DNA Exclusive: CBI probes Mauritius co’s MCX exit

The Central Bureau of Investigation (CBI) has initiated a probe into Multi Commodity Exchange’s IPO held in 2012 that provided an exit to one of the foreign investors — Alexandra Mauritius Ltd — without the requisite approval by Foreign Investment Promotion Board (FIPB).

The country’s premier investigation agency has written to Securities and Exchange Board of India (Sebi), asking for details and the status of the case. The markets regulator has in turn asked MCX to file a report regarding the same.

The case came into play when a Delhi-based fund manager filed a complaint with the investigation agency against MCX.

As part of the listing in 2012, Alexandra Mauritius Limited (AML) had divested its 3,90,754 shares in the company, through the offer for sale (OFS).

AML had purchased 781,508 shares of MCX from the promoter Financial Technologies on November 29, 2007. It had paid Rs 577.50 for each share having a face value of Rs 5, the total cost being Rs 451,320,870 (over Rs 45 crore). The face value increased from Rs 5 to Rs 10 at the time of IPO.

AML sold the shares at more than the reserve price of OFS, which was pegged at Rs 1,032 per share.

Prior to the IPO, MCX had approached the Reserve Bank of India (RBI) seeking an approval for divestment of stake by Alexandra Mauritius Limited. The MCX IPO was purely a case for offer-for-sale (OFS) which meant existing shareholders would sell their stake to exit their investments. As global firms were participating in the stake sale, they required approvals from the RBI and FIPB. In November 2011, before filing the DRHP with Sebi, MCX received a nod from the RBI, but with a rider that it needed to take an approval from the FIPB, post-IPO. At that time, MCX management and merchant bankers had convinced the banking regulator for its approval.

However, in 2013, FIPB rejected the sale by Alexandra Mauritius Limited since it could not divulge details of “beneficial ownership” or “source of funding”.

And till date, MCX and the merchant bankers have not been able to get approval for Alexandra Mauritius Limited from FIPB.

An email sent to RBI and Sebi did not elicit any response.

The Mauritius-based fund has invested in India in merely two firms including MCX, the other being Su-raj Diamonds.

Another source close to the development added, “In the last communication between RBI and MCX, the central bank has clearly mentioned that they needed to take FIPB approval for Alexandra Mauritius Ltd’s sale. Otherwise, the case will be transferred to Enforcement Directorate. However, it has been two years since the last communication and till now, the case has not been transferred to ED.”

Sources further tell DNA Money that Alexandra Mauritius had divested rest of shares in MCX in the secondary market. “When the exchange was aware that Alexandra Mauritius Limited had not received FIPB approval, they should have seized holdings of the investor, which they failed to do.”

When contacted by DNA Money, MCX said, “We don’t want to comment”.

Sources say that the Sebi has now called MCX company secretary for clarification. But as of now, the exchange has not filed any written reply to Sebi.

As per sources, it is the duty of the IPO issuer and merchant bankers to furnish all approvals before and after the IPO.

Edelweiss, Citibank and Morgan Stanley were the merchant bankers for MCX during its share sale process. Edelweiss and Citi did not respond to an e-mail sent to them two weeks back.

Sources told DNA Money, “Sebi is also consulting the legal department to see if the regulator can take action against MCX and any violations in listing agreement regulations.”