FTIL to renegotiate its tech service fee to MCX

The Financial Technologies India Ltd (FTIL) may renegotiate its technology service fee that it now charges its former group company, Multi Commodity Exchange (MCX). FTIL is charging about ₹60 crore per annum, which is likely to be slashed by almost ₹20 crore or about 33 per cent, by scaling down the fixed and variable charges.

Fixed charges as per the existing agreement (prior to negotiation) are ₹2 crore per month while the variables amount to about 12.5 per cent of the transaction value. Together, these account for the bulk of the ₹60-crore fee.

Importantly, the commercial clauses that are being re-negotiated, are significant to MCX.

As per PwC’s forensic audit report, various service agreements with FTIL were considered one sided with restrictive clauses that were disadvantageous to MCX.

For instance, the agreement provided for automatic renewal — after a period of 33 years for another 33 years — with no exit scope unless MCX paid the fee for the unexpired time of the lease period with some penalty.

Also, the agreement lacked reciprocal arrangements for MCX in terms of change of vendor.

These commercial clauses are being renegotiated. Besides, it is now mandated by regulatory requirements under the new Companies Act and SEBI’s listing guidelines.

According to sources, the revised agreement as and when concluded, would need the shareholders’ approval in the AGM consistent with SEBI’s guidelines dated April 17 2014, applicable to material-related party transactions.

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