Former bureaucrat Satyananda Mishra finds himself in a place where the "rasgullas are tasty" but the cook is a "liar". The place of course is MCX, the commodities futures exchange that is facing a crisis of reputation after its founder Jignesh Shah got mired in an alleged Rs 5,500-crore fraud at another exchange he promoted, the National Spot Exchange Ltd (NSEL). Mishra, 65, a former chief information commissioner, was appointed last month as chairman of MCX. His task: restore the credibility of the exchange and revive its flagging fortunes.
And there's more. After the regulator, the Forward Markets Commission, declared Shah and his flagship, Financial Technologies (India) Ltd (FTIL), not "fit and proper" to run any exchange in the country earlier in the week, Mishra also has to find a new owner for MCX. But only after it regains its lustre — and its value.
In Mishra's words, FTIL's technology platform with 4 lakh terminals is robust and comparable to a rasgulla, a sweet the bureaucrat hailing from Odisha is particularly fond of. As far as he is concerned, the rasgulla is still mouth-watering, never mind who the cook was, and his alleged fraudulent ways. "Institutions are bigger than individuals. So it would not be fair to treat MCX as someone's property. Anyway, the company [FTIL] now needs to sell its stakes in the backdrop of the regulator's order," Mishra says.
FMC's declaration that FTIL can no longer hold anything more than a 2% shareholding in MCX may go well with the plan that is being calibrated by the new team made up of Mishra and five other independent directors. After all, if MCX needs to salvage its reputation and bring in a sense of confidence among its members and investors, it must distance itself from Shah who is being probed by multiple enforcement agencies.
As per the current shareholding pattern, FTIL holds 26% in the commodities exchange, which isn't an ideal situation for the men chosen by the regulator to bring back trust in MCX and fix its problems. Other shareholders include Indian banks and foreign funds (52%) and 22% is with non-institutional investors.
Critical Period
But if there was ever a time for Mishra and his men to be worried, it is now. Shah's hasty exit may create turbulence in the entity and erode its valuation big time. And that has made the next board meeting, scheduled for the day after Christmas, crucial. "We don't want an abrupt sell-off which may impact the exchange," Mishra says, adding that the board will try to frame a timeline for the Shah company to exit MCX.
Operation MCX is not to dissimilar from the one to rescue the fraud-struck Satyam Computer Services four and a half years ago. The IT major struggled to stay afloat after its founder B Ramalinga Raju made an admission that the company inflated its financial performance, a scam that is considered to be of the size of Rs 7,800 crore. Government was quick to nominate directors to take over the operations and, after some stability was brought back, the board flagged off a bidding process.
"In a broader sense, there is a similarity though MCX is platform-based whereas Satyam was employee-based. Both are comparable so long as attempts to stabilize operations and build confidence are concerned," says Kiran Karnik who along with banker Deepak Parekh and CII's Tarun Das were appointed as directors to save the scandal-hit IT firm. "Unlike today's MCX, our worry in Satyam was how to retain clients and pay the salary of the employees on time. Then, we had to pick a CEO who was to be widely respected and could take people along," adds Karnik, who was also president of Nasscom, the trade association of IT and BPO industries.
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