Foreign institutional investors (FIIs) in commodity exchange Multi Commodity Exchange of India (MCX), promoted by Financial Technologies, have been caught off-guard by the sharp slide in its share prices.
Panicky investors continued to dump the stocks of Financial Technologies and MCX for the second consecutive day on fears that group company National Spot Exchange (NSEL) may default on outstanding contracts after it announced deferment of the contracts’ settlement (except e-series contracts) by 15 days on Wednesday.
The stock of MCX, which has significant institutional ownership, was locked in the lower circuit of 20% for the second day running to close at a fresh all-time low of Rs 409.65. The stock, which had 38.40% FII ownership and 19.99% ownership by domestic institutional investors at the end of last quarter, has now lost over 74% from its peak of Rs 1,596.80 in November 2012.
This sharp slide has left many institutional investors with deep notional losses, including FID Funds (Mauritius), an affiliate of Fidelity International, Passport India Investment, Euronext NV (an affiliate of NYSE Euronext) and Merrill Lynch Holdings (Mauritius), which owned 5%, 4.90%, 4.73% and 2.79% respectively (as on June 2013 end).
While the average buying price for FID Funds works out to Rs 480 considering the bonus issue in 2011, the approximate buying price for Passport India that invested in 2007 is around Rs 924 and for Merrill Rs 840 per share. With the stock price now plunging below their buying prices, they are sitting on huge notional losses on the shares which they didn’t sell before.
Merrill Lynch has cut its losses significantly as it sold nearly 2% stake in MCX to Blackstone in March 2013 at a price of about Rs 1,020 per share.
However, Euronext, which has been considering stake sale in MCX for the last few months, wasn’t that lucky as it couldn’t find a buyer. Euronext had invested in MCX at an average adjusted price of Rs. 894.74.
On the other hand, most of the public sector DIIs and private media companies have been less hit as their purchase price is still below the current market price.
The FIIs which had invested in MCX’s promoter entity, too, would be sitting on huge losses as the stock of Financial Technologies, which had tanked 64.59% on Thursday, fell another 45% in the first few minutes of trading to Rs 105.45 before recovering sharply. The stock finally closed the day at Rs 151.25 on BSE, down 21.12% over Thursday’s close, to its lowest level since December 2004.
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