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5Paisa Capital Ltd
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Good afternoon, ladies and gentlemen. I'm Vidya, moderator for the conference call. Welcome to 5paisa Capital Limited Q2 FY '24 Earnings Conference Call. We have with us today Mr. Narayan Gangadhar, MD and CEO, Capital Limited; and Mr. Gourav Munjal, whole-time Director and CFO, 5paisa Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to the management. Thank you, and over to you Sir, please go ahead, sir. Narayan Sir, can you please go ahead, sir.
Is there any connectivity issue? Do we need to reconnect to sir, again?
Sir, one moment sir, we are reconnecting.
Yes.
Please go ahead, sir.
Yes. Am I audible now?
Yes, sir, you are audible. Please go ahead sir.
Hi, everyone. Good afternoon, and welcome to our Q2 FY '24 earnings call. On the call, I'm joined with Mr. Gourav Munjal, our Chief Financial Officer. The markets have continued to perform reasonably well, and customer sentiment continues to remain strong. Q2 FY '24 has been a milestone quarter for the entire industry as we've added 9 million DMAT accounts, 51% growth from FY '20 -- from Q1 of FY '24 across India. We ended this quarter with 3.7 million accounts. We have acquired 1.35 lakh customers this quarter, a 25% quarter-on-quarter growth with all our efforts focused on quality acquisition and improving cost efficiency, we have succeeded in achieving the highest ever revenue of INR 96.9 crores, 15% growth on a quarter-on-quarter basis and 21% on a year-on-year basis. The quarter profit in F -- in Q2 FY '24 of INR 19.1 crore that is a growth of 31% quarter-on-quarter and 78% year-on-year, along with the highest PAT margin of 20% this quarter. We are very glad to report strong growth in our retail ADTO segment, and our overall ADTO market share tanks at 3.23%. That represents a 27% quarter-on-quarter growth.
This quarter, we made significant improvements to our overall MarTech stack by standardizing our tools, fixing data attribution and introducing best-in-class frameworks to measure efficiency on our digital platforms. We are well placed to scale our acquisition channels due to the investments we have made in our KYC journey, our 1-click identity integration, pipeline optimization and effective personalization. Our superior technology investments in this domain will help us scale our top of the funnel over the coming quarters. Our focus remains building a scalable digital acquisition engine to attract new customers to our platform. This quarter, we have begun investing in artificial intelligence and data science to offer a better suite of products to our customer cohorts. This past month, we launched several data science models to understand dormancy and optimize trading behavior while minimizing the risk for our customers. While this is a brand-new domain for 5paisa, we are very excited about the prospects of integrating AI into our product offerings. We will be talking more about these initiatives in the coming quarters.
This quarter, on the product side, we've made many significant updates largely tailored to our traders. We launched our new market charts products, which is integrated and across and available across all our platforms in beta. With this, traders can expect better SLAs and throughput while placing large orders during peak periods. We've introduced a lot of trader-oriented features such as predefined option strategies like bull call spreads, Straddle, Condor, Butterfly, et cetera. We are fully integrated trading view web hook into our FnO 360 platform. Our customers will now be able to generate links from our platform and connect with trading new alerts to place orders based on pricing. In addition, we also introduced the trading of BSE options on all our platforms. These features that I just talked about are the best in class in the industry, and they raised the bar for innovation in the trading space.
Over several years, 5paisa has innovated fast for our customers. However, which time are products across iOS, that is Apple, Android and web have grown disparately with each other. Now while this is true of most products in the industry, I believe our customers deserve a standardized best-in-class consistent experience. Therefore, I'm excited to announce that we have launched a major technology project to overhaul our product offerings and make them consistent across all 3 platforms. This new product launch will be our largest offering in many years. It will help us innovate faster, reduce technical debt while helping us launch multiple categories very quickly across platforms. While this is our largest project launch in many years, I expect the full rollout to take a couple of quarters while we start early beta testing later in December.
Our retail customers -- and trading investors stand to benefit greatly from these new capabilities, which will help to add flow much more smoothly across different platforms and product types. This, I believe, is the first of our products -- of our overall product strategy to introduce cutting-edge trading products to the market. 5P is a technology-led broking firm, our goal is to provide best-in-class trading platform for investors and traders alike. We will continue to provide technology and strategy updates as we charge the journey ahead. We continue to invest in technology and launch innovative products for our 3.7 million strong customers. With this, we would like to open the meeting to any questions. Thank you very much.
Thank you, sir.
Moderator over to you. Moderator you can take the questions.
Yes, sir. [Operator Instructions] The first question comes from [indiscernible], an Individual Investor.
Am I audible?
Yes.
You are audible sir. Please go ahead.
Yes, sir. Sir, I just have a query regarding the component of bank balance. Could I just possibly know what is the segregation between what amount is owed to the customers as in -- what has been deposited as margin and what actually belongs to us as in the company?
Gourav?
So our total FD balance is approximately INR 1,588 crores. So other financial liabilities, you see that approximately INR 1,159 crore. So whatever the other financial liabilities is of later and remaining...
Okay. So apart from the other liability remains long term, okay, sir.
The next question comes from [ Sumit Jankar ], an individual investor.
Congratulations for a good set of numbers. Sir, my question is regarding the retail market share. The market share which is mentioned is 3.23%. So is it overall market share or cash market share?
It is overall market share, overall.
So can you just split for cash and derivatives. What is the cash market share and derivates market share?
So sorry for interrupting, sir, your voice is not audible clearly, sir.
Is it audible now?
Yes, sir, you can go ahead.
So what is cash and derivatives market share?
Actually, we don't share that segregate data, but I can tell you that overall it is in the range of 3% to 5% cash market, and the same is in the FnO segment.
Okay. Sir, in last 2 quarters, the market share has grown by almost 20 basis point, which is over and above the growth of industry turnover. So can you mention what has helped you? And what could be your target market share in coming quarters?
So see, what has helped us is that over the last several months, we have focused heavily on launching trader specific features, which are very well received by our customers. If you look at our product offering over the last -- just the last 2 months, right, there's lots of new features that we have built, such for example, users can now make decisions in derivative markets using heat maps, bits versus indices, OI buildup and whatnot, right? All of these are best-in-class, and they are the first in the industry. So a lot of these features have actually helped drive adoption to the platform. That's one. Second is that we continue to invest very heavily in our FnO 360 platform, and we have done a lot of work on developer API, which has improved our core infrastructure and market debt APIs and things like that. So all of these product features ultimately have led to greater participation and obviously, greater market share as a result of that as you see.
Okay. And what could be your target market share, I mean, in coming quarters? So how much growth you can see -- can you see in coming quarters?
Yes, see, we generally don't think in terms of these -- in terms of these kind of metrics. The metrics which are important to us is we want to continue launching these features so that our customers can be happy and they continue to pay more on our platform. Now obviously, the growth that you have seen, we will be -- our goal is obviously to accelerate and exceed that. But in our experience, I think our focus is really on actually winning the trading customers. And to that end, some quarters, we may launch fewer features. Some quarters, we may launch more features. So ultimately, we are not so interested in seeing a month-on-month -- what is it, a game plan. We are taking a much longer view. But overall, if you ask me, I would say that within the next year, we should be at least doubling from here on out. That's really where I want to take the company to.
The next question comes from Kajal Gandhi from ICICIdirect.
Congratulations on a good set of numbers. So what would be [indiscernible] overall volume?
So we don't discuss that information, as you can understand, it's a very sensitive information. But I can tell you it's a nontrivial part of our overall number, largely because we are the largest -- one of the largest actually, API and algo players today in the industry. And I think that's a known fact. So -- but for sensitivity information, we don't really divulge that. That said, it's a very, very central part of our overall order mix.
[Operator Instructions]
Hello?
Yes, yes, please go ahead.
You are audible sir please go ahead sir.
So my question was regarding the client acquisition thing. So how do we plan our client acquisition strategy for us to gain market share as well as the models that you're developing on the platform front. So what would be your strategy for client acquisition thing because that would drive the overall numbers as per...
Right, right. See, as we had discussed that our company, currently, we are on the cusp of digitization, okay? So in the past, we have historically underinvested in the MarTech capabilities, which is why we could not really scale acquisitions very quickly. Now over this past quarter, obviously, things have changed. We are doing a couple of -- we have undertaken a couple of major initiatives. One of them is a total rehaul of our market stack. And unless the market stack is -- then that holds the key to actually scale. So how are we fixing it? One is we are building new capabilities on the MarTech side. We are building new technology systems. We are deploying them. We are fixing data issues because as -- over the last 7, 8 years, there have been lots of legacy that has been built up, which we are currently moving beyond, right? So that's 1 part. Second is we have -- as you may have noticed, we have completely rehauled our KYC platform. It's currently in the beta stage, and we plan on launching the new KYC within the coming -- by the end of November, right? So as these new products come to light, the journey is going to be very seamless for customers. So this is the main 2 initiatives we are taking. Of course, now in addition to that, what we also will do is through this quarter, as the MarTech stack continues to ready, and I discussed this in the -- in my earnings -- opening earnings script, right?
What we plan on the -- we plan on scaling more. We plan on expanding the top of the funnel and we plan on introducing the 5paisa product offering to Tier 2, Tier 3 customers and beyond, right? Because we believe the market is currently still expanding. And a lot of that growth comes from these cities which we want to target. So it's really 3 things: fix the product, fix the tech, get the MarTech capabilities, which we are already doing. And over the coming quarters, continue to scale it further. That's really it.
Got it. So with the same thing, considering the competition, how do you see as to -- because we are still in the nascent stage and we are yet to see the growth in terms of customer acquisition, in terms of market share as well. So considering competition, how do you view as an overall industry in front of you? How do you go about...
See, it's interesting. If you just look at the industry -- I mean, the answer is actually in the history itself. If I were to -- if you were to ask me this question 3 years ago, there would be no Groww or Upstox in the picture at all. There would be the top 5 completely effect. Now if you look just within 2 years, the entire landscape has turned upside down, right? So actually, what is going on right now is there is no clear winner. That is really the hard part. Yes, it is true that the top -- the #1 player seems to have taken away the market. But again, this market is so -- it is -- the product experience is changing and customer expectations are changing big time. To give you an example, if you take the number of traders, [Foreign Language] that number itself has grown by about -- so their needs, their requirements, their product offerings are changing very rapidly. So everybody is trying to figure it out. So what I see is that when I look at the industry going forward, what is -- what we are going to bet on is how can we create a space for these high-end traders and build a very deep and a very -- like a defense and depth type product offering which allows us to enhance and launch newer strategies, newer models, which are not available on any other platform. And that's why if you look at all our earnings call, my focus is largely on features that we have introduced for traders because that's where the [ buck is trading ].
Got it, yes. So is it fair to say you would focus more towards the derivative segment of the customers?
Yes, that is definitely one of the areas we're focusing on. Obviously, cash is also important. But between the 2, yes, I think the derivative part is more of a -- is more where the innovation is happening. Other products are kind of already reached -- they've kind of reached that right risk-reward profile. So there's not much in terms of new products that can come in on the cash side.
Got it. Got it. And lastly, if you consider this overall tech -- the tech infrastructure that you are going to develop. So how long will this last? And how do you see this shaping in coming years? So basically, how long will it take the investment journey to complete?
Yes, it's a great question. So see, as I told you, in this -- as I mentioned in the call, right, see, we are right now undertaking a major rehaul of the 5paisa app. See our app is already rated -- if you look at our -- if you compare my rating, that is of 5paisa's rating with Groww and Upstox, we are also at 4.3, 4.4, and they are also at 4.3, 4.4. In fact, I would say 5P is within the top 3 as far as the product rating is concerned. Now but what has happened is that because our product experience is not consistent across iOS, that is across your Apple iPhone and across your Android phone, customers are obviously [indiscernible] about it. They want to -- they are -- the customer bar itself has gone up. So what I think is that I am looking at multiple -- at a couple of quarters of baseline development. And I expect that by the time we exit this calendar year, most of the core work would have already landed. And then post that it's just continuous fruition.
The next question comes from Deepak from Sapphire Capital.
Yes, am I audible?
Yes, yes. Yes, you are.
So I just wanted to understand, you mentioned somewhere in 1 year, we are looking to double the market share. Is that right?
Yes, that's right.
So from 3.25% odd, we are looking at 6.5% of market share?
That's our goal. That's our target.
Okay. Understood. And what it means for the revenue? I mean, if your market share doubles, ideally, your revenue should also double? Or how should one look at it?
See, I think whenever you're in this [indiscernible] space, where we are currently, see as we discussed, right, the market is expanding, okay? So in a rapidly expanding market, the focus really has to be only on growth because otherwise, we will be completely irrelevant in another 4, 3 years from now. So to continue to expand and improve our presence in the entire marketplace, we will continue accelerating our investment pipeline, which is our customer acquisition pipeline. Obviously, with -- when you are targeting growth, clearly, sometimes the revenue doesn't go one-on-one in hand. It's not like -- there's not a direct correlation. That never happens in any business, not just broking, any business. So the way we are thinking about it is that we know that we want to run the business within the current operating model that you're already seeing, right? We have seen -- for example, you saw how much profits we made, what margins we have. It's all an open book. So my plan is we want to continue maintaining that framework, and that's how I'm -- we are operating the company. So I can't give you a straight answer as to what whether the revenue will grow in straight line or whatnot. But you can expect that it will be in the same ballpark, in the same measure as it has been so far.
Just to be add in this, you understand in the broking industry, we are broking allied, cross-sell and other. So ADTO and all is major related to the broking, but that MTF income and DP income is not related to the ADTO. It can be -- I mean ideally it should be that direction, but there is no one-to-one 100% correlation between these 2.
But -- I understand that. But ideally if my market share doubles, ideally -- at least my revenue should be up by 50%, 60%, 70%, right? Not having a one -- that is a fair understanding, right?
Yes. Yes. That is a fair understanding.
Based on past experience, your understanding set, but we don't know that how the future market will react. Yes.
Of course, of course.
One important point, Deepak, to remember is that these customers, see, when we acquire customers and as the market share continues to scale, see many of these customers would not have aged in the system. So for actually seeing the real run rate of revenue, you may have -- you will have to wait for about 8 or 9 months. You have to give at least 2, 3 quarters beyond the acquisition point to see the whole effect of it. One great example is if you look at some of our competitors, they -- people who have gone off on an aggressive acquisition spree, say, about a year back. If you look at their revenue today, the numbers are looking very solid because, obviously, they are reaping dividends of what they've already sown. So when we look at our revenue pipeline, I think you will see a mix of both. You will see mix of new revenue as well as you'll see existing participation increase and that's really what we are focused on.
Correct. Correct. Correct. Fair enough. I got it. Now I mean, in terms of margins also, I mean, because your fixed cost is largely it will not grow at the same rate and your revenue is increasing -- has been on an increasing trend. So ideally, that is helping your EBITDA margin. I mean if you see last maybe what, 9, 10 quarters, you have been straight increasing our EBITDA margin from 10%, 11% to now 35%, right? And that's a commendable job we have done. But what's the steady state we are looking at? I mean it cannot keep increasing, right? So there must be some threshold we are looking at that this is the range where we want to stabilize our EBITDA margin given our investment in technology as well as in marketing. So what is the management thought process on that?
See, our thought process is like any healthy business, right? Currently, you see this EBITDA growth. And right now, we are at this number of 35%, as you yourself have said, right? So obviously, we want to continue to keep this and perhaps even grow it to a certain degree. But clearly, we cannot expect a 50% plus EBITDA margin because that makes no business sense because then we are leaning on the table because we need to go acquire customers. So ultimately, I think we will be somewhere in the same range that we are in right now. Perhaps it will be actually better but overall, our focus will be on top line and increasing the top of the funnel.
Fair enough. So a 35% to 40% range would be a right number to work with.
Yes, that's the right number, yes. It's very healthy range for a business like us. Okay. Okay.
And this quarter number includes the full impact of our acquisition, right?
Yes, yes, yes. Whatever you're seeing is fully accounted? Yes.
Fully accounted, right, the acquisition numbers.
Yes, yes, yes.
So why your gross client numbers have not changed. I mean this gross client number of 3.73 million does not include that additional, what, 2.75 million or 1.5 million, I think, that we got from the acquisition.
[indiscernible] So I mean if you -- I mean -- so in this quarter, we have acquired 1.35 million and earlier if we have acquired 1.0 million, so if we add, it will come 2.4 million, which is matching with our opening figure.
The next question comes from Rishikesh from RoboCapital.
Sir, my first question is with respect to the client acquisition. So quarter-on-quarter, we have grown 25% there. How do we see this growth in coming few quarters?
We see it accelerating and -- but 1 thing to remember is that this -- specifically this month and the next month because of this Diwali season and because of this cricket craze that is going on, all the inventory costs are gone through the roof. So almost all digital players, unless they are the largest ones like Flipkart and all, every other player who is in our category, the spend -- and accordingly, the acquisitions are likely to be muted because -- just because this doesn't make sense to overspend at this -- especially for the coming months. But if you take those 2 aside, I think the overall trajectory is likely to -- for us is likely to be the same and even increase going forward.
Okay. So in last quarter, you had alluded that quarter-on-quarter acquisitions once the processes are built at some point, quarter-on-quarter customer acquisitions can be 15% around. So do you -- so is it fair to say this will be a sustainable growth number quarter-on-quarter?
Yes. Yes. If you take the trailing aspect, yes, that is what we are aiming for. Yes, that's correct.
Okay. Okay. Got it. And sir, my next question is actually on the cost structure. So we have roughly INR 140 crores OpEx in this -- total expenses in this H1. So roughly INR 280 crores for the year. How do you see this cost structure growing for the next 1 or 2 years?
See, I'll answer the first part, and Gourav will take over. See, basically, no, the way it is, is that a lot of these cost structures are already amortized and they are accounted for. It's not like we have to -- our existing cost structure is not likely to change very dramatically because a lot of the team building that's going on and a lot of the spend that is going on is actually replacement spend. So yes, it may go up slightly by maybe 10%, 15%, whatever the number is. But we don't expect that to change dramatically, okay? Now with that, I'll take -- I'll let Gourav take the question also, and he can give his perspective on how he is thinking about it. Yes, Gourav?
So most of cost has been stabilized. People cost, tech costs and everything. But there will be a -- in other expenditures, there is an advertisement and branding cost, which is purely dependent upon the market acquisition. So if we see the opportunity in the market that we can acquire double customers, the cost will go up related to that aspect only. And the second, we are also looking for some investment in technology, but that would not be much. It would be hardly 5% to 7% increase in existing cost. And otherwise , it will be the same.
Okay. But if you are looking to double our market share can we say that maybe 50% correlation within the revenues also. So if cost structure is not going up and maybe ad expense might not go up that much, the margin should actually increase, right?
But I haven't said that the cost will not go up. I said that in respect of advertisement and marketing, it will go up because we need to acquire more and more customers. And in that respect, the cost will go up.
The next question comes from [ Abhishek Saraf ] an individual investor.
So my question pertains to regulated growth and the way we are trying to expand into Tier 2 and Tier 3. So first of all, we all know that with the profitability at trader level is quite minimal, not many traders are able to make profits. So I wanted to understand how will this impact our stickiness going forward? Are you seeing any trend shift in the way the individual traders are able to make profits, are more traders able to make profit, which will actually ensure that more stick around. Secondly, since we are venturing into Tier 2, Tier 3, how is the behavior of such traders different from, say -- steeped into like Tier 1 towns, so is there any difference in the behavior of such customers? And what kind of impact that can have on our margins? And lastly, zero-day expiry, how are you seeing this because we see other industry players expect that the margins will be kind of lower, although that will have an impact on volume in a positive way? Just these 3 things, sir.
Okay. So you have asked 3 questions, we'll go one by one. See, first of all, now -- with this coming -- hello? I'm echoing. You will have to mute. Yes, so can you hear me? Am I audible. Yes, Okay. Yes, please. Yes. So see, basically, the customer behavior today has not been any different than customer behavior even 10 years ago. The -- actual on an absolute basis, the number of people who make money in the market and who -- for whom this risk -- this profile of investment makes sense, that is always likely to give the same percentage. It's not like today, customers are losing more than what they were losing 10 years back. That's not true at all, right? What has happened is that more awareness coming into the market, financial products such as mutual funds have taken off in a big way. So that -- if you look, the actual majority growth is headed -- is going in that direction actually.
Now for our industry, what we are noticing is that the sophistication of traders is dramatically increasing. And that is the more interesting trend actually because it's those customers, those top 10%, 20% customers, they are the ones who actually drive up margins and drive up the economies of scale for pretty much everybody else. They've kind of amortize it for people like us. So we can offer the product to all. So is trend changing? No, I don't see that trend changing. And I don't think it has any negative bearing also on the market. So that's first part and the participation.
The second part is that as the penetration in India increases, and we have data from U.S., from South Korea, from China. If you look the actual volume, the number of these high-end traders is only going to increase. And there, the participation in terms of ADTO is actually only going to keep rising. And we have data going back 10 years to prove that in India and we have data over the last 30 years to prove that from either U.S. or China or even South Korea. So overall, I think our economy is not any different than these economies. They are all growing at a very rapid pace. And with the customer profile and the risk profile available in the market, I expect that the retail participation will continue to remain strong, including from brokers -- including some traders.
Now your -- as far as your other question on margin is concerned, see, we have already answered that earlier. I expect that this is a business that can run within this 30%, 35%, 40% margin as we have discussed earlier. Because our goal clearly is, yes, we can run it even at higher margins, but that's not the goal. The goal is right now to expand the market. So that's really our single pointed focus is how do we get more products, how do we get more new platforms in the hands of customers so that they can get familiar with this equity class and continue to trade. And if you look in every single earnings call I've given here, you can see that my focus is largely on that because I talk about those features -- Yes, I'm done.
And just 1 last thing, sir, zero-day expiry on [indiscernible], how is it going to impact the business?
Sorry for interrupting. So your voice is not clear, sir.
I can't hear you.
Sorry, I'm in a poor network zone, sorry about that.
No problem.
If you can share your thoughts on the zero-day expiry products. So how is it going to impact our business?
Yes. So see, actually -- Gourav, do you have any -- can you share any data that we have seen from the last 2, 3 months on this? So let's just -- yes, let Gourav add to this point.
So the question is regarding that hybrid expiry, right?
Yes. [Foreign Language], yes.
Okay. So we know that -- so overall, the volume has gone up in the exchange side, and we are expecting that volume will -- I mean, will be going up even in future with the more participation of the customers. So with this volume that -- and most of the volume is increasing in the option turnover. So that will impact our revenue, which will be in the positive side. And I mean, it will help us to increase our margins also.
The next question comes from [ Anshul Mittal ] from [ Tiger Assets ].
Yes. Sir, this is Anshul Mittal from Tiger Assets. Congratulations on good set of numbers. So my question is regarding, like you said, you'll double your market share, right? So can you like tell me how...
Sorry, you got [indiscernible] could not hear your question. Can you please repeat?
Yes, we are planning to double our market share in next 1 year so I just want to know how exactly are we doing that? Are you going to do that?
See, first of all, asking that question in a public forum, you are not going to get an answer from any CEO because that is our secret sauce. But anyway, I can give you an overall idea. See, the overall idea is that the reason we are investing in MarTech capabilities is because we can spend on the top of the funnel to acquire new customers. So far, our company had never really invested in MarTech capabilities at all. Our investments are underwhelming. Now we are doing a total revamp of that. So one is by improving that core technology, which allows us to spend more money and allows us to get customers at a more efficient scale. That's one. Second is we are aggressively investing in building new data science models that help us understand how to curate customers. And this is something that I've discussed in this earnings call earlier, right? I expect that a good percentage of the facelift will just come from these projects. And this is where a lot of the innovation is going to happen. -- because currently, as new customers come online, their onloading experience becomes extremely critical. So focusing on the KYC journey, focusing on the first trade, focusing on understanding, decluttering the product. all of these things will help us to build our brand presence across the platform. So we also plan on investing more in [indiscernible]. So far, we have not done any of that. But as we look at our growth strategy, it's going to be multifold. It's going to be product, it's going to be a mix of brand. It's going to be a mix of performance market and such in addition to organic, obviously.
Right, sir, right. Also, sir, like recently, Narayan Gangadhar from Angel broking has joined the firm, right?
You are speaking with Narayan sir actually, right now.
I think he got -- Gourav -- misconstrued you for me. So anyway, yes, I'm Narayan. Gourav is also on the call, Gourav Munjal. He's our CFO.
Yes. Sorry, my bad. So exactly, sir, so how are we planning since your onboarding 5paisa, how are you revamping this management order? How are you like making changes? What plans do you have in mind? Yes.
See, we have a very -- we are obviously, as you know, now for 2 quarters, we have said that we are continuing to invest in technology. That is, I think, a big area of [indiscernible]. So clearly, those investments, some of those are already finished, some of those are already in progress and some of those will take place over the next quarters or so. So our -- my overall strategy is to focus on this part, build these tech capabilities. And in addition, we have a very solid team. But there are some parts of that which need to be up-leveled. So we are continuing to attract new talent the company because obviously, our -- the kind of problems we are solving now are also changing. So my plan is that I plan on revamping and rebuilding this new product offering with the new teams that's already in place and continue to scale from here on out. So that's how we are looking...
The next question comes from Franklin from Equentis Wealth Advisory.
So I wanted to know what are your yields -- average yield and margin for the MTF book?
Gourav...
MTF book, we have 18% to 22%. It is based on the net worth of the customers, but the range is 18% to 22% per annum.
Okay. And what is the margin that you will be getting on this?
Exchange defines the margin, it's a script-wise. Most of the securities, I mean, they want it at 25% upfront. So we...
I was asking about net interest margin after adjusting for your cost of funds?
So, we do have a INR 500 crores of net worth and on which we have owned funds as well as that the banking facility also. So we can't say [indiscernible]. But overall, I can tell you that right now, 11% of the costing is coming. It's a cost of overall industry, and we are getting 18% to 19%. So the difference is 7% to 9% is the spread.
Okay. 7% to 9% is what is the spread that...
Yes, yes.
Yes. Okay. Okay. And how -- what is the outlook for this book?
So actually, we have improved that. I mean we have mentioned in our investor presentation that it is the INR 269 crores, but that was the average. So even the average has gone up by 20%, but if I tell you that 30th September [Foreign Language], it has crossed INR 300 crores.
Okay. Okay. Because at the industry level, I have seen a lot of players have scaled up this book. So I was just trying to understand maybe from a 1- to 2-year perspective, can we see meaningful increase even from these levels?
So you -- I understand that what you are referring to that, but that they are also not earning anything on that. They have reduced the cost drastically, I mean they are just recovering cost. So they are not getting any profit on this. So what we want to grow this with the profit margin. So anyhow, we won't be able to reach that level, that I can't go with the 10% or 11%. So yes, the competition there that may impact even in the future, but let's see what will happen.
Yes. And recently, last year, is we have seen 250 basis point increase in costs. So have you been able to pass on this entire cost for this book?
No, actually. I mean, as you know, that in the MTF overall industries, I mean, reducing the rate and the competition is coming. So we haven't -- so in terms of income, we haven't changed it. And yes, but that 2.5%, we have internally optimized it, and that is not a 2.5% for us, it would be approximately 1.5% for us, but that we are taking in our book.
Okay. So this 18% to 22% kind of range that would have been prevalent even in the last year as well?
Yes. Yes. We haven't changed the -- I mean, interested on that.
Okay. Okay. And sir, in the revenue mix, you have a component, others, which is about 24% of the overall revenues, what would be the broad 2, 3 components within this?
Actually, majority is that interest on FD that -- which we earn from own funds as well as on the client funds. And apart from that, there is very small, the figure is in lakhs. But I can tell you that out of that 99.9% is interest on FD.
Okay, okay. And at least at SEBI circular says that they are in talks, are planning to come up with an ASBA facility for a secondary market as well. So what is your approach on that in case we lose some of the float?
Yes, we can. We need to see that how the industry will impact because it is -- so even in the IPO the people got so much confused, but in this every day trading, they may get confused and they don't accept this kind of facility because it is optional. So we need to review that, how much it will have back to other venue, not us, even in the entire industry needs to view that. And if -- there will be drastically impact on that in terms that definitely, the entire broking industry will increase the broking income. It won't be able to INR 20 per trade. That's my opinion.
[Operator Instructions] The next question comes from [ Sayansh ] from [ Electrum PMS ]
Sir, congratulations on a good set of numbers. I just have 1 question. What will be the impact on our interest income due to instantaneous settlement coming in?
So I just answered on that. Your -- recent circular ASBA is coming, so if the client operate not to transfer the fund to the broker. So that other income can be -- can impact but we need to see that when the circular will come and what exactly they want from investors as well as from the broker and how much it will impact us, we need to review that.
No, sir. No, I'm not talking about ASBA. I'm talking about the instantaneous settlement. Like right now, we are settling at T+1, right, like let's say next year, we move to instant settlement, so what will be the impact of that? Like float income will definitely be reduced then, right?
No, no, no, it will not be impacted. It will not be much impact. Most of the trader -- see every -- most of the traders -- key funds and for the intraday facility and also -- the margin would be the exchange and they wanted to play with the intraday -- and then I understand there are settlement. So if I need to settle in the T+ and T+0, there will be not much impact for me, even on the intraday...
[Operator Instructions] We have a follow-up question from Deepak from Sapphire Capital.
Sir, you mentioned in 1 of the remarks, I think, quarter-on-quarter, some 15% growth we are looking at. So what exactly we are looking at there? I mean, which parameter we are talking about here and is the parameter this for?
See, we are looking at -- our growth metric is basically the number of customers who have been acquired in the quarter. And that is obviously the meta metric. And then obviously, the other metric is all other metrics such as revenue and others are derived from that. But the main metric is growing top of the line, traded active customers.
So that you're talking about is the active customer, right? The 15% quarter-on-quarter?
Yes.
Okay, understood. And secondly, on this other income, I mean, the ASBA and also, will it impact or will it not? It depends upon the circular. So what we are trying to say here?
So I just conveyed earlier that ASBA will come, and it may impact and it may not impact. But I don't know that how much it will impact to our financials because I need to see that how many investors has adopted that. And yes, if let's say 10% of the customers is adopting that, then definitely, the income will fall by 10% other income. But I mean, we can increase somewhere else so that we can compensate our income on the total...
So what exactly we are saying that the excess fund that is lying at maybe our account, 5paisa account, so that the customer choose to transfer it back to their bank account. So that's how our income...
It will not be transferred. It will be in the customer bank account, and it will be blocked by the bank, and the bank will send us to our RMS that these funds are blocked that, customer should do that rate. So I mean, I can't earn interest on that.
Correct. Correct. So that's how it will impact us. I mean in that sense.
Yes, as ultimately the margin which we are keeping in the form of FD to the exchanges that we are getting the interest, that you can't earn that -- ultimately the customer...
Because earlier, these funds were lying in your account, right, largely?
Yes. Right now, it is lying in the customer accounts, yes.
And by when will you get the clarity, I mean, in terms of time line?
Actually, we are in touch with SEBI. I mean they are -- they will release a detailed circular along with all depositories and all. And then we will see. I'm hoping that in the month of January they will issue the final guidelines and all, and they will also allow some time, 2 to 3 months for the implementation -- actually, this requires a lot of integration on the banking side also because ultimately, bank, broker and exchanges, all 3 should be in the line. So there are systems need to be developed by the banking side also, and that's why it's taking time.
But as of now, we are enjoying that interest income, right?
As of now, we are, every broker, not every broker [indiscernible].
[Operator Instructions] We have a follow-up question from [ Sumit Jankar ], an Individual Investor.
I have a question regarding to algo trading. What I am seeing is the algo trading -- the turnover coming through algo trading is rising quarter-on-quarter, but it is mainly driven by premium customers as it is not much cost efficient. So how do you see it in coming years? Will it be affordable for retail plans so that it is driving huge turnover? So how do you look into algo trading?
Yes. So see, actually, that's a very good question, okay? The -- with algo trading, the main opportunity that we see is that we have to make the product easy to use for customers. And that today is the biggest challenge, the biggest challenge in any broking platform because they make it harder for people to actually go and start and test different strategies, deploy them on cloud and scale. So our -- so clearly, there is a room there where we can innovate. We are obviously the leader in the category. So we are investing big time in building our features so that with the right infrastructure capabilities and such, the algo guys can reap the benefit. Secondly, what the algo people want is other facilities such as colocation. They want the ability to run their own custom infrastructure. There's a lot of other unique requirements like that, which make it technologically very challenging to actually provide it. But those are precisely the problems we are solving. So overall, I see algo participation will only grow from here on out. That is definitely here to stay.
And your other question on whether the margins are depressed? That is not true. The margins are not depressed. It is just that these customers have a very different profile. The way we treat them and the way they look for the kind of products and all is very, very different because their strategies are different. Other than that, there's no material difference actually between them and our regular high-end retail customers.
Okay. So will low-margin customer will be able to trade in algo?
Yes. Not today, but in time, yes; in time, absolutely. Today, they can't trade. Today if they trade, they'll likely not have the infrastructure, the tooling, the money and capabilities. But that is what we are -- that's what we're building. So it's -- I'm just saying in general, for [indiscernible] platform, not just our platform.
We have a follow-up question from [ Abhishek Saraf ], an Indian investor.
Yes. Sir 1 small thing on our growth. So we are definitely trying to grow 15% Q-o-Q and acquisition. If you can share some of your thoughts on the stickiness of the customer [indiscernible] is what kind of customers and what percentage of customers, let's say, stick with the platform for a year out or 2 years out? And which type of customers who engage in certain kind of product or a type of trading? So any broad level thoughts on this will be very helpful.
Yes. I think obviously, our customers are -- majority of our customers are repeat customers. So they are coming to the platform, they use the systems. And as they build the experience -- they continue to improve their engagement with time. Now obviously, for those customers, as they age in the system, we have to provide them the right products for their right risk profile, which is what 5paisa is focused on. So overall, I see that our retention numbers are very strong. Obviously, we don't disclose those numbers. They're very sensitive. But they're very strong, and I expect those only to get better with time.
So the reason I asked is that because many traders or investors have multiple accounts, and as you rightly said that once we're engaged in -- let's say, a new customer or a new-to-trading kind of customer, he will have multiple accounts, but slowly, he will try to migrate towards 1 where he gets more used to it and get more comfort level. So I was coming from that place, actually.
Yes. I think that's why product experience is the most important thing, right? If you look at customers, if you talk to any of the top customers, it's not like they prefer Zerodha to any other product. There is no such thing. It's a misconception. The -- ultimately, what they want is a stable, reliable platform, and they want a broker they can trust. So if you look like the reason they -- our customers trust us is because they can pick up the phone, they can call us. We are engaged and being -- we have maintained that good touch advantage with all our top clients. And obviously, we are also one of the few brokers who is heavily focused on traders. So we've invested a lot in building capabilities for them, which obviously gives us a lot of a leg up advantage over many of our competitors.
[Operator Instructions] There are no further questions. Now I hand over the floor to the management for the closing comments. Over to you, sir.
Yes. So again, thank you very much for this earnings call. We look forward to continuing the momentum and growth, and we will share the investor deck and everything online and we look forward to this call again next quarter. Thank you very much. Have a good day.
Thank you so much to all the investors. If you have any questions, you can mail to us at ir@5paisa.com. And I wish you a happy Diwali to all the investors. Moderator, we can go.
Hello? Yes, we can disconnect.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you, and have a pleasant evening, everyone.
Thank you.
Thank you.