31 March 2020
Update | Sector: Exchanges
CMP: INR 1,131
TP: INR 1,400 (+24%)
Key beneficiary of global market volatility
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
57.7 / 0.7
1442 / 762
Financials Snapshot (INR b)
2020E 2021E 2022E
EBIT Margin (%)
39.9 39.1 40.7
46.7 44.0 56.0
EPS Gr. (%)
18.2 15.7 18.3
17.6 15.3 17.8
51.8 68.6 54.0
23.7 25.1 19.8
26.3 23.7 18.8
Div Yield (%)
Shareholding pattern (%)
Dec-19 Sep-19 Dec-18
Total value of contracts traded on MCX increased strongly by ~44% YoY in 4QFY20.
This was significantly ahead of our earlier estimate and largely led by heightened
uncertainty and volatility in the global markets. Gold/silver/crude reported strong
growth of ~120%/133%/60% YoY in traded value.
Against the backdrop of COVID-19 outbreak, trading at MCX was truncated to eight
hours (v/s 14 hours earlier), making it out of sync with the global commodity markets.
This led to a sharp ~80% drop in traded value (v/s monthly average till 25
our base case, we expect the restrictions to continue till end-Apr’20, materially
impacting revenue growth/EBITDA margins (0%/16% QoQ contraction) for 1QFY21.
Nevertheless, the medium-term prospects of MCX remain robust. Cues from the GFC
period hint at increased interest in precious metals over a 2-3 year period following
crisis/market volatility. COVID-19-led slowdown in global growth, soft interest rates
and liquidity injections should be the key factors driving interest in gold/silver this
time. Normalization of margin requirements in the crude segment is likely to drive
continued strength in volume growth.
Over FY21-22, we expect strong revenue growth of 14-18% and stable EBITDA margin
of 42-44%, notwithstanding the COVID-19 impact on 1QFY21 operations. We upgrade
our EPS estimate by 5-7% over FY21-22 to factor in the increase in volumes led by
global market volatility. We continue liking the company for its near monopoly in the
commodity exchanges segment in India. Reiterate Buy.
Global market volatility drives sharp increase in activity in Feb/Mar’20
Total value of contracts traded on MCX increased strongly by ~44% YoY in 4QFY20
(data considered only till 30
March 2020). This was significantly ahead of our
earlier estimate and largely led by heightened uncertainty and volatility in the global
markets. Precious metals like gold and silver reported a robust increase of
~120%/133% in total value of contracts traded. Volatility in crude prices led to a
surge in speculation activity translating into ~60% YoY growth in traded value
During the quarter, while growth in traded value of gold and silver was more
pronounced in Feb and March, it was more front ended for crude (toward Jan and
Feb) due to the sharp fall in crude prices. Most of the base metals continued to
show a trend of decline (YoY) due to the compulsory delivery rule, which impacted
the interest levels of speculators and arbitrageurs.
FII Includes depository receipts
Stock Performance (1-year)
Multi Comm. Exc.
Sensex - Rebased
Expect COVID-19 disruption in the near term
Against the backdrop of the three-week lockdown imposed in the country, trading
at MCX is truncated to 8 hours per trading day (v/s 14 hours earlier) from 30
March to 14
April 2020. This makes the timings of the Indian commodity markets
largely out of sync with those of the global commodity markets/news flows. Our
interactions with commodity market experts suggest this limitation should have a
material negative impact on speculation/investment appetite on MCX.
Sudheer Guntupalli – Research analyst
(Sudheer.Guntupalli@MotilalOswal.com); +91225036 2749
Research analyst –Mohit Sharma
(Mohit.Sharma@MotilalOswal.com); +91226129 1531 /
(Heenal.Gada@MotilalOswal.com); +91225036 2654
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.