MCX IPO Review by ARM Research (Subscribe)

Review By ARM Research Pvt. Ltd. on Feb 21, 2012

Total Issue of Shares (Lk): 64,27,378
Employee Reservation (Lk): 250,000
QIB Investors (Lk): 3,088,689
Non -Institutional Investors (Lk): 926,606
Retail Investors (Lk): 2,162,083
Issue opens on: Feb 22, 2012
Issue closes on: Feb 24,2012
Price Band (Rs.): 860-1032
Lot size (No. of shares) and multiple: 6
Face Value (Rs): 10
Issue Size (Rs in Cr.): 552.7-663.3 Cr
Equity Shares outstanding prior to the Issue: 50,998,369
Equity Shares outstanding after the Issue: 50,998,369

MCX IPO HIGHLIGHTS

  • Multi Commodity Exchange of India Limited (MCX) has emerged as the market leader in India's commodities future industry with 87% market share. MCX will be the FIRST OF ITS KIND IPO to hit the markets and will act as a BENCHMARK for other exchanges planning for IPO's
  • MCX is the 5th largest commodity futures exchange globally, among all the commodity exchanges considered in the Futures Industry Association (FIA) survey, in terms of the number of contracts traded for 1H CY 2011.
  • Globally, MCX is the largest silver exchange; the second largest gold, copper and natural gas exchange; and the third largest crude oil exchange in terms of the number of contracts traded in each of these commodities (in CY10 and 6 months ended June 30, 2011).
  • As of Dec 2011, MCX had 2,153 members nationwide with more than 296,000 terminals including CTCL spread over 1,572 cities and towns in India. Company will continue to pursue geographic expansion, product diversification and enhance marketing and awareness in order to drive its volume growth going forward.
  • The number of products MCX offers on its Exchange has grown from 15 as of Mar 04 to 49 as of Dec 11. MCX continues to pursue introduction of variety of new commodity futures contracts on exchange which will open up new avenues of business growth for the company.
  • Regulatory reforms in form of granting permission for trading in options & indices and approval to foreign as well as domestic institutions & banks to participate in commodity futures trading (which is currently prohibited) can be the next big trigger for growth in exchange volumes and consequently on profitability of exchanges like MCX.
  • Despite the global headwinds, MCX's has reported stellar results over past 3 years. Operating income has grown at a CAGR of 32%, EBITDA at 31.2% and adjusted PAT at 30.1%, over FY09-11.

Conclusion / Investment Strategy

Recommendation:

MCX's Leadership position in the Indian Commodity Futures Market over past four years, with a share of ~82% of the overall traded turnover in FY11. The operating Income has grown at an CAGR of 32% from FY09-10 with Healthy Profitability.

We recommend the Investors to "Subscribe" to the issue. Short term investors can book profits on listing .While long term investors can continue to hold the stock for next 2-3 years.

We "Recommend Long Term Investors" to Invest and reap the benefits of Wealth Creation.

Reviewer recommends Subscribing to the issue.

Review By ARM Research Pvt. Ltd. on Feb 21, 2012









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