Reliance Capital has alleged that Multi Commodity Exchange (MCX) is not co-operating in sharing critical information for stake sale by Financial Technologies (FTIL). It also expressed disappointment with the process followed by FTIL and wanted the commodity regulator Forward Market Commission (FMC) to take over the process.
Meanwhile, sources in FMC indicated that the regulator will not take over the process, but ensure that stake sale process should be over by April 30. On the other hand, when contacted, Reliance Capital declined to comment. However, both MCX and FTIL said they have thoroughly cooperated with the bidders.
MCX said: “The law does not permit us to share any unpublished price sensitive information including part of PwC report with any person(s) selectively.”
FTIL proposes to sell 24 per cent stake in MCX and Reliance Capital is one of the shortlisted bidders.
PwC, which conducted a detailed audit on MCX at the behest of FMC, submitted its final report last Monday. The report has pointed to grave discrepancies in the exchange’s operations and its business dealings with its parent company Financial Technologies.
The report also has crucial information on MCX dealings with other group companies such as Indian Bullion Market Association and National Bulk Handling Corporation.
As a listed entity, MCX needs to comply with listing agreement to share price-sensitive information with investors so that they can take informed decisions. It is for MCX to take appropriate action in this matter, said an FMC official.
Business Line has learnt that in a letter to the commodity exchange regulator FMC, Reliance Capital said, “The entire process being followed by FTIL, coupled with MCX’s lack of co-operation demonstrates a complete disregard of transparency on the part of FTIL and MCX when co-operation and transparency is necessary for implementing and completing the proposed divestment mandated by FMC.”
FTIL is the promoter of MCX and crisis-ridden National Spot Exchange Ltd (NSEL). This disinvestment is taking place after the regulator, in its order dated December 17, 2013, declared FTIL not a ‘fit and proper person’ to continue to be a shareholder of 2 per cent or more in MCX.
Following this, the board of FTIL appointed a committee to oversee a restructuring plan which include divesting up to 24 per cent (from 26 per cent) in MCX.
According to a communication sent to stock exchanges, FTIL said that the committee met on April 11 and shortlisted bidders from 9 proposals. The committee also decided that FTIL would write to the Board of MCX seeking their co-operation for management interaction with the shortlisted bidders and the customary due diligence to enable the proposed sale within the defined timelines.
However, Reliance Capital appeared not satisfied with the process. The company has raised concern on tax implication due to third party transaction and MCX’s unwillingness to share PwC’s forensic investigation report. The bidder also desired FMC to direct MCX to share the report with potential investors.
Related Part TransactionsBidder’s concern was about some of the contracts, including the most critical one related with Trading & Clearing engines, between MCX and FTIL have one sided terms. In fact, MCX has admitted that these related party contracts are not arms length, it claimed. Reliance Capital was apprehensive about tax implication and other liabilities which may arise on account of these related party contracts including from transfer pricing perspectives. It also felt that these issues pose significant risk and exposure to any potential investor.