Tuesday, 21 May 2013

Incredible Stocks - MCX

We have known stock exchanges for so long. Stock exchanges encourage companies to list themselves on the exchange for the double purpose of raising money through public equity investment and also for enabling better price discovery and unlocking the real value of the company.

In doing this stock exchanges provide a transparent platform for companies to raise funds easily and also for investors to select and invest in good companies. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are two very successful examples in India. 

All that has been said above about equity exchanges is also true for commodity exchanges. Only difference being that in a commodity exchange the entities listed are commodities and investors and traders alike can take their positions regarding commodity future and contracts. 

MCX Ltd. is the most successful commodity exchange in India. As per the regulator, MCX is India’s largest commodity exchange with 87% market share. MCX was incorporated in 2003 as Multi-Commodity Exchange and has since been providing a world-class electronic platform to trade in commodity futures. The company has shown good corporate governance and is regulated by Forward Market Commission. 

MCX became a listed company in march 2012 and presently is the world’s largest exchange in number of trades for Silver, 2nd largest in Gold and Natural Gas and 3rd largest in Crude Oil. MCX product list includes metals to crude oil and from Agri-commodities to bullion. It has a strong network of 2170 registered members and a penetration of 3,46,000 trading terminals. 

A quick look at the financials is as follows :

Sales (in Cr)52636828735.38
Profit (in Cr)28717222014.22

CMP at the time of posting was Rs. 935.15

9 months results ending Dec2012 shows net profit of 222cr as against 220cr YoY. OPM was 69%.
Q3 2012 results have shown growth of 3% in income to 161.81cr and net profit of 10% to 75.87cr.

MCX is the only stock exchange which is a listed company and in addition to commodities, it has recently entered into equity cash and equity futures & options, signalling its willingness to diversify and remain competitive. It also gives scope for increase in number of trading contracts YoY which is the key business driver for profitability for any exchange. MCX is a good stock investment considering that it is poised to play a bigger role in the economy of the country allowing retail and non-retail investors to participate in the commodity and equity market and at the same time giving a platform for companies and commodity entities for better price discovery and funds. Also MCX is presently a monopolistic player in commodity futures market with debt free business and good cash flow.