Reliance Capital, one of the nine reported bidders looking to acquire Jignesh Shah-promoted Financial Technologies’ stake in Multi Commodity Exchange (MCX), has asked the Forward Market Commission to assume full control of planned stake sale.
In a three-page letter to the commodity market regulator, a copy of which is available with FE, Reliance Capital has expressed its disappointment over the way MCX divestment process is being followed by FTIL and has also complained of “lack of co-operation” by MCX in providing critical information to potential investors.
MCX and FTIL, however, have refuted the charges, citing transparency and co-operation in the process. “MCX has been thoroughly cooperative with the bidders and have shared information to the extent possible,” said an MCX press release.
The letter, a copy of which has also been sent to FTIL, MCX and the ministry of finance, says the way in which the stake sale process is carried out is “shocking” and “non-transparent”. The letter also said that despite FMC ordering the divestment, potential investor is deprived of critical information.
“The potential investor is expected to execute a binding share purchase agreement on April 25, 2014, despite critical information not being provided or disclosed,” the letter alleges.
Reliance Capital requested FMC to direct MCX to share an audit report prepared by PwC on the behest of the regulator, with the potential investors before they execute the share-binding agreement.
The financial services arm of Anil Ambani-led Reliance Group, also flagged off several other concerns over the deal
and has sought an urgent meeting with the FMC chairman to discuss these issues.
These issues include “several” related-party transactions between FTIL and MCX, and extremely one-sided terms of some of these contracts. potential taxation issues, technology contracts and concerns arising out of a PWC forensic investigation conducted on MCX at FMC’s directions.
“The law does not permit us to share any unpublished price sensitive information, including part of the PWC report with any person(s) selectively,” said the MCX statemnet.
Meanwhile, FTIL board has decided to reconvene on May 2, 2014, to review the divestment process. “This is in light of the bidders seeking extension to put in their binding bids subsequent to MCX board on April 26, 2014, for deliberating and deciding the further course of action on the special audit report conducted by PwC,” said a press release by FTIL.
In the statement, the anchor investor of MCX claimed that all transactions between MCX and FTIL have been clearly disclosed in MCX’s statutory audit conducted by leading auditors for past ten years.
“Also, all transactions between the two companies were clearly based on commercial agreements, which were disclosed in detail in MCX’s final red herring prospectus filed in 2012, based on which the market regulator allowed MCX’s IPO in March 2012,” added the FTIL press release.