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Kotak Mahindra Bank submits binding offer to buy MCX stake

LiveMint logoLiveMint 22-05-2014 Malvika Joshi

Mumbai: Kotak Mahindra Bank Ltd has submitted a binding offer to buy a stake in Multi Commodity Exchange of India Ltd (MCX) from its troubled parent Financial Technologies (India) Ltd (FTIL), two people aware of the development said.

The bids come ahead of a 24 May board meeting of FTIL to take stock of the stake sale.

Kotak has been seen as a frontrunner to buy a stake in MCX ever since the commodities market regulator Forward Markets Commission on 6 May issued new ownership rules for commodity exchanges.

According to the rules, only domestic commodity exchanges, stock exchanges, depositories, banks, insurance companies or a public financial institutions can hold up to 15% of the paid-up capital in a commodity exchange.

No individual or any other kind of company can hold more than 5%.

A spokesperson for Kotak Mahindra Bank declined comment.

“It would be premature and improper to comment on this issue until the due process has been completed. Any definitive development of any substantive nature will be first notified to the stock exchanges in full compliance with Listing Agreement, so as to ensure uniform and simultaneous disclosure to all the investors,” FTIL said in an email response.

In addition to the binding bid received from Kotak, a second binding bid has been received from a consortium including the Chicago Mercantile Exchange (CME), Tata Capital, Warburg Pincus and the London Mercantile Exchange (LME), one of the two persons cited above said.

CME said it “did not have a comment on this”.

LME, Tata Capital and Warburg Pincus did not respond to emails.

MCX shares closed 19.9% higher on BSE at `586.40. It was the second-most traded stock on BSE, and the tenth-most traded stock on the National Stock Exchange (NSE) in terms of turnover, with a total turnover of `493.1 crore.

FTIL is in the process of divesting stake in MCX after the commodity regulator, the Forward Markets Commission (FMC) directed it to do so on 17 December because it said the Jignesh Shah-led FTIL was unfit to run an exchange. The order followed an inquiry into the `5,574.34 crore payments crisis at National Spot Exchange Ltd, which is 99.99% owned by FTIL. While FTIL initially planned to sell 24% stake in MCX, it will now sell its entire 26% stake after the FMC’s 6 May rules on ownership of commodity exchanges barred an entity declared unfit from holding any stake in a commodity exchange.

The change in ownership rules also meant that a number of players, including Reliance Capital, who had earlier expressed interest in picking up stake in MCX, could no longer bid for more than 5% each.

Before the change in rules, Reliance Capital had emerged as the highest bidder for the 24% stake in MCX, The Economic Times reported on 19 April. Other bidders include Kotak Mahindra Bank Ltd, Tata Capital, Chicago Mercantile Exchange and private equity firm Warburg Pincus, the newspaper said.

Separately, the board of MCX is scheduled to meet on 23 May. Satyananda Mishra, chairman of MCX confirmed that there was a board meet on 23 May, but did not disclose the agenda of the same.

“The board will decide on the issue of disclosing the full contents of the PwC report,” said a third person directly involved in the matter.

malvika.j@livemint.com

Joel Rebello contributed to this story.

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