The share price of the Multi Commodity Exchange of India (MCX) experienced a sharp decline of over 12% during Friday’s morning trade on June 30. The drop came in response to MCX’s announcement that it had prolonged the support services provided by its current software vendor, 63 Moons Technologies, for an additional six months starting from July 1, 2023.
Conversely, shares of 63 Moons Technologies witnessed a surge of 18%, reaching their 52-week high of ₹256.20 during the morning trade.
Under a regulatory filing, MCX disclosed that the compensation for this extension would amount to ₹125 crores per quarter, surpassing the previous quarter’s payment of ₹87 crores, made in March 2023.
MCX terminated its longstanding support service agreement with 63 Moons Technologies on September 30, 2022, after selecting a new technology service provider.
The decision to extend the contract drew some criticism from brokerage firms, deeming it a short-term setback for MCX.
Motilal Oswal Financial Services, a brokerage firm, forecasted a 15% decrease in the stock, emphasizing that this marks the third extension by MCX. The initial extension took place from October 2022 to December 31, 2022, at a cost of ₹60 crore.
“We have revised our FY24 EPS (earnings per share) estimate downwards by 69% to ₹14.7. Tech costs for FY25 remain relatively stable. Although Q1FY24 volumes for futures and options exceeded our expectations, leading to a lower reduction in our FY24 estimates. We have increased our FY25 EPS estimate by 8%,” stated Motilal Oswal.
“The delayed transition will affect the launch of new products and increase foreign portfolio investor (FPI) participation in the segment. We maintain our neutral rating on the stock and have revised our one-year target price to ₹1,400,” the brokerage firm added.
Nirmal Bang, another brokerage firm, noted that MCX’s decision to extend the support services provided by 63 Moons Technologies for six months is a short-term negative for MCX.
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