Multi Commodity Exchange of India is entering the capital market on 22nd February 2012, with an offer for sale of 64.27 lakh shares of Rs. 10 each, in the price band of Rs. 860 to Rs. 1,032 per share.
Shares are being offered by the existing Promoter, Financial Technologies (India) Ltd. to meet with statutory compliance, to bring down its stake in the company to 26%. Apart from this, SBI, Corporation Bank, Bank of Baroda, ICICI Lombard are the selling shareholders. Dilution is 12.60% of the total issued equity capital, which is now placed at Rs. 51 crores.
The company is a leading Commodity Exchange, with a de-mutualised exchange for nation wide online trading, clearing and settlement operations of Commodities Future transactions. The company is offering trading in 49 commodity futures, which includes bullions, ferrous and non-ferrous metals, energy and agriculture. As at 31-12-2011, it had 2,153 members with over 2,96,000 terminals, including CTCL spread over 1,572 cities and towns across India. The company derives its income from transaction fees, with respect to the trades executed on the exchange, annual subscription fees, members admission fees, terminal charges, proceeds of sale and dividends from investments and interest from bank deposits.
For FY11, total income of the company was placed at Rs. 448 crores, with PAT at Rs. 176 crores resulting in an EPS of Rs. 34.50. For nine months ending December 2011, total income was placed at Rs. 475 crores with PAT at Rs. 218 crores, resulting in an EPS of Rs. 42.75 for the period. FY12 EPS is likely to be over Rs. 60.
As at 31-12-2011, paid up equity capital of the company was at Rs. 51 crores with Net Worth at Rs. 1,074 crores, giving a book value per share of Rs. 210 per share. The company has cash and cash equivalent of over Rs. 1,200 crores as at 31-12-2011, which represents major part of Net Worth and deposits and margins collected from the members.
The company has shown a growth of over 70% growth in first 9 months of FY12. However, considering the new commodities and products, being added by the exchange and huge inflow of new registration of sub-brokers, company should be able to post a CAGR of over 25% for next 3 years.
Price band having fixed between Rs. 860 to Rs. 1,032 looks quite wide, but at the upper end of the band at Rs. 1,032, valuation per share works out at a PE of about 17 times, based on estimated EPS of Rs. 60 for FY12. Same works out at a PE of less than 14 times, based on estimated EPS of Rs. 75 for FY12.
With this kind of financial performance, IPO is likely to evoke excellent response from the institutional investors. It may probably revive the languishing primary market, as well, as it is seen a first quality IPO of year 2012.
Considering this, it is advised to apply at the upper price band of Rs. 1,032, as it is likely to give a return of over 20% in first 3 months, from the date of its listing.