MSEI, NSE in talks for out-of-court settlement

PALAK SHAH | | | Updated on: Nov 17, 2021
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NSE said to be offering much lower amount against CCI order of ₹856-cr compensation

More than a decade after winning a legal claim of ₹856 crore against the National Stock Exchange (NSE) at the Competition Commission of India (CCI), the Metropolitan Stock Exchange of India (MSEI) is now seeking an out-of-court settlement into the matter, sources told BusinessLine .

The NSE is likely to have offered between ₹25 crore and ₹100 crore to settle the matter but a proposal of such a low amount is likely to face stiff resistance from MSEI shareholders, the sources said.

Case stuck in SC

“The matter is sub judice and confidential, hence we will not comment,” said MSEI.

On a complaint from MSEI, the CCI, in 2011, held the NSE guilty of predatory pricing and monopolistic practices. But NSE challenged the CCI order in the Supreme Court (SC) and the final outcome of the award to MSEI has been pending since. Multiple adjournments and dates have been taken by the parties involved and the SC did not take up the case for hearing amid Covid backlog for nearly two years now. If the SC sticks to the award, the NSE will have to pay the same with interest, experts said.

MSEI in urgent need of money

MSEI is now desperate for cash since its net worth is fast depleting and its licence may be cancelled by market regulator SEBI next year if the net worth of the exchange falls below ₹100 crore. As per SEBI rule, exchanges have to maintain a net worth of ₹100 crore all the time. In terms of business, MSEI has not been able to do much mainly as its management remained embroiled in controversies.

Also, the exchange has so far failed in efforts to convince the SC to give it an urgent hearing into the matter since it was on the death bed. SEBI has disallowed MSEI to claim available tax credits as net worth and also disallowed the exchange from reacquiring the cash lying in the books of its clearing and settlement arm, the sources said.

NSE for clearing ahead of IPO

So far, the NSE lacked any urgency to settle the matter as SEBI did not push the exchange. But NSE’s pending IPO could force it to get to the table with MSEI for a settlement, the sources said.

As of March this year, MSEI enjoyed a net worth of ₹165 crore, which dropped to ₹158 crore for the June quarter. In the filings of September quarter results, MSEI said that its net worth was still above ₹100 crore.

“The company is adequately capitalised, the regulatory net worth of the company, as on September 30, 2021, is much higher than ₹100 crore. The exchange has also gone live on interoperability and operations are running smoothly. It is pertinent to note that the core transaction income of the exchange increased on account of increased volumes. Exchange has adopted various cost-reduction measures to help it improve its financial position,” MSEI said in its September filings along with unaudited financial results.

MSEI has suffered a loss of around ₹8.31 crore for half year FY (Financial Year) 2022 as per its unaudited results. As of June quarter, MSEI’s loss stood at ₹6.7 crore. The net loss for the financial year ended March 2021 was ₹24.03 crore. MSEI and NSE did not reply to an email on the settlement talks.

Published on November 18, 2021

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