MCX IPO Opens Today for subscription, Subscribe IPO or not

Multi Commodity Exchange of India (MCX), country’s largest commodity exchange, will open its IPO (initial public offer) for subscription from today. This is India’s first commodity exchange to hit the capital market, by offering 64.27 lakh equity shares (dilution of 12.6% post issue) through this issue. Based on the comparison of the trading volumes of MCX with the leading global commodity futures exchanges in the world, MCX was the largest Silver exchange, the second largest Gold, Copper and Natural Gas exchange and the third largest Crude Oil exchange. MCX is the 5th largest exchange globally and has large market share (87%) in commodities market.

The company has registered growth of over 70% in first 3 quarters of FY12. However, considering the new products and commodities, being added by exchange and huge inflow of new registration of sub-brokers, company should be able to post a CAGR of over 25% for next 3 years. At higher end of price band of Rs.860-1032, valuation per share works out at PE of 16 times based on estimated EPS as Rs.65 for FY12. With such strong fundamentals this IPO is likely to get very sound response from retail and institutional investors.

Rating agency CRISIL too has also rated it 5/5 as it has strong business model of the company. We strongly advice to subscribe this IPO, On listing day itself we are expecting about 10% gains.