London-based billionaire among bidders for Financial Technologies’ MCX stake

MUMBAI: An entity representing the interests of London-based Lord Bagri family has bid for the 24% stake of Financial Technologies (FT) in Multi Commodity Exchange (MCX), two sources close to the deal said.

The Bagri family is led by billionaire Raj Kumar Bagri, the former chairman of London Metal Exchange and a peer in the House of Lords. Bagri mainly deals through his company Metdist. FT said it will not comment. But sources close to the deal say an entity representing the Bagri family is among the bidders shortlisted by FT for its MCX stake.

ET had reported on Sunday that Tata Capital, Kotak Mahindra Bank and BSE are among the front runners to buy FT’s stake in MCX. R-ADAG, Warburg Pincus, US-based exchange group CME and Dubai’s DGCX are among the other bidders.

A few short-listed entities have put in their bids on the condition they will readjust their offer price if any sensitive information regarding potential tax or other form of liability comes to light during the bidding stage.The bidders are worried about potential tax liability or other penalty that could arise in MCX and had sought certain vital information regarding the commodity exchange before making a non-binding offer.

FT holds 26% in MCX. But after the.`5,600-crore crisis at NSEL, a former exchange of the FT group, the Forward Markets Commission (FMC) had said FT cannot own more than 2% in any commodity bourse in India.

FT had said it has shared all the details available in the public domain and has requested MCX to provide the additional information required by the bidders.

The interested parties want to know the mix of trading volume on MCX, its related party transactions and forensic tests conducted on the exchange after the government banned all trading activities on FTfounded National Spot Exchange citing irregularities. The bidders want to determine if there will be any future tax or other monitory liability risk due to MCX’s past transactions. If there were related party transactions, then a potential tax liability could arise with 100% penalty if taxes are not deducted as per law.

MCX has a 33-year technology agreement with FT and the bidders fear any breach of the contract or its mid-way termination could hurt the exchange, the sources said. Bidders are worried as FT has a 99-year technology contract with MCX Stock Exchange, which would be liable to pay compensation worth thousands of crores to FT if the ties were snapped in between due to reasons not covered in the contract. Until last year, FT was the promoter of both MCX and MCX Stock Exchange.

Bidders have demanded details of all related party agreements involving more than .`1 crore as well as other transactions between MCX and FT that are material to MCX’s net income.