After long period of time, an IPO of this size and stature has hit the market, which is unique of its own. This is the first ever IPO by an exchange in the country and the issue has been given highest grade of 5/5 by the rating agency Crisil.
Issue Detail:
Issue Open: Feb 22 - Feb 24, 2012.
Issue Size: 6,427,378 Equity Shares of Rs. 10.
Issue Price: Rs.860-Rs.1032.
Listing At: BSE, NSE.
The promoter of the company is Financial Technologies, which is a leader in offering trading solutions like ODIN and other similar products. Globally, MCX is the fifth largest commodity exchange, which holds top two positions in gold and silver segments and higher positions in other commodities as well.
The EPS for the reported year 2011 stands at Rs.34.5 and the book value at Rs.210. The company had recorded Rs 447.5 crore of total income and net profit of Rs 176.2 crore with an equity capital of about Rs 38 crores for the year March 31, 2011. Considering the current growth of about 70-75%, the current year EPS would be around Rs.60 and at the lower price band of Rs.860, the issue is done at 15 times earnings and at the upper end of the band at Rs. 1,032, valuation per share works out at a PE of about 18 times.
Though the pricing seems on the higher side, considering the huge growth potential, the issue price is justified. Hence investors with long term view can invest in MCX IPO and not for listing gains alone. Once this issue is gone through, one could expect couple of similar IPOs from BSE and NSE also.
Watch out this space for more such IPOs and as well as about the big one from the international front, which is the Facebook IPO.
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The issue could have been priced still lower. The Price to book value is more than 3 times.
Though the pricing is bit on the higher side, huge growth rate justifies it. The grey market premium indicating good response (Rs.150-200)
MCX will be listed on BSE only on NSE.
Any risks or negatives about this ipo?
Yes, listing only on BSE.
Regarding key risks, any ban on Agri commodities by the regulator will be the one. This is unlikely to happen, may be one or two commodities could be banned, but not the whole lot.
Competition could arise in the form of NCDEX, which is at present has the market share of about just 50-10%
Negatives/Risks: also likely introduction of ctt(commodities transaction tax) in upcoming budget(similar to stt) which will lead to reduction in trading volumes.
The main reason for spurt in volumes traded in MCX was increase in prices of gold/silver. Any volatility or change in those prices can severely affect trading volumes.
@ Roshni Bhatia, yes CTT could slow things a bit, if it is introduced in the current budget session.