MCX crashes 12% as firm extends software vendor 63 Moons contract by 6 months - Whats worrying investors?

Multi Commodity Exchange of India (MCX) share price tumbled over 12 per cent in initial trade on Friday, June 30, 2023, a day after the commodities exchange firm announced they are extending the services of their existing software vendor 63 Moons Technologies, for six more months, beginning from July 1, 2023. MCX stock price opened 10 per cent lower on June 30 at Rs 1,478.10, on NSE hitting the lower circuit. The intra-day low came in at Rs 1,411.40. Meanwhile, 63 Moons Technologies share price surged, hitting the day's high at Rs 255.90, after opening at Rs 238. At 12.29 pm, the scrip quoted at Rs 246.10, still nearly 14 per cent up.

MCX on-boarded Tata Consultancy Services (TCS) in September 2021 to design and deploy software for securities trading and market infrastructure and the new software was to replace the existing before the end of the firm's contract with 63 Moons in 2022. But, the latest extension implies a further delay in the migration to the new Commodity Derivatives Platform (CDP), developed by TCS.

A worrying trend for MCX investors is that 63 Moons has been raising the price of its services every quarter. From Rs 81 crore in the fourth quarter of FY23, it is estimated to rise to Rs 125 crore by Q3FY24.

Source: Zee Business Research

Operationally, MCX posted a weak performance in the March 2023 quarter owing to higher software-related expenses (as the chart below suggests), which has come down to Rs 5.5 crore in Q4FY23 from Rs 63.3 crore in Q2FY23. MCX's consolidated revenue from operations jumped nearly 26 per cent year-on-year, rising from Rs 106.46 crore in Q4Fy22 to Rs 133.75 crore in Q4FY23.