MCX goes for an IPO

The biggest commodities exchange in India Multi Commodity EXchange (MCX) decided to go for an IPO (Initial Public Offer). This is the first Commodity Stock Exchange in India to come for an IPO.

About MCX

Multi Commodity Exchange is being operated by Financial Technologies. Along with Financial Technologies, The major share holders of Multi Commodity Exchange are
State Bank of India, NYSE, Fidelity, Meryll Lynch, IFCI, Corporation Bank, ICICI, passport Capital, Union bank, HDFC bank, Bank of India, and Bank of Baroda. Through this public issue Financial Technologies want to sell 5.18% from its total share and State Bank of India selling 4.14% of its total share. Multi Commodity Exchange (MCX) has around 80% market share in Commodity Futures Trading. MCX is providing Future Contracts for 49 different varieties of commodities which include gold, silver, ferrous, non-ferrous metals, electrical and agricultural items. The number of members (commodity brokers) as of December 2011 is 2153. There are around 2.96 lakh MCX terminals all round the country. Moreover the Exchange is still in growth phase only. This indicates that the revenues of MCX will be growing year by year.

Other Details of MCX

Commodities’ trading is increasing day by day in India. 82% of the revenues of MCX as of December 2011 are from transactions only. The annual subscription fee accounts to less than 3% of the revenues. The growth rate of this exchange is 46% from 2007-08 till date. Gold and Silver contracts contribute a major share to the revenues and MCX is the market leader in gold and silver contracts. In the first 9 months of this financial year the revenue increased to 474 crores which is 27crores more than the previous year (447 crores). The net profit also increased from 173 to 220 crores for the same period. The EBIT margin is more tha 70%. The net profit is 46.5% of the company’s total earnings for the first 9months of the financial year.

About the IPO

Issue start Date: February 22^nd 2012

Issue End Date: February 24^th 2012

Total shares Available for Public issue: 64, 27,378

Face Value of Share: 10 INR

Issue Price: Low: 860 INR High: 1032 INR

The total worth of the shares that are being issued is 96 crore INR. These are given to 12 anchor investors for the Public Issue. These anchor investors include (Indian and International companies) Black Rock Global Funds, Daish Securities, Kuwait Investment Authority, Credit Suizi e.t.c and Indian companies like TATA AIG life, Canara Bank, HSBC Bank, Oriental Bank of commerce, ICICI prudential, Birla sunlife, Sundaram Mutual funds. These investors have purchased 9,26,606 shares at a price of 1032 INR per share on Tuesday.

Benefits for an Investor

As I said earlier, the commodity futures market is in its initial stage in India. There is a big chance of growth in this market. So, it will be a very good option to invest in for a long term. Considering the revenues that MCX generates for 2011-2012, the share value of 1032 INR is equal to around 18.4 PE. Apart from this the capability of the management, attractive business, good growth e.t.c add to the add icing to the cake. MCX is expecting a good response for this IPO from the side of institutional investors also. So if you are looking for a long term investment options this can be a good choice. But you need to hurry as the issue closes on 24^th feb 2012 (i.e 2 days from today…)