue, the cost of each share acquisition for Passport comes to Rs 900 plus, said sources. HT Media, another shareholder with 0.2 per cent stake, also exited the company in the run up to the IPO, according to the above notice. MCX shareholders have raised Rs 663 crore in an offer for sale, pricing each share at Rs 1,032. The issue is getting listed in early March. In June 2011, Passport had sold 1.6 per cent stake for Rs 62 crore in Financial Technologies (India) Ltd, one of the promoters of MCX. Passport had been cutting its stake in MCX since 2009, when it held 10 per cent in the company. Passport Capital had started building up stakes in Financial Technologies during January 2007, when its share was trading at around Rs 1,700. The hedge fund continued to build up stake in the firm as its stock price reached over Rs 3,000 per share and was trading between Rs 2,400 and Rs 2,700 during late 2007, thus, increasing its stake to 4.23 per cent by March 2008. The fund had later averaged out its investment by buying more shares after the financial meltdown in 2008, raising its stake to 10 per cent in March 2009. San Francisco-based Passport Capital LLC, founded by John H Burbank III in 2000, manages approximately $4.7 billion in assets. It has invested in other Indian companies like VA Tech Wabag and Koutons Retail. Other shareholders of MCX include Euronext, Merrill Lynch, IFCI, Intel Capital and New Vernon Private Equity, besides ad-for-equity investors HT Media and Bennett, Coleman & Co, among others. --

MCX had stellar listing; 11 IPOs already called off in 2012 (Moneycontrol)

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MCX IPO may be the lone shining star in the IPO market. The year 2012 has already seen call-off of 11 IPOs, says Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities Limited.

1. MCX had stellar listing today. The listing has generated hopes of revival of IPO market. Almost in all the metrics the MCX IPO has proved to be highly successful. It has brought much needed hope and smile to the Indian IPO market.

2. However, MCX IPO may be the lone shining star in the IPO market. The year 2012 has already seen call-off of 11 IPOs. The probable amount that these 11 IPOs were planning to raise was to an aggregate of Rs 4,771 Crores.

3. The list of the 11 companies who have called-off their IPOs during 2012 include: Micromax, Embassy Property, Lokmat Media, VRL Logistics, etc

4. This is in additon to the call-off of 29 companies during 2011 calendar year. The probable amount that these 29 companies were planning to raise was to an aggregate of Rs 32,400 Crores.

5. So, starting 1st January 2011 till date, about 40 IPOs were called off. The total amount they were expected to raise was about Rs 37,169 Crores.

6. All these 40 companies had valid SEBI approval in hand for their IPOs. Even then, they couldn't open their IPOs within the validity period of one year from the date of SEBI approval.

7. This surely will impact the Indian corporate's ability in fund raising to finance their expansion projects resulting in slow down in capacity building and job creation.

8. Further, the government's disinvestment program which was supposed to bring public issues of several blue-chip PSUs couldn't take off. The recent lukewarm response to ONGC auction can also impact the confidence of the public issue market.

9. IPO market is smiling after MCX listing. However, it needs to be seen whether that smile will get converted into jubilation.

MCX, India's only listed exchange, ends with 26% gain :Money control

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Shares of MCX , India's largest commodity exchange, shut shop with gains of 25.68% or Rs 265.05 at Rs 1297.05 on the BSE. It touched an intraday high of Rs 1,426 and an intraday low of Rs 1,282.10.
The country's only listed exchange opened up 38% at Rs 1,425 as against issue price of Rs 1,032 on the BSE.
"NSE is already the shareholder of MCX and listing on NSE will be the gradual step," MCX Vice-Chairman Jignesh Shah told reporters on the sidelines of the listing ceremony on BSE. The group company Financial Technologies is already listed on the NSE, Shah added.
The MCX scrip witnessed robust buying interest in its debut trade on the stock market and saw its price soaring past Rs 1,400 level within minutes of listing.
After becoming the first Indian exchange to come out with an IPO, and also the first public offer of the year 2012, MCX also became the first company to list under the new Sebi rules introducing pre-open bidding in the first-day trade of stocks listing after IPOs. The IPO got over-subscribed more than 54 times with bids worth about Rs 36,000 crore, as against the targeted proceeds of up to Rs 663 crore through sale of 64.27 lakh shares. MCX had set a price band of Rs 860-1,032 per share for the IPO, and the final price was fixed at the top end at Rs 1,032 given the strong demand witnessed for the offer.
The anchor investors were also allocated shares at the same price. Commenting on pricing of the issue, Shah said, we have decided to go ahead with the IPO in last November and were guided by our merchant bankers. "We are happy along with our selling shareholder partners that investors have subscribed in IPO in large numbers. When decision was taken for IPO, this was the right pricing," he said. Commenting on budget he said, "We are hopeful that lot of things will come positive in this budget.
All five national commodity exchanges and six regional commodity exchanges have given their inputs to the government. We feel that the right decisions are flowing and within that framework we all will perform," he said. Refusing to comment on the finance ministry's proposed move to again impose a Commodities Transaction Tax (CTT), Shah said, "in 2008 it was on consideration and was rolled back. We have not heard anything on that from the government."