MCX extends contract with 63 Moons Technologies: What it means for the stock

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The Multi Commodity Exchange (MCX), in a filing dated June 29, said so They are expanding services to the current software vendor 63 Satellite TechnologiesFor another six months, the minimum extension period available. Thus, the company again made a delay Move to the new commodity derivatives platform (CDP), developed by Tata Consulting Services (TCS).

The extension cost became more expensive as the existing vendor charged Rs 125 crore per quarter, an increase of 54 per cent against the January-June extension cost. Thus, the company has to pay Rs 250 crore for a period of six months starting from 1st July. In comparison, MCX paid Rs 81 crore per quarter i.e. Rs 162 crore for the six months commencing January 1st. The company used to pay Rs 15 crore per quarter before these extensions. The new CDP was originally scheduled to be implemented by December 2022, and delays have affected MCX’s profitability.

What should investors do?

Existing fiscal profitability will be affected by this extension. Bloomberg consensus estimated net income for FY24 at around Rs.220 crore, which will now be revised downward due to additional platform expenses. However, this is a temporary burden, and the company will eventually switch to the new CDP, which is positive from a long-term perspective.

After announcing the extension the last time – December 30, MCX’s share price lost just over 6 percent in the next session. However, stocks have subsequently rebounded. Likewise, there are reasons to believe that negative impact on stocks Because the current extension is unlikely to be long-term. Because these costs are one-time rather than recurring, markets tend to override them to propagate quick initial reactions.

in our area bl. portfolio Edition dated June 25We had compiled a rating of dips recommended on the MCX. Against the backdrop of possible delays in the implementation of the new CDP and the extension of services with the existing provider, we anticipated the possibility of a decline in the share price. The rating being slightly high was also a factor for recommending the accumulation on the dips. The decline in the share price due to news of the delay in implementing the new CDP could be an opportunity to accumulate shares. While the profits of fiscal year 24 will be affected due to the higher cost incurred, this will not affect the company’s earnings and profitability in the long run.

The company’s long-term fundamentals remain intact. MCX’s market share in commodity derivatives trading is over 98 percent. Its dominant position in this space remains firmly established, and thus it is likely to remain a leader in the space for the foreseeable future. In a growing economy, the growth trajectory in commodity derivatives trading looks good and MCX will continue to be the main beneficiary of this trend.

We reiterate our accumulated dip rating on MCX news after Thursday’s news.