MCX shares plunge over 12% post extension of deal with 63 Moons; here's why

Shares of Multi Commodity Exchange of India (MCX) tumbled over 12% on Friday, a day after the country’s largest commodity exchange extended a software support deal with its existing vendor 63 Moons Technologies. The exchange has renewed its contract for the third time with 63 Moons for a period of six months, beginning July 1, 2023, for ₹250 crore, compared with ₹81 crore for the first six months of the year.

The deal was extended due to further delay in the delivery of the trading software by Tata Consultancy Services (TCS), which was hired in 2021 as the technology solution provider to design and deploy software for its commodity derivatives platform.

MCX shares opened at ₹1,477.70, down 10% against the previous closing price of ₹1,641.85 on the BSE. In the first two hours of trade so far, the stock declined as much as 12.5% to hit an intraday low of ₹1,437, while the market capitalisation dropped to ₹7,448 crore.

The smallcap stock trades 15% lower than its 52-week high of ₹1,697 touched on December 20, 2022, and 24% higher than its 52-week low of ₹1,156.05 hit on September 28, 2022. The counter has registered a growth of 12% in the past one year, while it delivered flat return in six-month period as well as one month. In the past one week, the stock has fallen over 9%.

In a regulatory filing on Thursday, MCX said: “We wish to inform you that to ensure all stakeholders are better prepared to migrate to the new commodity derivatives platform and to ensure necessary compliances, the Company was obligated and has decided to extend the support services being rendered by its existing software vendor, 63 Moons Technologies Ltd. for six months, being the minimum period offered by the vendor, beginning from July 1, 2023 at a consideration of ₹125 crore per quarter.”

“We understand the importance of providing a reliable and robust platform to our users, and we are committed to continuously improving our services. We will communicate to all our stakeholders, about the roll-out plan to migrate to the new Commodity Derivatives platform,” it added.

In October 2020, MCX floated a request for proposal (RFP) for developing the Exchange’s Commodity Derivatives Platform (CDP) and TCS was selected as the vendor for the same in February 2021.

In September 2021, TCS informed the exchanges that it was selected by MCX as the technology solution provider for its growth and transformation journey. As part of Project Udaan, TCS was hired to help MCX build a new technology core, transforming its trading as well as post-trade functions, to support its future growth and further strengthen its leadership position in the commodity derivatives market in India.

As per the deal, TCS will design and deploy high-performance solutions that would integrate multiple systems to transform MCX’s operations using the Deutsche Börse T7 trading platform from the Deutsche Börse Group. Post-trade activities such as clearing, risk management, delivery and settlement will be transformed using TCS BaNCS for market infrastructure, which will help MCX meet current and future regulatory standards including emerging regulations around client level collateralisation. 

Additionally, TCS will implement TCS BaNCS for securities trading for MCX’s trading members, providing them a modern, fast, intuitive user interface and real time market data feed for trading and post trade activities. 

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