3 November 2012
2QFY13 Results Update
Multi Commodity Exchange
BSE SENSEX
S&P CNX
18,755
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,698
MCX IN
51.0
1,446/838
14/29/-
72.2
1.3
CMP: INR1,417
Buy
Multi Commodity Exchange of India Ltd's (MCX) 2QFY13 results were operationally in line, while PAT at INR814m
was above estimate of INR722m due to higher other income and lower tax rate (24.9% v/s estimate of 28.5%).
Revenues were INR1,310m (v/s estimate of INR1,303m), up 6.5% QoQ but down 18% YoY. Lower revenues YoY
was due to a decline in traded volumes to INR39.3t in 2QFY13 (18% YoY). EBIT was INR746m, in line with our
estimate of INR754m. Implied EBIT margin was 57% (excluding other income and other operating income),
v/s our estimate of 57.9%.
The exchange's market share in 1HFY13 is 86.4%, thus sustaining its near-monopolistic hold. Average daily
turnover at the exchange in 1HFY13 was INR495b, down from INR529b in 1HFY12.
We expect MCX to grow transaction fees at a CAGR of 12.6% over FY12-15E and EPS at a CAGR of 17% during this
period.
Our FY14 standalone EPS estimate for MCX's exchange business is INR65.6. We currently value the standalone
exchange business at 20x FY14E earnings.
We separately value MCX's stake (including warrants) in MCX-SX. With the launch of MCX-SX's equity operations
following a successful membership drive, we expect significant upward revision in potential value unlocking
for MCX. Maintain
Buy.
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Multi Commodity Exchange of India
2QFY13: Operationally in line; PAT above estimate on higher other income,
lower tax rate
Revenues were INR1,310m, a growth of 6.5% QoQ but YoY decline of 16%, in line with
our estimate of INR1,303m. Lower revenues YoY was on expected lines as the total
value of volumes declined to INR39.3t in 2QFY13, by 18% YoY from INR47.8t in 2QFY12.
Revenues grew QoQ but declined YoY
Source: Company, MOSL
EBIT was INR746m, in line with our estimate of INR754m. Implied EBIT margin was
57% (excluding other income and other operating income), v/s our estimate of 57.9%.
EBIT margin was lower than that in 2QFY12, explaining the high operating leverage
Source: Company, MOSL
PAT was INR814m, +25.7% QoQ but down 9% YoY, higher than our estimate of INR722m,
due to higher total other income (INR338m v/s estimate of INR256m) and lower tax
rate (24.9% v/s estimate of 28.5%).
The company announced an interim dividend of INR12 per share. Total EPS as in 1HFY13
stands at INR28.7.
3 November 2012
2

Multi Commodity Exchange of India
Volumes update: Down YoY on lower activity in gold, silver counters
Total volumes by value increased 8% QoQ in 2QFY13 to INR39.3t but declined 18% YoY
from INR47.8t in 2QFY12. In terms of total number of contracts traded (in lots), volumes
declined by 9% YoY and 1% QoQ.
Total traded value increased 8% QoQ but declined 18% YoY…
Source: Company, MOSL
YoY decline was driven by significantly muted activity in gold and silver counters,
compared to the corresponding quarter last year. Total traded value of gold was down
42% YoY in 2QFY13 and that in silver declined 40% YoY.
…led by YoY decline in volumes in gold (42%) and silver (40%)
Source: Company, MOSL
While volumes increased in copper (19% YoY) and crude oil (38% YoY), this could not
make up for the loss of volumes in gold and silver, due to relatively lower share
(copper and crude oil had a volume share of 33% in 2QFY13 v/s 51% share of gold and
silver).
3 November 2012
3

Multi Commodity Exchange of India
Combined market share of gold and silver has declined from 72% in 2QFY12 to 51% in 2QFY13
Source: Company, MOSL
1H operational performance: Average daily volume down, market share
marginally higher
Total commodity contracts traded in 1HFY13 stood at 195.5m, +10% YoY v/s 177.15m
in 1HFY12.
Average daily turnover at the exchange in 1HFY13 was INR495b, down from INR529b
in 1HFY12.
Near-monopolistic market share was maintained, with 1HFY13 market share at
86.4%, marginally higher than 86% in FY12.
Valuation view
We expect MCX to clock transaction fees at a CAGR of 12.6% over FY12-15E and EPS
at a CAGR of 17% during this period.
Our FY14 standalone EPS estimate for MCX's exchange business is INR65.6. We
currently value the standalone exchange business at 20x FY14E earnings.
We separately value MCX's stake (including warrants) in MCX-SX. With the launch
of MCX-SX's equity operations following a successful membership drive, we expect
significant upward revision in potential value unlocking for MCX. Maintain
Buy.
3 November 2012
4

Multi Commodity Exchange of India
Multi Commodity Exchange of India: an investment profile
Company description
Multi Commodity Exchange of India Ltd (MCX) is a state-
of-the-art electronic commodity futures exchange,
offering futures trading in over 47 commodities, mainly
gold, silver, copper and crude oil. It began operations in
November 2003 and has over 86% share of the Indian
commodity futures market. In terms of contracts traded
in CY11, it is the third largest globally, second-largest in
gold, largest in silver, second-largest in natural gas and
third-largest in crude oil.
MCX got the FOW Award for its Gold Petals futures
contract under the most innovative new contract by
an exchange in the metals category.
Valuation and view
We expect transaction fees CAGR of 12.6% over FY12-
15E and EPS CAGR of 17% during this period.
Our FY14 standalone EPS estimate for MCX's
exchange business is INR65.6. We separately value
MCX's stake (including warrants) in MCX-SX. We
currently value the standalone exchange business
at 20x FY14E earnings. With the launch of MCX-SX's
equity operations following a successful
membership drive, we expect significant upward
revision in potential value unlocking for MCX.
Maintain
Buy.
Key investment arguments
Supply of technology platform by its parent,
Financial Technologies India (FTECH), gives MCX a
competitive edge that is difficult to replicate.
The Union Cabinet approved a proposal to move
official amendments to the FCRA Bill. This will give a
fillip to MCX's volumes, with the introduction of
options trading, new commodity classes like
intangibles and new participants like banks and MFs.
Sector view
Indian commodities exchanges are highly regulated
and in the current regulatory environment, foreign
institutional investors (FIIs), banks and mutual funds
cannot trade on commodity exchanges.
Growth potential in an economy like India's remains
huge over the next decade, which is expected to
drive the demand for commodities. The increase in
physical market volumes consequently increases the
hedging requirements for industry players, thus
influencing derivative trading volumes.
Penetration remains low - globally, futures gold
volumes are 70-80x that of physical trade, v/s 17-18x
in India, 20x in crude v/s ~7x in India, 100x in
aluminum v/s 8-9x in India.
Key investment risks
Increase in technical services fee (as a percentage
of transaction fee) charged by the parent FTECH
could be a potential threat to MCX's profitability.
Delays in amendments by the regulators will impair
growth in volumes at the exchange.
Recent developments
MCX-SX, an exchange which was promoted by MCX
and FTECH, received over 700 applications for
membership for all segments. It plans to formally
launch around mid-November.
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
56.1
65.6
Consensus
Forecast
61.2
71.1
Variation
(%)
-8.3
-7.7
Current price and recommendation
Current
Price (INR)
1,417
Reco.
Buy
FY13
FY14
Stock performance (1 year)
Shareholding pattern (%)
Sep-12
Promoter
Domestic Inst
Foreign
Others
3 November 2012
26.0
23.4
33.9
16.7
Jun-12
26.0
23.5
31.6
18.9
Sep-11
-
-
-
-
5

Multi Commodity Exchange of India
Financials and Valuation
3 November 2012
6

Multi Commodity Exchange of India
N O T E S
3 November 2012
7

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Multi Commodity Exchange of India
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