MMTC Ltd’s recent attempt to sell its stake via an Offer for Sale (OFS) appears to have fallen flat, casting a shadow over the government’s intent to divest its holdings. The lack of investor interest has prompted discussions about the company’s future, potentially leading to a recommendation for closure, as reported by Moneycontrol.
This predicament stems from the government’s prior nod for the stake sale through OFS, which ultimately faced a roadblock due to the transaction advisors’ inability to proceed. Senior officials shared their insights with the news website, hinting at a possible conclusion. “Given the current circumstances, it’s highly likely that MMTC will be proposed to the Alternative Mechanism (AM) for closure. The inability to execute the stake sale through OFS could prompt a reevaluation, potentially resulting in an approval for closure,” revealed these officials.
Lack of Investor Interest Sparks Contemplation of Closure
In a notable shift, the AM now holds the authority to decide the fate of Public Sector Undertakings (PSUs), bypassing the conventional cabinet route. Currently, the government maintains a dominant 99.33 per cent stake in MMTC. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expressed his view on the matter, emphasizing the redundancy of canalizing agencies like MMTC, STCI, and PRC in the contemporary landscape. “These agencies, initially critical during times of scarcity, steep tariffs, and trade constraints, have surpassed their relevance and should be phased out,” Dr. Vijayakumar stated.
MMTC’s troubles don’t end there. According to news on India’s economy, the Securities and Exchange Board of India (SEBI) revoked its stockbroker registration earlier this year due to its involvement in unlawful ‘paired contracts’ concerning the now-defunct National Spot Exchange Ltd (NSEL). This development prompted SEBI to instruct MMTC to facilitate the withdrawal or transfer of securities and funds held by its clients within a 15-day window. In cases of non-compliance by clients, the broker was directed to facilitate the transfer of assets to another registered broker within the subsequent 15 days, with client notification.
As per SEBI’s ruling, MMTC had been functioning as a commodity derivatives broker under its purview since December 2015 and was an active member of the Multi Commodity Exchange of India Ltd (MCX). Notably, MMTC had sought to surrender its MCX membership in September 2019, but this application remains pending with MCX to date, as per articles about business news.