The Hindu Business Line : MCX IPO gets Crisil’s highest rating

Mumbai, May 22 Rating agency Crisil on Thursday rated MCX initial public offering (IPO) at the highest grade of 5/5. The grade indicates that the fundamentals of the issue are strong, relative to other listed equity securities in India. However, the rating is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. It is neither a trading recommendation, nor a comment on the future market price or its suitability.

The exchange officials were not available for comment on when the IPO will hit the market. Mr Chetan Majithia, Head-Equities, Crisil Research, said apart from MCX, Acme Tele Power is the only company to receive the highest rating. Crisil has rated 24 IPOs till date, he added.

Return Indicators

According to the draft red herring prospectus (DRHP), the public issue is for 10 million equity shares of Rs 5 each. The IPO would comprise fresh issue of 6-million shares and another 4-million shares is to be sold by Financial Technologies (India) Ltd and Corporation Bank.

The company is expected to raise Rs 500 crore-Rs 600 crore with issue priced at Rs 500-600 per share. It was for the second time that MCX issue had been cleared by SEBI. Earlier, the company filed a DRHP way back in 2006, but the plans were later shelved.

MCX’s profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short-term due to the impact of the commodity transaction tax (CTT), Crisil said. However, in the medium term, MCX’s strong market position and continuous focus on product innovation would act as growth drivers.

Market leadership

Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices, Crisil said. Of the company’s total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest.

For the year ended March 31, 2007, MCX reported a net profit of Rs 93 crore on a turnover of Rs 200 crore, compared with a net profit of Rs 37.50 crore and revenues of Rs 100 crore in the previous year.

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