FTIL and NHBC are the two key related-parties to which monies have been paid by MCX for the exchange technology solutions and warehousing, respectively, says a report from PwC
Auditing firm PricewaterhouseCoopers (PwC), in a report had said Multi Commodity Exchange of India Ltd (MCX) entered into agreements with related trading parties and paid around Rs709 crore to its erstwhile promoter, Financial Technologies India Ltd ( FTIL) and other group companies without following a proper documentation process.
Following the Rs5,600 crore payment crisis in National Spot Exchange Ltd (NSEL), last December, commodity market regulator Forward Markets Commission had appointed PwC for auditing books of MCX. PwC was asked to examine if NSEL subsidiary Indian Bullion Markets Association (IBMA) and another FTIL subsidiary, National Bulk Handling Corporation (NBHC), traded on MCX.
PwC, in the report, which was released partially by MCX, alleged other inconsistencies and gaps in the way the commodity exchange processed related-party transactions and expressed doubts whether these agreements were conducted on an arm’s length basis.
FTIL, which set up MCX in 2003 but no longer controls the Exchange even while holding a 26% stake, rejected the PwC report. It said it will take legal action against the bourse and PwC for painting a wrong picture in the report.
The PwC report said: “FTIL and NHBC are the two key related-parties to which monies have been paid by MCX for the exchange technology solutions and warehousing, respectively. MCX also entered into related-party transactions with other FT group companies for various ancillary services.”
The PwC audit said that “there are various gaps and inconsistencies noted in the way MCX processed related-party transactions.” The commercial terms and conditions agreed by MCX with related parties were not substantiated by any underlying market benchmarking or competitive bidding process, the report said.
“Additionally, there was limited or no supporting documentation available to evidence the existence, adequacy and robustness of price discovery mechanism which may have been adopted by MCX. Therefore, it is not possible to conclude whether various related party agreements and transactions were indeed conducted on an arm’s-length basis,” the report said.
Officials of FTIL took active part in the affairs of the MCX, including trading, the special audit report has said.
“In various instances, key management personnel of MCX such as ex-CFO, Head-Information Technology, ex-Chief Compliance Officer stated that the decisions were directly taken and instructions received from the ‘Chairman’s office (FTIL)’ or the ‘MD & CEO office’,” said the audit, prepared by PwC.
The audit report, forwarded to stock exchanges by MCX, also found 676 additional entries or individuals who were directly or indirectly related to the MCX or FTIL Group, FTIL key management personnel or their immediate family members by being common directors or shareholders.
In particular, select entities or individuals were allowed to indulge in illegal wash trades, which allows a member to take a position without any intent to execute the transactions.
According to the report, it appears that MCX surveillance activity may not have been commensurate with the steep pace of growth of the exchanges over the year. It also said that there was no formal mechanism to share information on related parties between the membership department and the secretarial department. Therefore, abnormal trades of identified parties were not scrutinised thoroughly, it said.
“This review identified 15,131 instances of trades aggregating to approximately Rs1,856.56 crore where the same party placed buy and sell orders within 60 seconds of each other resulting in no change in the positions. Additionally, in 1565 instances aggregating to approximately Rs1181.72 crore, the buyers and seller were part of the same group of companies who placed orders within five seconds of each other resulting in no change of position within the group,” it said.
The report also mentioned that two members who were debarred by SEBI in July 2006 continued to trade on MCX between September 2006 and December 2011 though the FMC issued a circular mandating that members debarred by other exchanges should not be allowed to trade on commodity exchanges. Name of such member has been removed from the report placed in the public domain but it says that one of these two members was “a member with the highest turnover on MCX in the year 2004.”
The audit agency said that MCX emerged as a significant customer for FTIL by driving about 25% of latter’s revenue. MCX paid approximately Rs649 crore to FTIL on various agreements and transactions. “In spite of this, it does not seem that MCX was able to enjoy adequate bargaining power against FTIL at the time of negotiating the technology support agreements,” the report said adding that contractual terms and conditions forming part of agreements between FTIL and MCX appear to favour the former.
“Under the existing contractual terms and conditions, MCX appears to be contractually bound to FTIL for an unprecedented long tenure ranging between 22 and 50 years with a provision of automatic renewal for up to two similar terms. Further, the termination clause in certain contracts grants termination rights only to FTIL whereas the contracts were silent about MCX’s right of termination,” the report said.
An executive summary of the audit report was sent to the stock exchanges by the MCX. The report was prepared on the orders of commodities market regulator Forward Market Commission. The report is yet to be independently verified by the company.
Jignesh Shah-promoted FTIL is the promoter of MCX and crisis-ridden NSEL.
“At this stage, the company neither agrees nor disagrees with the contents thereof and does not have any opinion on the same and takes no responsibility of the contents or makes no inferences thereon as the same are yet to be independently verified by the company,” MCX said while forwarding the report.
In 1,565 instances aggregating Rs1,182 crore, the buyers and seller were part of the same group of companies who placed orders within five seconds of each other resulting in no change of position within the group.
For FY14, Kotak Mahindra Bank reported higher net profit of Rs1,503 crore on 16% growth in its net interest income
Kotak Mahindra Bank, India’s fourth largest private sector lender, reported a 10% increase in its full year net profit mainly on rise in its net interest income (NII) and total revenues.
For the 12 months to end-March, Kotak Mahindra Bank said its stand alone net profit increased 10% to Rs1,503 crore from Rs1,361 crore, while its total revenues, including interest income, grew 10.47% to Rs10,167 crore from Rs9,203 crore, a year ago period.
During FY14, the private sector lender said, its NII increased 16% to Rs3,720 crore from Rs3,206 crore of FY13. Its net interest margin (NIM) stood at 4.90% from 4.65%, a year ago period.
Kotak Mahindra Bank has made 65% more provisions during FY14 to Rs304.70 crore from Rs184.55 crore a year ago period. As on 31 March 2014, its provision coverage ratio on non-performing assets (NPAs) stood at 55.5%.
As on 31 March 2014, total advances of Kotak Mahindra Bank increased 9% to Rs53,028 crore compared with Rs48,469 crore, a year ago period. Its total deposits, during the year, increased 16% to Rs59,072 crore and saving account deposits grew 39% to Rs10,087 crore compared with same period a year ago, while its current and saving accounts (CASA) stood at Rs18,828 crore from Rs14,918 crore.
Kotak Mahindra Bank's capital adequacy ratio (CAR) stood at 18.83%, gross non performing assets ratio (GNPAs) stood at 1.98% (Rs1,059.44 crore). Its net non-performing assets stood at 1.08% (Rs573.56) as on 31st March 2014.
For the quarter to end-March, the lender said its stand alone net profit fell 6.66% to Rs407.18 crore from Rs436.21 crore, while its total revenues, including interest income, declined marginally (0.75%) to Rs2,552.96 crore from Rs2,572.23 crore, same period last year.
As on 31 March 2014, the Kotak Mahindra Bank's total number of branches and ATM network stood at 605 and 1,103 respectively.
Kotak Mahindra Bank declared a dividend of Re0.80 per share.
Kotak Mahindra Bank shares closed Wednesday marginally down at Rs803.20 on the BSE, while the 30-share Sensex ended the day flat at 22,417.
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During the March quarter, Hexaware Technologies' net profit fell to Rs70.3 crore on forex loss and higher tax provisions, even as its revenues increased 16%
Hexaware Technologies Ltd (Hexaware) reported a 11.3% fall in its March quarter net profit on foreign exchange loss and higher tax provisions. Although the company reported 16% higher revenues, the share from its top 10 clients witnessed a decline.
For the quarter to end-March, Hexaware said its consolidated net profit fell 11.3% to Rs70.3 crore from Rs79.3 crore while its total revenues, including sales, grew 16% to Rs589 crore from Rs507 crore, same period last year.
Hexaware reported a first quarter forex loss of Rs13.5 crore compared with a profit of Rs2.3 crore it recorded in March 2013. The IT company also made 29% higher tax provisions of Rs27.2 crore compared with Rs21.1 crore in same period a year ago.
“We have engaged a leading consulting firm to provide advisory on sharpening the ‘Go to Market’ strategy, conducting portfolio assessment of our micro-verticals and to institutionalize sales excellence processes. This initiative will drive the company on its long term growth path,” said PR Chandrasekar, chief executive and vice chairman of Hexaware, in a statement.
During the quarter, Hexaware experienced decline in revenues from some of its top 10 customers. “This was primarily due to some project closures as well as budget re-allocation to other initiatives on the client side. The relationships with all these customers continue to be strong and the company expects a healthy growth from the same set of clients in the coming quarters,” said the company in its regulatory filing.
During the March quarter, Hexaware said it added 11 new clients across all its key focus areas. Of these, one client was added in the Banking and Financial Services (BFS) Domain and two clients each were added in the Healthcare & Insurance (H&I) space and in the Travel and Transportation Vertical and three clients in the Manufacturing Vertical. Of the 11 clients added in Q1 2014, five customers are based in America and six in Asia Pacific (APAC) region.
Hexaware has declared an interim dividend of Rs3 per share.
Hexaware Technologies closed Wednesday 1.21% down at Rs151.30 on the BSE, while the 30-share Sensex ended the day flat at 22,417.
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