Shares of Multi Commodity Exchange of India (MCX) plunged over 12% on Friday to hit an intraday low of 1,411.40 on NSE a day after the company announced it had extended the support services being rendered by its existing software vendor, 63 Moons Technologies for six months beginning from July 1, 2023
Meanwhile, shares of 63 Moons Technologies surged 18% to hit their 52-week high of Rs 256.20. In a regulatory filing, MCX informed that the consideration for the services would be Rs 125 crore per quarter. This was higher than the consideration of Rs 87 crore paid for the March 2023 quarter
MCX’s long-term support service arrangement with 63 Moons Technologies ended on September 30, 2022, as MCX had selected a new technology service provider. In the last few weeks, MCX had to cancel several mock trading sessions which were aimed at checking the new trading platform
The technology support for MCX has been provided by 63 Moons, its erstwhile founder-promoter, ever since it started operations in Nov 2003. However, TCS was selected as the vendor for the development of the new commodity derivative platform in February 2021. MCX and TCS have been working on developing a new platform and it was initially expected to go live by July 2022. But both companies have encountered several delays
Some brokerage firms found this move a short-term negative for MCX. Brokerage firm Motilal Oswal Financial Services sees a 15% downside in the stock as it pointed out that this is the third extension by MCX; the first was from Oct 2022 to Dec 31, 2022, at a cost of Rs 60 crore
"We cut our FY24 EPS (earnings per share) estimate by 69% to Rs 14.7. Tech costs for FY25 remain broadly unchanged. We also note that volumes in Q1FY24 for both futures and options have been better than our forecasts, and hence the cut in FY24 estimates is relatively lower. We increase our FY25 EPS estimate by 8%," Motilal Oswal said
According to analysts at Motilal Oswal, the delay in transition will impact new product launches as well as increase FPI participation in the segment. "We maintain our neutral rating on the stock with a revised one-year target price of Rs 1,400," the brokerage firm said
Brokerage firm Nirmal Bang pointed out MCX has decided to extend the support services being rendered by its existing software vendor, 63 Moons Technologies for six months which is a short-term negative for MCX. On the technical front, AR Ramachandran from Tips2trades told BT, "MCX now has strong support at Rs 1,395. Only if the daily resistance of Rs 1,499 is broken on a closing basis, investors should buy for better returns."
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