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IPO Note on Multi Commodity Exchange of India Ltd

February 22, 2012


IPO Note on Multi Commodity Exchange of India Ltd – subscribe – 17-Feb-2012

We attended IPO analyst meet of MCX, overall company has good business model and stock is very attractively valued even at upper price band.

Couple of key reason why we like MCX- Strong competitive position – market share of 80%, ability to come up with innovative product and huge market opportunity.

Currently only Futures are allowed in Commodities, while Options are still being considered by regulator. Any headway in allowing option, MCX would be biggest beneficiary of the same due to already strong market share.

Globally Futures & Options volumes are anywhere in range of 40-50x of each commodity compared to its actual spot market. While in case of India it stands in region of 15-20x, offering strong market growth visibility.

In terms of valuation, at upper price band company would have market cap of Rs5,263cr, which would trade at 5x its 9mFY12Book Value and 18x FY12 Profit (month annualised earning). Given there are no comparable peers in India we have looked at international comparison. Globally in developed as well developing country many of commodity exchanges are listed. In case of developed markets, average PE is in range of 18-19x one year forward earning and growing at 8-9%, while in case of developing/emerging market it’s trading at 25-30x one year forward earnings, while growth being very high in region of 15-25%. Hence we believe, MCX valuation even on upper band of IPO is valued very attractively and recommend investor to Subscribe to the IPO.


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