MCX (Multi Commodity Exchange of India) saw its stock price surge by 9% to reach an almost two-year intraday high of ₹2,114.40 following the company’s announcement that it would migrate to the TCS (Tata Consultancy Services) commodity derivatives platform by October 3rd. This news was well-received by the market, as it marked the end of a costly vendor contract with 63 Moons that had been a financial burden on MCX.
The cost incurred for extending the software contract with 63 Moons for one year amounted to ₹472 crore, significantly higher than the ₹60 crore per annum that MCX had been paying before the contract expired in September of the previous year. The escalating costs associated with each extension took a toll on the exchange, resulting in a total expenditure of ₹385.6 crore in FY23, representing a 69% increase compared to the previous year.
The first extension from October to December of the previous year cost MCX ₹60 crore, followed by a six-month extension from January to June that cost ₹162 crore. The latest six-month extension through December 2023 saw costs rise to ₹250 crore. Consequently, the company’s profit for Q1FY24 declined by 53% year-on-year to ₹19.7 crore, while expenditure surged to ₹139.5 crore from ₹65.3 crore a year ago.
Analysts are optimistic about MCX’s stock performance following the migration to the TCS platform, with some believing that the share price could surpass its previous record high of ₹2,135 apiece in the near future. The market has reacted positively to the news since September 19th, driving the stock price up by nearly 20% until Thursday’s closing at ₹2,092.
While the stock has already seen significant gains, the potential cost savings from the migration and the expectation of increased trading volumes are expected to further support MCX’s stock performance. The new arrangement with TCS involves a fixed cost structure, unlike the previous contract with 63 Moons, which had a variable component linked to exchange turnover.
Despite the stock’s strong performance, some analysts believe that the cost-saving benefits of the migration may already be priced into the stock. However, the market will likely closely monitor MCX’s trading volumes and financial performance in the coming quarters for additional cues on the stock’s direction.
