India's Multi Commodity Exchange experiences a sharp decline after renewing its IT contract at a higher cost.

On Friday, shares of Multi Commodity Exchange of India (MCX) (MCEI.NS) plummeted by as much as 14% following the company's decision to extend the services of software vendor 63 Moons Technologies (63MO.NS) for an additional six months, but at a higher cost. The renewed contract is set at 1.25 billion rupees ($15.24 million) per quarter, starting from July 1, which is significantly higher than the previous renewal cost of 810 million rupees and the earlier contract value of 600 million rupees.

It is worth noting that 63 Moons Technologies's long-term contract with MCX had already expired last year. In 2021, the commodity exchange MCX had chosen Tata Consultancy Services (TCS) (TCS.NS) as its new service provider.

In a statement on Wednesday, MCX stated that it is now better prepared to migrate to the new commodity derivatives platform. The company further mentioned that it opted to extend the support from 63 Moons to ensure compliance with necessary requirements.

Despite assuring analysts and investors that the transition to the TCS-run platform would occur by the end of June, MCX's migration has experienced delays.

Motilal Oswal analysts remarked in a note that this delay will have an impact on new product launches and could also lead to a decrease in foreign investor participation. As a result of these developments, they have reduced their earnings per share estimate by 69% for fiscal year 2024.

On Thursday, 63 Moons released a statement acknowledging that they had once again accommodated MCX's eleventh-hour request. The software company expressed their hope that this would be the final instance of such occurrences. They also mentioned that MCX did not choose to buy the software source code from them.

Following the contract renewal, shares of 63 Moons surged by 11.6%.

In contrast, MCX shares, which have experienced a decline of approximately 5% this year, were down by 10.1% at the last reported time.

(Note: The exchange rate mentioned is $1 = 82.0170 Indian rupees.)