MOSL: MCX (Buy) - Clarifies on whistleblower allegations
MCX: Clarifies on whistleblower allegations
(MCX IN, Mkt Cap USD0.6b, CMP INR871, TP INR1000, 15% Upside, Buy)
We attended a call hosted by MCX, where management clarified on the recent concerns raised by a whistle blower with the SEBI. Key highlights:
- Concern-1: Malpractice in cotton trade from November 2018 to June 2019 by two international customers, which delivered stock of sub-standard quality. MCX passed it off to investors who bought on the exchange platform.
- Clarification: Those two international customers have been participating for some time now, and from November’18 to June’19, they bought the commodity and sold the same commodity. There is no remiss here and there is an opportunity to retest the quality. In one instance, it received a complaint for quality of cotton for a small quantity. MCX retested and quality met the standards specified in the contract; the delivery too has been lifted. People tend to keep the stock on the delivery platform in order to be able to trade again.
- Concern-2: Siphoning money by increasing contract to foreign vendor.
- Clarification: MCX entered into an agreement with a UK-based firm in July/August 2018 for gold and energy spot exchange platform development. The contract value for software was ~INR200m – it has not been increased and the scope of the project also remains same. They will provide minimum viable product (over 22-23 sprints, currently 18th sprint is underway). Further enhancements will be taken care of by the internal tech team. Thus, the allegations are false. Also, allegation of Chairman and Mr Paranjape travelling together to Europe is a figment of imagination.
Multi Commodity Exchange of India Limited (MCX) is a holding company. The Company is engaged in Facilitating Trading, and Clearing and Settlement of Commodity Derivatives. It operates as a commodity futures exchange. It offers its products in various segments, such as Bullion, including Gold, Gold Mini, Gold Petal and Silver; Base Metals, including, Aluminum, Copper, Lead, Nickel and Zinc; Energy, including Crude Oil, Brent Crude Oil and Natural Gas, and Agro Commodities, including Cardamom, Cotton, Crude Palm Oil, Kapas and Mentha Oil. Its MCXCOMDEX is a real-time commodity index based on commodity futures price of an exchange. Other commodity indices developed by the Company include MCXAgri, MCXEnergy and MCXMetal. Its online trading platform is accessible to its members through its trader workstation or computer-to-computer link (CTCL) using multiple connectivity media, including point of presence (POP) connectivity, very small aperture terminal (VSATs) and the Internet.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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