Financial Technologies, -Motilal Oswal research report

Incubating success
Potential to create multiple MCXs; Buy
 FTECH is a unique play on end-to-end presence in the ecosystem of stock exchanges.
Its presence across the chain enables it to offer a distinctive value proposition.
 Leading market shares of multiple FTECH's exchanges and its proven technology
credence substantiate its capability of long-term sustenance across multiple exchanges.
 Every FTECH exchange bears the potential of replicating MCX's success.
 We recommend Buy, with SOTP-based target price of INR1,370 (27% upside). Three
upside triggers in near-term: [1] FCRA bill, [2] IEX stake sale, and [3] MCX-SX volumes.
Unique play on end-to-end ecosystem of stock exchanges
FTECH is a unique play on end-to-end presence in the ecosystem of stock
exchanges. The company was incorporated as a provider of technology solutions
for the financial markets. It has forward integrated from being a trading
technology solutions provider to a creator and operator of financial markets
(nine exchanges) as well as complementary ecosystem ventures supporting
these markets (Warehousing, Clearing, Info vending, Payment solutions etc.).
Strong economic moat - right business, right capabilities, right strategies
An Economic Moat protects a company's profits from being attacked by a
combination of multiple business forces. Exchanges globally have been winnertakes-
all businesses, with minimal competition. Leading market share of
multiple FTECH's exchanges and proven technology credence substantiate its
capability of long term sustenance of its ventures. Forward integration from
trading platform to exchanges to complementary ecosystem ventures facilitates
a distinctive value proposition to customers, non-replicated in the market.
Potential to create multiple MCX's over a sustained period
MCX has cornered a monopolistic market share in commodity exchanges. Supply
of technology platform by its parent, FTECH gives MCX a competitive edge. FTECH
has been setting / scaling up multiple other exchanges that span across asset
classes and geographies, which can map MCX's success. Potential opportunities
at MCX-SX and SMX are even higher than that at MCX.
Resolving the value enigma; Buy with an SOTP target of INR1,370
We value FTECH's businesses by dividing them into: [1] Base value, coming from
sizably scaled Technology business (INR543/share) and MCX (INR500/share
including value of warrants in MCX-SX held by MCX), and [2] Option value - from
other ventures such as MCX-SX, IEX, NSEL and SMX (applying a multiple to nascent
base of current financials). We see three potential upside triggers to the stock
in the near term: [1] Passage of FCRA bill, [2] stake sale in IEX (to bring holding
down from 33% to 26%) and [3] Volumes performance at MCX-SX post launch on
February 9th. We recommend Buy, with SOTP based target price of INR1,370.

�� -->