CRISIL has assigned a CRISIL IPO Grade “5/5” (pronounced “five on five”) to the proposed initial public offer of Multi-Commodity Exchange of India Ltd. (MCX). This grade indicates that the fundamentals of the issue are strong relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

CRISIL expects MCX to maintain its dominant market position in the commodities market, backed by product innovation and strong technological capabilities. Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices. The high liquidity in these commodities and the low impact costs (comparable to other leading exchanges), along with MCX’s strong technological capability – aided by its association with the promoter, FTIL, a leader in exchange related technology – are expected to help the company maintain its competitive advantage.

MCX’s profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short term due to the impact of the commodity transaction tax (CTT). However, in the medium term, MCX’s strong market position and continuous focus on product innovation would act as growth drivers. In the long term, growth could be spurred by the introduction of new instruments (like options) and participation by institutional players, once the necessary regulatory changes are in place.

Mr Jignesh Shah, the founder and Non-Executive Vice Chairman and Mr Joseph Massey, the MD & CEO of MCX, have been the driving force behind the company’s business growth and product innovation. MCX also benefits from a strong and experienced senior management team as well as a highly capable product innovation and development team.

Sourced From: CRISIL Limited

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