The Multi Commodity Exchange (MCX) ? India?s biggest commodity derivatives exchange and a FTIL group company ?reported a sharp decline in profit for a second straight quarter. For the three months to December 2013, its topline and net earnings more than halved as trading activity fell by two-thirds in the period compared to last year.
MCX reported a 55% drop in its y-o-y operating revenue in the December quarter to R55.8 crore while its net earnings plunged 71% to R21.8 crore compared to last year. Earnings per share (EPS) declined by more than R10 for a second consecutive quarter and stood at R4.3 per share. In the previous quarter also, both revenue and net profit of MCX had seen a more than 40% drop y-o-y. The MCX stock rallied R12.35, or 2.6%, to R489.6 on Friday on the BSE.
In the last six months, its earnings were impacted by the imposition of a commodity transaction tax (CTT), while the R5,600-crore scam at another group company, National Spot Exchange (NSEL), also affected trading interest.
The September quarter performance reflected an impact of the imposition of an additional margin of 5% on trading on commodities like gold, silver, crude oil and copper in September.
As per the MCX website, average trading volume in the third quarter of the fiscal fell to 1.08 crore contracts compared to 3.06 crore last year. The average turnover in the period has dipped to R4.4 lakh crore from R12.3 lakh crore in the same quarter last year.
The NSEL fiasco has also resulted in the commodity market regulator, Forward Market Commission (FMC), directing Financial Technologies, the anchor investor in the exchange, to bring down its stake from 26% to 2%. While FTIL has challenged this order in the Bombay High Court, the reshuffled board of MCX recently indicated that FTIL cannot hold more than 2% in MCX and that its voting rights would be capped at 2%.
Since the FMC order in mid-December 2013, the MCX shares rallied as much as 53% to R596.65 in early January this year. Investors turned upbeat on the stock on hopes that more institutional investors may buy a stake in the exchange.
However, the latest quarterly data showed that the holding of foreign institutional investors (FIIs) declined nearly 12% to 25.23%. While Blackstone GPV Capital increased its stake in MCX from 1.99% to 4.78%, NYSE Euronext sold its 4.73% holding in the December quarter.
Even the Government of Singapore Investment Corporation and Swiss Finance Corporation, each of which held a 1.24% stake in the previous quarter, are absent from the list of investors who own more than 1% after the latest quarter.
