Multi Commodity Exchange of India Limited

MCX is India's commodity derivatives exchange. Trading began in 2003, it is the only listed pure play in the segment, and it holds over 99% share in bullion, base metals and energy. Clearing sits in MCXCCL, a wholly owned subsidiary that has been central counterparty to every trade since 2018.

Bullion and energy are 98% of the Rs 10.49 lakh crore daily turnover. Within futures, gold and silver alone are 64%. Base metals, agri and index are negligible.

The fee structure decides everything else. Futures are charged on contract value, options on the premium paid rather than the notional. A gold option can double in notional because gold got dearer and MCX earns nothing extra from it. Premium tracks how much prices move, not where they sit.

Options are now the bigger engine. Premium ADT went from Rs 1,698 cr in FY24 to Rs 3,131 cr, Rs 6,534 cr, and Rs 9,086 cr in Q1 FY27. Futures ADT went from Rs 19,636 cr to Rs 59,674 cr over the same stretch.

There is no promoter. Kotak Mahindra Bank holds 14.99%, mutual funds 30.07%, FPIs 29.84%.

Q1 looked like a bad quarter. Revenue down 21% to Rs 702 cr, profit down 22% to Rs 413 cr.

It wasn't. Trading on the exchange went up 58% in the same three months, to Rs 10.49 lakh crore a day. Gold options volume doubled. What fell was how much gold and silver moved day to day, and MCX gets paid on movement, not on volume.

The traders who showed up during the wild quarter did not leave when it calmed down. Twice as many clients traded as a year ago and turnover is three and a half times. That base is what the next burst of volatility earns on.

Foreign investors cannot trade gold, silver or copper on MCX today. Those three are 64% of the futures on this exchange. On 11 August SEBI proposed opening them up.

FPI access to physically settled contracts. FPIs can currently trade only cash-settled non-agri contracts, which in practice means crude and natural gas. Gold, silver and copper settle by delivery and are closed to them, and that is 64% of futures turnover. MCX added 35 FPIs in Q1 to reach 220, and they account for 2.5% of turnover against roughly 16% at the equity exchanges. SEBI's paper proposes letting them in. The circular is the event.

Silver 100 grams, launched 1 June. The standard silver contract is 30 kg, a ticket no small jeweller can carry at today's prices. The 100 gram version took 2.08 MT of delivery in its first month. It answers the question of whether smaller contracts create new participants or merely split existing volume, and the answer so far is the first one.

Crude holding the book while bullion is quiet. Energy options premium ran at Rs 6,647 cr a day in Q1 against bullion at Rs 2,371 cr, nearly three times. Management says the two segments counterbalance each other. Q2 tests that with gold volatility still subdued and crude still moving. Revenue holding near the Q1 level would end the habit of pricing MCX as a gold proxy.

BULLDEX and METLDEX. Index options notional ADT in Q1 was Rs 0.0016 cr. The products exist and nobody trades them. Management said BULLDEX is being reworked on futures and options with launches over the next few months. An index has no delivery leg, which is precisely the obstacle keeping institutions and foreign money out of bullion.

Electricity. Rs 37 cr of daily turnover, 55% market share, over 70% of open interest, and DISCOMs beginning to participate. Indian electricity derivatives run at 70 basis points of deliverable supply where Europe and America run at multiples of spot. FY28, not FY27.

Coal and minerals. MCX Coal Exchange of India is incorporated and SEBI cleared up to Rs 100 cr for a mineral spot exchange on 12 August. Both are spot platforms rather than derivatives. They build the benchmark prices that contracts need later. Worth nothing in today's number.

Revenue is volatility, not volume. Q1 proved it. Bullion tonnage doubled and bullion premium revenue fell 27% in the same three months. A long calm stretch cuts revenue with the client base fully intact.

The RBI bank guarantee rule. Live since April after a 90 day absorption window. Members fund proprietary margin with bank guarantees. Asked to size the exposure, management said it was not a number they could put a handle on and pushed it to Q2. Client trading was 50.96% of futures and 39.25% of options, so half of futures and 60% of options is prop flow. Q2 is where this shows.

The client base did not grow. Traded F&O clients were 13.72 lakh against 13.9 lakh in Q4, and futures clients fell from 4.7 lakh to 4.12 lakh. Management called it flat after a strong quarter. It is the one line in the presentation that argues against the widening base.

Product licence fees. Rs 39.68 cr in Q1 against Rs 22.01 cr, up 80%. Contracts are licensed from LME and CME NYMEX on a step-up model, so the cost climbs with volume and takes a slice of every incremental rupee.

Concentration and competition. Bullion and energy are 98% of the book with no third leg yet. Equity exchanges are moving in and have played with expiry dates, though the main contracts have held so far.

Estimated revenue of Rs 2,950 cr in FY27, Rs 3,540 cr in FY28. Q1 did Rs 702 cr. I have put the next three quarters at Rs 750 cr to Rs 800 cr each. That needs no repeat of the Q4 FY26 spike, only for the crude activity running through August to hold. FY28 adds 20%, roughly the pace the client base is growing at.

Margin at 72%. Q1 came in at 72%. Almost nothing in the cost line moves with volume except statutory contributions and the licence fees paid to LME and CME, and I have scaled both with turnover. Q1 employee cost carried an 8% to 9% one-off the CFO said will not repeat, so it is out.

Tax at 21%, the Q1 rate.

So 45 times FY27 and 37 times FY28.

For that to be a 25 times business three years out, MCX has to earn about Rs 3,120 cr, which is 26% compounding from the trailing Rs 1,542 cr. It grew profit 138% in FY26 and 103% year on year in Q1. The price is asking for a quarter of the current run rate, and FY28E covers two thirds of the ground before a single trigger lands.

What 45 times buys is a 72% margin, over 99% share of its market, no capital needed to grow, and a fee base that widens every time commodities move.

Two straight quarters of falling options premium with the client base flat or down. That would mean the volatility episode did not leave a wider base behind, and the whole thesis rests on it doing so.

The bank guarantee rule visibly taking out prop volumes in Q2 with management still unable to size it. That changes the earnings base rather than the multiple.

Bullion and energy premium both falling in the same quarter. The counterbalancing argument fails and MCX is a single factor volatility trade after all.

TenetFour Research. Educational analysis only. Not investment advice or a recommendation to buy, sell, or hold any security. Author may hold a position. Readers are responsible for their own decisions.