SEBI Gets Tough On FTIL

India’s capital market regulator Securities Exchange Board of India (SEBI) declared that Jignesh Shah's Financial Technologies (India) (FTIL) was unfit to hold a stake in any stock exchange or clearing corporation. The company will have to dispose its stakes in all the stock exchanges within 90 days. FTIL holds a stake in Multi-Commodity Exchange of India Ltd (MCX), MCX Stock Exchange Ltd (MCX-SX), MCX-SX Clearing Corporation Ltd (MCX-SX CCL), the Delhi Stock Exchange (DSE), the Vadodara Stock Exchange (VSE) and National Stock Exchange of India Ltd (NSEIL).

In MCX-SX Clearing Corporation, Financial Technologies has around 2.71 crore shares as well as 56.24 lakh transferable warrants, while in DSE and VSE it has 14.96 lakh and 2.9 lakh shares respectively. The company has 10000 shares in NSEIL. The SEBI ordered to sell its 4.99% stake in MCX-Stock Exchange (MCX-SX) within 90 days. The company has the option to seek help from the Supreme Court but still they will have to start the process of divestment. MCX-SX is in the midst of right offering of the shares, while in this right issue FTIL will not participate and automatically stand to reduce to 1.72% approximately. 

The regulatory order came after the payment crisis at National Spot Exchange (NSEL) of Rs 5574.35 crore, where FTIL holds more than 99% stake. FTIL and Multi Commodity Exchange (MCX) hold a 4.99 per cent stake in MCX-SX. The two also hold warrants that on conversion will translate into a 69 per cent stake in MCX-SX. According to the SEBI order, FTIL and MCX can neither hold the equity shares nor the convertible warrants.

According to the market sources, the current value of its stake in these five entities is estimated to be around Rs 2500 crore. Earlier to this the Financial Technologies has also sold its 100% equity ownership in National Bulk Handling Corporation (NBHC), a subsidiary of the company at a consideration of Rs 241.74 crore. The FTIL board has already constituted a committee to propose and oversee a restructuring plan, which included the sale of up to 24% stake in MCX.