MCX slumps as higher software cost drags Q1 performance

In June, MCX decided to extend its licence and maintenance contract with 63 Moons Technologies for six more months as its migration to the new trading platform got further delayed

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MCX shares opened lower on July 31 as the company’s net profit for the April-June quarter was dragged down by the hefty license and maintenance charges paid to 63 Moons Technologies.

At 9:16 am, the stock was quoting at Rs 1,642 on the NSE, lower by 1.7 percent from previous close.

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In June, MCX decided to extend its licence and maintenance contract with 63 Moons Technologies for six more months as its migration to the new trading platform got further delayed.

Also Read: Short Call | Street looks for ‘next best ideas’ as focus shifts to MCX, Colgate, Dr Lal Path Labs

The original contract with 63 Moons had ended in September 2022, and since then MCX has been missing deadlines to get on to the new platform developed by TCS. Till September 2022, when the original contract was in force, the software support and license fee that MCX paid 63 Moons was around Rs 16 crore per quarter.

The cost shot up to Rs 67 crore plus for the first extension of three months ended December 2022. In the March quarter, MCX shelled out Rs 87 crore and likely paid as much for the June quarter too. For the upcoming six-month extension, MCX will pay a whopping Rs 125 crore per quarter.

Foreign broking firm Morgan Stanley has an ‘Underweight’ rating on the stock with target price of Rs 1,270 per share. “The focus is on management confidence on TCS software implementation by December,” it said.

“While continued momentum in options volume remains positive for accretion in topline, implementation of new software remains watchful,” said ICICI Securities.

As of June end, domestic mutual funds held 34.4 percent stake in the company, foreign portfolio investors held 23.49 percent and Kotak Mahindra Bank alone had 15 percent.

While robust topline growth along with dominant market share of 96 percent in commodity futures bodes well for the stock, investors are keenly watching out for the exchange’s transition to TCS’ software by December. The company has scheduled its earnings call on July 31 at 6 pm.

The commodity derivatives exchange recorded consolidated profit at Rs 19.6 crore the quarter, falling 52.6 percent over a year-ago period, impacted by dismal operating performance. Meanwhile, revenue from operations surged 34 percent to Rs 145.7 crore compared to year-ago period.