Financial TechnologiesÆ success is more notable because the company is not under active research coverage by most international brokerage houses. Observers commented that the company, which has a 64% stake in the Multi Commodity Exchange (MCX), is almost a proxy play on the Indian commodities market.
Selling software stocks out of India nowadays is generally quite easy as past performance has led investors to be bullish on prospects in this industry. Noteworthy however that Financial Technologies is not a name which is well-known globally and the company achieved pricing at the top end of its indicated conversion premium of 15%-20%.
The zero-coupon bonds have a five-year maturity. The bonds were marketed to investors at a yield of 7.875% per annum calculated on a semi-annual basis. They were offered at a fixed conversion premium of 20% over ThursdayÆs (December 14) close of Rs1968.90 ($44.20), which gives a conversion price of Rs2362.68. Over the course of the last year, the share has traded on the Bombay Stock Exchange at a high of Rs2225 on November 28 and a low of Rs988 on June 15. The bonds will be listed on the Singapore Stock Exchange.
The book was easily covered with 30-40 investors participating. According to a market source, the bonds, which were priced early on Friday morning, traded a tad above par on Friday. About 40% of the demand came from Asian-based accounts and an equal amount from European accounts. The balance was offshore US accounts.
The proceeds from the CB will be used for new software development centres Financial Technologies is planning in Mumbai and Goa, new joint ventures and/or subsidiaries and capital expenditure for technology upgrades.
MCX, which has been up and running since end 2003, is one of IndiaÆs first commodities exchanges and is widely considered the jewel in the Financial Technologies' portfolio. It has earned Jignesh Shah, Financial Technologies' founder and principal shareholder, names like Commodity King and MCX Maharajah. MCX has a lionÆs share of commodity trading in India, a country which is widely expected to grow into a regional hub for commodities trading. Financial Technologies also has a leading market share in technology solutions that facilitate trading and related activities.
Deutsche Bank was sole bookrunner for the transaction. Observers commented that attention paid by DB to investor education regarding the company played a large role in achieving the healthy premium.
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