Financial Technologies Plunges on Order to Absorb Defunct Bourse

Financial Technologies (India) Ltd. tumbled the most in more than a year after the government ordered the company to absorb a defunct bourse to help settle about $900 million of the exchange’s dues to investors.

Shares of the Mumbai-based company dropped by the daily limit of 20 percent to 169.70 rupees, the biggest fall since Aug. 2, 2013, and erasing gains this year. Financial Technologies lost 84 percent last year after authorities halted trading on the National Spot Exchange Ltd. in July following the biggest payment default in the nation’s commodity market.

A merger of the two companies will ensure efficient administration and satisfactory settlement of rights and liabilities of stakeholders and creditors of the exchange, the Ministry of Corporate Affairs said in an e-mailed statement. The members of the two companies and its creditors can respond to the draft merger order within 60 days, the ministry said.

NSEL, founded by Financial Technologies, was ordered by the government to halt trading as it broke rules by allowing sales of goods traders didn’t keep in its warehouses, according to the regulators. The probe led to the arrest of Jignesh Shah, the founder of Financial Technologies, and the commodity market regulator ordered the company to sell its holdings in all exchanges including the Multi Commodity Exchange of India Ltd..

NSEL failed to settle about 56 billion rupees ($913 million) in dues to investors, according to the Forward Markets Commission, the commodity markets regulator. About 3.6 billion rupees of dues have been recovered so far, it estimates.

Using Cash

“The merger is going to play a very major role in taking care of the liabilities toward the investors, who are suffering,” Deven Choksey, managing director of K.R. Choksey Shares & Securities Pvt., said by phone from Mumbai. “Financial Technologies has got the cash, which they have generated by selling exchanges, and is now available for the investors, who were affected by the NSEL episode.”

The company sold its 26 percent stake in MCX to investors including Rakesh Jhunjhunwala and Kotak Mahindra Bank Ltd. after the commodity market regulator declared it unfit to run the bourse that trades everything from gold to cotton. Financial Technologies also sold its stake in the Singapore Mercantile Exchange to ICE Singapore Holdings, a unit of Intercontinental Exchange Group.

Financial Technologies will take appropriate steps on the merger in consultation with its legal counsel, the company said in a filing to the BSE Ltd. today.