MCX IPO to open for subscription on February 22, 2012

The Initial Public Offering (IPO) of MULTI COMMODITY EXCHANGE OF INDIA LTD will open for subscription by investors on Wednesday - February 22, 2012. The IPO closes for subscription on Friday - February 24, 2012.

The company is coming out with IPO of 6427378 equity shares of Rs.10 each for cash at a price band of Rs.860.00 - Rs.1032.00 through a 100% book building offer.

The Minimum Subscription Quantity is 6 equity shares and further subscription can be made in multiples of 6 equity shares.

Edelweiss Financial Services Limited, Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited are the Book Running Lead Managers to the issue.

The equity shares are proposed to be listed on the BSE and the company has received in-principle approval from the BSE for the listing.

CRISIL Research has reaffirmed CRISIL IPO grade of '5/5' (pronounced 'five on five') to the proposed initial public offer (IPO) of Multi Commodity Exchange of India Ltd (MCX). (CRISIL Research has undertaken a fresh grading exercise for MCX as the grade assigned to the company on June 15, 2011 had expired.) This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy, sell or hold the graded instrument, its future market price or suitability for a particular investor.

The grade reflects MCX's leadership position in the Indian commodity futures market over the past four years, with a share of ~82% of the overall traded turnover in FY11. It is a leader in the trading of bullion, crude oil, copper and natural gas (which accounted for ~85% of MCX's traded turnover in FY11). Historically, metals and energy commodities have witnessed lower regulatory intervention. With a strong technology-backed trading platform and infrastructure (supplied by its promoter Financial Technologies India Ltd), MCX is able to provide high liquidity and low impact cost of transactions – key criteria for the success of any exchange.

The grade takes into account the benefits that MCX will derive from amendments to the Forward Contracts (Regulation) Act, which will allow trading of options and indices, and participation by institutional investors, leading to increase in the traded turnover on commodity exchanges. The grade also draws support from MCX's strong management team and its ability to attract talented and experienced personnel.

While new commodity exchanges have been set up over the past couple of years, they have not been able to nudge MCX from the top. However, given the high profitability and cash-churning nature of the business, we expect competition to intensify in the future.

MCX's operating income has grown at a CAGR of 32% over FY09-11, with healthy profitability. EBITDA margin and adjusted PAT margin were 60.4% and 39.4%, respectively, in FY11.

Source : Equity Bulls

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