MSEI EGM Outcome – On recent controversy regarding depriving existing shareholders

18 January 2025

The Metropolitan Stock Exchange of India (MSEI) conducted its Extraordinary General Meeting (EGM) on January 18, 2025, via e-voting, where key resolutions, as outlined in the notice, were duly approved.

Shareholder Concerns and IPO Prospects

• IPO timeline: A significant portion of shareholder inquiries revolved around MSEI’s Initial Public Offering (IPO) plans, seeking clarity on the anticipated listing timeline. Notably, only one shareholder raised concerns regarding the company’s long-term strategy, its ongoing legal case with NSE, and the management’s efforts towards profitability. He has also questioned the management's recurring assurances regarding future profitability and IPO plans, emphasising that despite such assurances, the company has yet to achieve sustained profitability. Additionally, he expressed concerns over stock price volatility, which tends to rise on positive news but subsequently declines, failing to reflect any fundamental improvement.
  
  
• Furthermore, the shareholder proposed conducting hybrid meetings to facilitate in-person attendance, enabling shareholders to engage in direct dialogue with management. However, MSEI’s management declined this request, citing the geographically dispersed shareholder base across India. The company reaffirmed its commitment to virtual meetings to ensure broader accessibility.

Management’s Response

The management reiterated its stance that the company will pursue an IPO once it achieves profitability. They emphasized their first focus on the equity cash segment while holding licenses for both equity and derivative segments.

Private Placement of Equity Shares

On the recent controversy regarding the non-issuance of shares to previous investors, the Company Secretary clarified that the funds raised through this private placement followed a prior notification to existing shareholders regarding a rights issue. However, as there was no response from existing shareholders, the company proceeded with the private placement.

Company Valuation Approach
Two independent valuers were present at the EGM to elucidate the valuation methodology employed for the company. They adopted a dual-approach framework:

1. Income Approach (Discounted Cash Flow - DCF Methodology): This approach assessed the company’s valuation based on revenue and cash flow projections provided by MSEI, incorporating necessary adjustments. However, no specific projections were disclosed to shareholders.
   
   
2. Market Approach (Revenue Multiples): Given that MSEI is EBITDA-negative, the valuers opted for a revenue multiple-based valuation. Since BSE is the only listed stock exchange in India, global listed exchanges were used as benchmarks to derive a comparable valuation.
   

Conclusion

The EGM highlighted investor concerns regarding MSEI’s financial performance and IPO plans, with shareholders urging greater transparency and engagement. While management remains committed to profitability before proceeding with an IPO, investor scepticism persists, particularly around the company's long-term strategy and execution. Going forward, MSEI’s ability to address these concerns and demonstrate tangible progress will be critical in gaining investor confidence and paving the way for a successful public listing.