CRISIL has assigned a CRISIL IPO Grade "5/5" (pronounced "five on five") to the proposed initial public offer of Multi-Commodity Exchange of India Ltd. (MCX). This grade indicates that the fundamentals of the issue are strong relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.

CRISIL expects MCX to maintain its dominant market position in the commodities market, backed by product innovation and strong technological capabilities. Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices. The high liquidity in these commodities and the low impact costs (comparable to other leading exchanges), along with MCX's strong technological capability - aided by its association with the promoter, FTIL, a leader in exchange related technology - are expected to help the company maintain its competitive advantage.

MCX's profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short term due to the impact of the commodity transaction tax (CTT). However, in the medium term, MCX's strong market position and continuous focus on product innovation would act as growth drivers. In the long term, growth could be spurred by the introduction of new instruments (like options) and participation by institutional players, once the necessary regulatory changes are in place.

Mr Jignesh Shah, the founder and Non-Executive Vice Chairman and Mr Joseph Massey, the MD & CEO of MCX, have been the driving force behind the company's business growth and product innovation. MCX also benefits from a strong and experienced senior management team as well as a highly capable product innovation and development team.

About the company and the issue
Multi-Commodity Exchange of India Pvt Ltd was incorporated on April 19, 2002. The proposed IPO is in the form of an offer for sale of 4 million shares by the promoters and a fresh issue of 6 million shares. Subsequent to the IPO, the promoters' stake in the company will reduce to 26.1 per cent.

On September 26, 2003, MCX received permanent recognition from the Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country. MCX offers trading in 56 different commodities categorised into various market segments such as bullion, energy, ferrous and non-ferrous metals, oil and oil seeds, cereals, pulses, plantations, spices, fibre and others. The company has leadership position in bullion, energy and metals trading in India.

Of the company's total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest. Globally, MCX is the largest silver exchange, second-largest natural gas exchange, third-largest gold, crude oil and copper exchange in terms of number of contracts traded in each of these commodities. MCX was the first exchange to launch futures trading in steel, crude oil and plastics in India. The company has launched weather indices such as RAINDEX - to track the progress of monsoon rains in locations such as Mumbai, Indore and Jaipur - and also trading in carbon credits on the exchange. MCX was also the first exchange to initiate evening trading sessions to coincide with trading on international exchanges such as London, New York and other international markets. The company's initiative to constantly innovate and develop new products is expected to help increase volumes.

For the year ended March 31, 2007, MCX reported a net profit of Rs 930 million on a turnover of Rs 2.0 billion, as compared with a net profit of Rs 375 million and revenues of Rs 1.0 billion in the previous year.

About CRISIL IPO Grading
CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security.

About CRISIL Limited
CRISIL is India's leading Ratings, Research, Risk and Policy Advisory Company.

About CRISIL Research
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