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Review By Dilip Davda on February 16, 2012

While secondary market has started 2012 on a hectic note with rampant inflow from FIIs that pulled up indices to last six and half month high. This definitely brought some action on primary market front which was at standstill post November 2011. No doubt Goodwill Hospital IPO tried its luck on last day of December 2011 and was ultimately stood withdrawn on 8th Jan 2012 due to poor response.

Since then, primary market has seen some of the infra bonds and tax free bonds issues that too received lukewarm response from retail category in particular. Thus primary market was in search of some trend setter issue and announcement of MCX IPO has definitely raised the hopes of market men that is lifting the curtain of IPO market.

The Multi Commodity Exchange (MCX), India's biggest commodity exchange by turnover is entering the market with an offer for sell from existing investors like FTIL, SBI, Corp Bank, BoB, ICICI Lombard etc. The total size of the issue is ) 6,427,378 Equity Shares of equity share of Rs. 10 each that also includes reserved quota for employees. The total offer size of 12.6% of the issued capital is stands reduced to 12.11% after reserved  quota and thus final offer is for 6,177,378 shares that is being offered to QIBs (50%), HNIs (15%) and Retail (35%).  The issue is opening for subscription on 22.02.2012 and will close on 24.02.2012. The issue is being made in the price band of Rs. 860-1032 and is thus priced below the market expectation of around Rs. 1100 per share. Minimum application is to be made for 6 shares and in multiples thereof thereafter. This being offers for sale, post issue equity remains the same as of now.

The company will become the first Indian bourse to list its shares on an exchange. MCX had to shelve the IPO twice earlier because of a downturn in the stock market. But the company hopes to trigger fresh activity in the primary market this time around. This IPO is expected to be the trend setter for the bourses that are planning maiden issues. MCX is the largest commodity bourse in the country and commands over 70 per cent share in an annual estimated turnover Rs 177 lakh crore in the commodity derivatives space. Globally, MCX is the fifth largest commodity exchange, while it figures among the top two positions in gold and silver segments.

FTIL now holds 31.2 per cent stake in MCX, which will come down to about 26 per cent after the IPO. MCX is trying to rope in anchor investor in the public offering. MCX will be the first exchange in India to go public. CRISIL has rated IPO Grade 5 for this IPO indicating at strong fundamentals of the company. The issue is being managed by Morgan Stanley, Citigroup and Edelweiss Capital and registrar to the issue is Karvy Computershare Pvt. Ltd.

MCX had recorded Rs 447.5 crore of total income and Rs 176.2 crore of net profit in the financial year ended March 31, 2011. The company posted net profit of Rs 218 crore and total income of Rs 474 crore for the nine-month period ended December 31, 2011. This gives an EPS of Rs. 34.55 for fiscal 2010-11 and Rs. 57.00 for 2011-12 (on annualized basis). As on 31.12.11 its NAV stands at Rs. 210.58 This translates the offer price in the range of 15-18 P/E and at a Price to book value of 4 -5 based on lower and higher price band. As no peer comparison is available, this pricing looks on an average side but considering the fancy of such IPOs, it looks attractively priced.

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