FTIL sells SMX for $150 mn; clear dues, say NSEL investors
Singapore/Mumbai: Embattling a major crisis at group entity NSEL, exchange operator FTIL Tuesday announced sale of its Singapore-based bourse SMX for USD 150 million (Rs 931 crore) to InterContinentalExchange.
Jignesh Shah-led Financial Technologies India Ltd (FTIL) operates commodity bourse MCX, stock exchange MCX-SX and the crisis-hit National Spot Exchange in India.
FTIL holds its stake in the Singapore multi-product exchange through a wholly-owned subsidiary Financial Technologies Singapore Pte Ltd.
In a regulatory filing to stock exchanges in India, FTIL said its Singapore subsidiary has signed an agreement to sell 100 percent of its equity in Singapore Merchantile Exchange (SMX) to ICE Singapore Holdings, an entity owned by US-based ICE group, for USD 150 million.
The regulatory filing said the company will use the sale proceeds towards repayment of outstanding debt in external commercial borrowing and foreign currency loans subject to regulatory approvals, if any. Pursuant to this, FTIL will become debt/lien-free, it added.
FTIL has a debt of Rs 1,223.75 crore in external commercial borrowings and foreign currency loans, as per its annual report 2012-13.
Commenting on the sale, Harish Galipelli, Head, Commodity and Currency Derivatives at JRG Wealth Management Ltd, said: "After NSEL fiasco, investors' confidence and performance of FTIL and its group firms have declined. This would hamper the prospect of servicing the debt and this must have prompted FTIL to sell SMX."
National Spot Exchange Ltd (NSEL) is engulfed in 5,600-crore payment crisis after the bourse stopped operations on government directive following violation of certain norms.
After NSEL crisis came to the fore, FTIL and its group firms like MCX-SX came under scanner of market regulator SEBI. Top NSEL officials were also arrested and different investigative agencies are probing the NSEL crisis.
Arun Dalmia, President of NSEL Investors Forum, a body of aggrieved investors, questioned FTIL's sudden move to sell SMX to clear foreign currency loans which, he said, are due in 2014 and 2015.
"FTIL is equally responsible in the NSEL payment crisis and it should repay dues of NSEL investors first. There should be a serious enquiry into the issue," Dalmia said.
Raising an emotional pitch on sale of SMX, FTIL CEO and Managing Director Jignesh Shah said: "He has mixed emotions about parting ways with an asset that he had nurtured as a global showcase of an institution, built with Singapore's world class infrastructure and regulation coupled with Indian technology and expertise."
SMX was launched with much fanfare in 2010 as a pan-Asia trading platform for various commodities.
Shah, however, said, "He will be happy to watch it (SMX) scale new heights with satisfaction from a distance under ICE."
Shares of FTIL soared by 11 percent to Rs 201.40 on the BSE in early trade. However, stock pared some of the gains and settled at Rs 185.05, up 2.07 percent from the previous day.
ICE Group said it has entered into a definitive agreement to acquire SMX and also its wholly-owned subsidiary SMX Clearing Corporation (SMXCC) in an all-cash transaction, which is expected to close by the year-end, subject to regulatory approvals and closing conditions.
Post the deal, SMX and SMXCC will transition from their existing technology to the ICE trading and clearing platforms, it said in statement.
"The acquisition of SMX represents an important step in ICE's growth trajectory as we look to expand our customer base and markets in Asia by establishing a local exchange and clearing presence," said David Gonne, Chief Strategy Officer, ICE.