MCX sees strong derivatives volumes as higher costs drive Q1 EBITDA miss

Investment View and Recommendation

Motilal Oswal Financial Services retained its Neutral rating on Multi Commodity Exchange of India Ltd (MCX) in its August 5, 2026 Q1 FY27 results update. The broker’s one-year target price is Rs 2,790, compared with the CMP of Rs 2,599.

The broker remains positive on MCX’s longer-term opportunity because commodity derivatives are under-penetrated and the exchange has optionality from new products. However, volumes may remain vulnerable in the near to medium term as the current run-rate has been highly volatile. Motilal Oswal also believes that the full impact of RBI regulations on proprietary books may not yet have been seen.

Q1 FY27 Financial Performance

MCX reported operating revenue of Rs 702 crore in Q1 FY27, up 88.1 per cent year on year but down 21.0 per cent quarter on quarter, broadly in line with Motilal Oswal’s estimate. The sequential decline reflected normalisation after an exceptionally strong, volatility-led Q4 FY26, while underlying business metrics remained healthy.

Higher operating costs resulted in EBITDA of about Rs 494 crore, which was 7.1 per cent below the broker’s estimate despite more than doubling year on year. EBITDA margin improved to 70.4 per cent from 64.8 per cent in Q1 FY26 but declined from 74.9 per cent in Q4 FY26. PAT was about Rs 413 crore, more than twice the year-ago level, but declined 22 per cent quarter on quarter and was 4 per cent below estimate.

Transaction Fees and Trading Volumes

Transaction fees were about Rs 650 crore in Q1 FY27, up 92 per cent year on year and down 20 per cent quarter on quarter. Options accounted for 75 per cent of transaction fees, compared with 68 per cent in Q1 FY26.

• Overall average daily turnover rose 238 per cent year on year and 58 per cent quarter on quarter to Rs 10.5 trillion, led by bullion, energy and base-metals contracts.
• Options notional average daily turnover grew 266 per cent year on year to Rs 9.9 trillion, supported by a 541 per cent rise in bullion contracts.
• Futures average daily turnover increased 47 per cent year on year to Rs 596 billion.
• MCX retained more than 99 per cent share in commodity futures, with gold and silver contributing about 77 per cent of futures turnover.

Participation, Products and Technology

Management’s near-term priorities are expanding market participation, broadening products, deepening liquidity and strengthening technology. MCX added 12 members and 35 foreign portfolio investors during the quarter, taking the FPI base to about 220. Traded clients reached 1.4 million, almost double the year-ago level, while client participation rose 8 per cent year on year to 597 members. Management expects FY27 traded unique client codes to exceed FY26.

Electricity derivatives, 10-gram gold contracts and Silver 100 Gram Futures are gaining traction. MCX has approval to establish the Coal Exchange of India subsidiary and continues to build metals and commodity-index products.

Technology investment remains a priority. Daily processing capacity has increased to more than 3 billion transactions from under 1 billion a year earlier, while current infrastructure can support more than twice peak volumes.

Earnings Estimates and Valuation

Motilal Oswal reduced its FY27 and FY28 EPS estimates by 5 per cent and 4 per cent, respectively, to reflect current volume trends and higher costs. The broker forecasts FY26–28 compound annual growth of 19 per cent for revenue, 17 per cent for EBITDA and 19 per cent for PAT.

The one-year target price of Rs 2,790 is based on 38 times FY28E EPS.