MCX’s Journey to ₹10,000: UBS Bullish on India’s Commodity Giant

You’ve probably heard of the BSE and NSE, the big stock markets where shares of companies like Reliance and Infosys are traded. But where does a jeweller buy gold for the future, or a farmer sell their cotton before it's even harvested? That happens on a different kind of market, and in India, the biggest one is the Multi Commodity Exchange (MCX).

Think of MCX as a massive, modern-day "mandi" or marketplace. Instead of fruits and vegetables, it deals in raw materials that run our country: gold, silver, crude oil, and even electricity. And just like any other business, MCX is in it to make a profit. Its journey, filled with high-stakes drama, crippling expenses, and a spectacular comeback, is a story worth telling.

Recently, MCX has been in the news for a stunning reason: global financial giant UBS believes its stock price could hit a massive ₹10,000. To understand this incredible optimism, we need to look at the storm MCX has weathered.

Inside MCX: How Commodity Trading Works in India

Commodity exchanges are organised marketplaces where buyers and sellers trade standardised contracts for various commodities, including metals, energy, and agricultural products. They play a crucial role in the economy by enabling price discovery and risk management. For instance, a farmer can use the platform to lock in a price for their future harvest, protecting them from potential price drops, while a manufacturer can secure raw materials at a fixed cost, hedging against price hikes. In India, while several exchanges exist, MCX commands a near-monopoly with around 98% market share in the commodity derivatives space.

A Costly Move: MCX’s Shift from 63 Moons to TCS

For a long time, MCX's trading operations were powered by its founder, 63 Moons Technologies. However, a major scandal involving 63 Moons' parent company led to a regulatory order forcing them to sell their ownership in MCX. Despite this, MCX still had to use 63 Moons' critical trading software to function.

To gain full independence, MCX hired the major Indian IT company, Tata Consultancy Services (TCS), in 2021 to build a brand-new trading platform. This project, called 'Udaan', ran into significant delays and missed its deadlines. This put MCX in a tough spot, as it had to keep its market running.

To do so, MCX was forced to ask 63 Moons for costly extensions for their software support, and this is where the expenses spiralled out of control. The cost, which was originally about ₹16 crore per quarter, skyrocketed.

• First, it jumped to ₹67 crore for a quarter.
• Then, it increased again to ₹87 crore.
• Eventually, it reached a massive ₹125 crore per quarter (part of a ₹250 crore deal for six months).

In total, MCX paid a staggering ₹222 crore to 63 Moons in just nine months (from October 2022 to June 2023). To show how huge this was, this nine-month expense was much larger than MCX's entire annual profit of ₹118 crore for the 2021-22 fiscal year. These software fees became the company's single biggest cost, sometimes making up 30-40% of all its expenses and creating a massive financial drain.

Finally, after these struggles, MCX successfully moved to the new TCS platform in October 2023. This was a pivotal moment that gave MCX its technological independence and, most importantly, drastically cut down its massive operating costs.

MCX’s Strong Financial Comeback

The successful technology migration is now reflected in MCX's robust financial performance. For the fiscal year 2025, the company reported a consolidated income of ₹1,208 crores, a stunning 59% year-on-year growth. The fourth quarter alone saw income surge by 61% compared to the same period in the previous year.

This top-line growth has translated into impressive profitability. The EBITDA for FY25 stood at ₹761.5 crores with a healthy margin of 63%, showcasing strong operational efficiency. The profit after tax was a solid ₹560 crores, with a margin of 46%. This financial resurgence is a direct consequence of shedding the exorbitant software fees of the past and leveraging the efficiencies of the new TCS platform. Alongside technology, employee benefit expenses are another significant cost for the exchange, amounting to 12.96% of operating revenues in the year ending March 31, 2025. However, with the major software-related financial drain plugged, the company's expense structure is now far more sustainable.

The exchange's core business is also booming. Trading activity has seen a significant uptick, with the average daily throughput (ADT) more than doubling to ₹2.2 trillion from ₹1 trillion, a 101% growth. This has been fueled by healthy increases in futures trading and a remarkable 85% growth in the notional and premium ADT of options.

Why UBS Thinks MCX Could Hit ₹10,000

On June 25th, UBS upgraded MCX with a ‘Buy’ rating and raised its target price from ₹7,000 to ₹10,000, the highest on the Street, sparking strong investor interest. The stock surged nearly 5.5% intraday to hit a record high of ₹8,808, delivering an impressive 30% return over the past month.

The brokerage's optimism is built on several key pillars:

• Increased Volatility and Volumes: Heightened volatility in global commodity markets, driven by geopolitical uncertainties, is expected to keep trading volumes strong on the exchange. Recent data supports this, with futures' average daily value up by approximately 50% quarter-on-quarter and options premiums' ADV rising by around 30% in the same period.
• New Product Pipeline: UBS has highlighted the improving momentum in the launch of new products. MCX recently introduced electricity derivatives and monthly silver options, which are expected to create new revenue streams. UBS conservatively estimates that electricity derivatives alone could contribute 3-12% to revenue in the coming years.
• Operating Leverage: With the major technology transition costs behind it, MCX is now in a prime position to benefit from operating leverage. As trading volumes increase, a larger portion of the revenue will flow down to the bottom line, boosting earnings. UBS has upgraded its earnings per share (EPS) estimates for MCX by 13-17% for FY27 and FY28, expecting a 26% earnings CAGR for FY26-28.
• Market Under-appreciation: According to UBS, the market has not yet fully priced in the growth potential from these new products and the benefits of higher trading volumes.

After a period of significant turmoil and uncertainty, MCX appears to have turned a corner. By resolving its legacy technology issues and charting a new course with a powerful partner in TCS, the exchange has fortified its foundation. With strong financial performance, booming trading volumes, and a clear strategy for future growth, MCX is not just a survivor but a formidable player in India's financial landscape, poised to capitalise on the dynamic world of commodities. The ₹10,000 price target may seem ambitious, but for many analysts and investors, it reflects the exchange's hard-won potential.

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