FTIL (Financial Technologies India Ltd) will have to sell shares in MCX Stock Exchange, rival National Stock Exchange of India, two non-functional bourses - Delhi Stock Exchange and Vadodara Stock Exchange, and MCX-SX Clearing Corporation within three months, Sebi said in an order yesterday.
According to market sources, the total value of FTIL's holdings in these five entities is estimated at about Rs 2,500 crore, although it could be difficult to sell these shares in the current scenario.
Financial Technologies has 2.71 crore shares as well as 56.24 crore transferable warrants in MCX-SX, 57.5 lakh shares in MCX-SX Clearing Corporation, 14.96 lakh shares in DSE, 2.9 lakh shares in VSE and 10,000 shares in NSE.
The shares and warrants held in MCX-SX would account for a large chunk of the potential sales proceeds, the sources said, adding that FTIL had told Sebi it had no intention to convert the warrants. These are convertible into an equal number of shares.
The Securities and Exchange Board of India (Sebi) directed FTIL to sell its shares in MCX-SX and the other entities within 90 days on the ground that it was not "fit and proper" to own stakes in any exchange.
The market regulator's order came when the MCX-SX is under the scanner of the Central Bureau of Investigation for alleged irregularities in being granted a licence in 2008 and its subsequent renewals.
Financial Technologies is the flagship firm of the Shah-led group and one of the original founders of the MCX-SX, although it is no longer classified as a promoter shareholder.
Since a payment crisis broke out at group company National Spot Exchange Ltd (NSEL) in August last year, it has sold holdings in some entities, including Singapore Mercantile Exchange and National Bulk Handling Corp Ltd.
It recently appointed JM Financial as an advisor for the divestment of a stake in the Multi Commodity Exchange of India Ltd (MCX).
In February, the Financial Technologies board had constituted a committee to propose and oversee a restructuring plan, which included the sale of up to 24 per cent stake in MCX.
Financial Technologies is a listed company with a market valuation of Rs 1,738 crore, while MCX, also listed, is valued at Rs 2,575 crore.
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According to a Sebi's order, Financial Technologies is not a "fit and proper person to acquire or hold any equity share or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date, in a recognised stock exchange or clearing corporation."
This would be applicable for both direct and indirect holdings of FTIL in stock exchanges and clearing corporations.
Sebi had issued a show-cause notice on the "fit and proper" status of Financial Technologies, which submitted its response earlier this week.
The show-cause notice followed a ruling in December by the Forward Markets Commission, which is the commodity market regulator, that Shah and Financial Technologies were not 'fit and proper' to run an exchange in the wake of the Rs 5,600 crore NSEL payment crisis.
Financial Technologies had submitted before Sebi that since it had a less than 5 per cent stake in MCX-SX and an insignificant shareholding in other recognised stock exchanges and the clearing corporation, there would not be any bearing on the bourse.