MCX’s average daily trading volume were flat year-on-year (down 7% quarter-on-quarter) and technology costs were higher by Rs30 million (post revision in agreement with Financial Technologies)
Multi Commodity Exchange’s (MCX) Q3FY13 net profit of Rs759 million, was up 10% year-on-year (down 7% quarter-on-quarter) and surpassed Edelweiss’ expectation of Rs644 million. The growth was despite average daily trading volume (ADTV) being flat year-on-year (down 7% quarter-on-quarter) and technology costs being higher by Rs30 million (post revision in agreement with Financial Technologies).
The beat to estimate was primarily on other income of Rs319 million (Rs284 million in Q2FY13)—investment income on margin money. Earning/valuations will draw comfort from optional value attached to regulatory changes boosting trading volumes and better-than-expected scale up of MCX-SX. Edelweiss maintains a ‘BUY’ recommendation on the shares of the company on the stock exchange.
Gold and silver, key volume movers last year, had set a high base for ADTV at Rs290 billion in Q3FY12. However, due to low volatility in Q3FY13, volume in gold and silver came off 15% and 12% respectively. YTD (year-to-date) trading volume in silver was down 30% (both in value and volume term) and 14% in gold (in value term against 30% fall in volume). However, this was offset by increased volatility in crude oil and base metals that aided growth of 14% and 18% respectively in value terms. Overall, ADTV in Q3FY13 was flat year-on-year (down 7% quarter-on-quarter) to Rs481 billion.
Technology cost came in a tad higher at Rs210 million (up 12% year-on-year and quarter-on-quarter) as it revised technology sharing agreement with Financial Technologies from October 2012 (fixed fee upped from Rs10 million per month to Rs20 million).
Edelweiss was anticipating operating margin impact of 90 basis points in FY13E and 150 basis points in FY14E due to this technology agreement revision.
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