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BSE Ltd
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Ladies and gentlemen, good day, and welcome to BSE's Q2 FY 2022 Earnings Conference Call. My name is Rita Jaan, I will be the moderator for today's conference. [Operator Instructions]Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Joshi, Head, Investor Relations, BSE Limited. Thank you, and over to you, sir.
Hello, everyone, and welcome to BSE's Earnings Call to discuss Q2 FY '22 results. This is Yogesh from Investor Relations.Joining us today on this earnings call is BSE's leadership team consisting of Mr. Ashish Kumar Chauhan, Managing Director and Chief Executive Officer; Mr. Nayan Mehta, Chief Financial Officer; Mr. Sameer Patil, Chief Business Officer; Mr. Girish Joshi, Chief Trading Operations and Listing Sales; Mr. Neeraj Kulshrestha, Chief Regulatory Officer; Mr. Kersi Tavadia, Chief Information Officer. Please note that the conference is being recorded, and a transcript of the same will be available on our website. The financial results and investor presentation are also available on our website. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Any forward-looking statements that we make on this call are based on the assumptions as of today, and BSE assumes no obligation to update these statements as a result of new information or future events. I would now request Mr. Ashish Kumar Chauhan to give a brief overview of the company's performance, followed by question-and-answer session.
Yes. Thank you, Yogesh. Good evening, everyone, and thanks for joining the call today. We meet today with cautious optimism that the coming days are going to see us resume our routing lives back again, as COVID-19 trade receipts. I'm glad to say that not only BSE has continued to function normally without any interruptions or glitches throughout the last 20 months of this pandemic. It has also been able to improve its performance, create value and wealth for its stakeholders.I will start with the broad financial results for the quarter, ended September 30, 2021, BSE's operation revenues have grown by 51% over corresponding quarter in the previous year. Further, BSE's net profit attributable to shareholders have grown by 39% to INR 65.14 crore for the quarter ended September 30, 2021 from INR 46.81 crore for the quarter ended September 30, 2020. The operational performance has continued to grow during September 2021 quarter across business segments, resulting in higher operational revenues and profits.Let me start by covering our primary market segment. Funds raising by India Incorporated continues to be violent despite COVID-19 pandemic and BSE platforms remaining preferred choice by Indian companies to raise capital. Core debt capital, BSE bond platform enabled issuers to raise INR 5 lakhs to INR 14,030 crore through issue of bonds, commercial papers, municipal bonds, InvITs, et cetera, during September 2021 quarter.Further equity issuance through public offerings, SME issuance, start-ups, preferential issues, sites, QIPs, et cetera, through BSE platforms was INR 60,988 crore during September 2021 quarter. The total number of investors registered with BSE have been consistently growing and currently we stand at over INR 8.58 crore and continue to move up. I shall update you on BSE's trading segments now. BSE's average daily turnover in the Equity segment increased by 53% to INR 5,622 crore during September 2021 quarter from INR 3,685 crore during September 2020 quarter. The same is also reflected in the company's strong operational performance in the current period. This market share in the Equity segment increased from 5.9% during the September 2020 quarter to 8% during September 2021 quarter. BSE's average daily turnover in the Equity Derivatives segment increased by 27% to INR 2,56,214 crore during September 2021 quarter from INR 78,442 crore INR during September 2020 quarter. This market share in the Equity Derivatives segment increased from 3.8% during September 2020 quarter to 4.1% during September 2021 quarter.BSE is India's second largest commodity derivative exchange. And offers a wide gamut of products across agri and non-agri segments. The average daily turnover in our Commodity Derivatives segment for the quarter ended September 30, 2021 increased by 4.8% to INR 322 crore from INR 3,074 crore in the quarter ended September 30, 2020. Even market share Commodity Derivatives segment increased to 8.7% for the quarter ended September 30, 2021 from 7.1% for the quarter ended September 30, 2020. BSE is now the largest section in India to trade gold mini contracts and enjoy a market share of 77%.And at the time of pandemic, BSE has launched many innovative contracts like SUFI Steel, COTTONJ34, et cetera. BSE has witnessed successful deliveries in gold mini contracts since the period of pandemic, including India gold delivery. SUFI Steel contract has witnessed delivery of 180 metric tons where Almondz have witnessed a delivery of 228 metric tons. BSE's average daily turnover in the Currency Derivative segment increased by 22% to INR 24,378 crores during September 2021, quarter from INR 19,976 crore during September 2020 quarter.BSE is clearly resolved to support the SME and start-ups in India, a -- listing 353 companies in its assembly platform and 12 companies and start-up platform till date. During the September 2021 quarters, BSE listed 8 companies on its SME platform and 1 company on startup platform. As on September 30, 2021, 348 companies registered BSE's SME platform, have raised funds amounting to INR 3,703 crore and 11 companies registered on BSE's start-up platform averaged INR 39 crores. The market capitalization of compensation of BSE's SME platform was INR 36,934 crore as of September 30, 2021. BSE's market share and listing of companies in SME segment stood strong at 61% as on September 30, 2021.BSE's StAR MF, India's largest mutual fund distribution platform continues to grow at a scorching pace. The total number of transactions on BSE StAR MF grew by 99% to INR 4.26 crore transaction during September 2021 quarter from INR 2.14 crore transactions during September 2020 quarter. BSE's StAR MF platform is a platform of choice for investments in mutual funds by investors and mutual fund distributors.It continues to witness consistent net flow over the industry's net equity inflow. BSE's StAR MF platform recorded a net equity inflow of INR 21,524 crore as compared to industry's net equity inflow of INR 39,928 crore during the September 2021 quarter. BSE's StAR MF platform stands as a single largest mutual fund platform, which has been able to provide net positive equity inflow to the mutual funds even during times when the entire industry was facing net equity outflow. Even during the month of October 2021, StAR MF platform, out from the industry, net equity inflow by contributing INR 7,914 crore as compared to industry's total net equity inflow of INR 5,215 crore. In effect, the StAR MF platform contributed more than the entire industry's net equity inflow, suggesting that other platforms and direct connect actually had an outflow. BSE's StAR MF platform continues to scale new peaks of transactions in a single day with ever-increasing growth of orders on each platform. BSE's StAR MF recorded 26.52 lakh transactions in a single day on November 8, 2021, surpassing the previous best record of 24.08 lakhs on September 13, 2021. The BSE's StAR MF app launched in May 2019 to help mutual fund distributors register lines on real-time basis and execute paperless transactions has been well received by the investment community and has processed over 38 lakh transactions till date. BSE's StAR MF Plus, a new framework launched for providing end-to-end software to mutual fund distributors is also receiving great response. BSE promoted international exchange at GIFT City, Gandhinagar, India INX, has been growing exponentially ever since its corporate commenced operations on January 16, 2017. Average daily trading turnover on India INX during the September 2021 increased by 278% to USD 11.67 billion as compared to USD 3.09 billion during September 2020 quarter.India INX continues to be the dominant IFS exchange in GIFT City, with its market share of 84% derivative setting and 92% in bond listing during the quarter ended September 30, 2021. Owing to investments by certain strategic and financial investors, BSE's stake in India in excess reduced to 77.55%, and BSE's stake in India International Clearing Corporation has reduced to 69.28% as of September 30, 2021.BSE-Ebix Insurance Broking Pvt. Ltd., a joint venture of BSE and Ebix Fincorp registered, with Insurance Regulatory and Development Authority of India's direct life and general insurance broker. Currently, its electronic insurance broking platform is integrated with 7 general insurance companies, 5 health insurance companies and 3 life insurance companies.Further, pending integration, portal of issuance company is being used for certain insurance companies to facilitate intermediation of policies. BSE-Ebix has over 4,000 active 35 points of sales as at September 2021. The gross premium collected during September 2020 quarter rose by 2.11x to INR 5.22 crore as compared to INR 2.47 crore during September 2020 quarters. BSE-Ebix has intermediated 1,740 policies during the quarter ended September 30, 2021, and its operations are stabilizing now.BSE e-agricultural markets, a JV between BSE Investments and Frontier Agriculture Platforms Private Limited, operates a nationwide electronic, institutionalized, transfer and commodity spot trading platform to facilitate spot agricultural commodity's transactions across value chain, consisting of producers, intermediaries, ancillaries and consumers. It has already enrolled 690 members, including 442 farmers, 238 traders and 10 FPO members. Trades worth INR 75.68 crores in 3 agriculture commodities are executed on the platform during the quarter ended September 30, 2021. The company is working closely with government and government enterprises to enhance the efficiency of procurement and sales of the commodities. Considering the market and opportunity, this platform is expected to grow at a faster pace in time to come in both agriculture and non-agricultural segments.The company received regulatory approval for enabling spot trading of non-agriculture commodity as well. As informed in our earlier call, the Power markets' regulator, CERC, granted registration on May 12, 2021, to pan out their solutions to establish and operate a power exchange. In order to brand itself as a power action, the company is in the process of changing its name to Hindustan Power Exchange Limited. The company proposes to commence live operations in the last part of financial year 2021, '22.BSE has a stake of 22.61% in the proposed power exchange, through its wholly-owned subsidiary, BSE Instruments Limited as of date. CDSL has granted recognition to BAFL as a regulatory body for administration and supervision of investment advisers. BAFL has commenced registration of investment advisers, being allowed to act as a regulator to regulate, conduct of a group of intermediates in the financial market through a subsidiary is a strong reflection of BSE's capabilities and regulators confidence in the government at BSE.On a consolidated basis, BSE's operational revenues have grown by 51% to INR 188.73 crores for the quarter ended September 30, 2021, from INR 125.38 crores. The transaction charges, revenue has increased by 123% to INR 67.96 crores from INR 30.42 crores in the corresponding quarter, previous year. Listing rated income increased by 20% to INR 56.84 crore from INR 47.24 crores in the corresponding quarter, previous year. Book building fees increased by 25% to INR 16.62 crore from INR 13.29 crores in the corresponding quarter, previous year. The clearing and settlement operation revenue increased by 93% to INR 10.15 crores from INR 5.26 crores in the corresponding quarter, previous year. Net profit attributable to shareholders of the company increased by 39% to INR 65.14 crores from INR 46.81 crore in the corresponding quarter previous year. Operating EBITDA has increased by INR 40 crores -- INR 40.01 crores to INR 53.16 crore for the quarter ended September 30, 2021, as against operating EBITDA of INR 13 crore -- INR 13.15 crores. So it has moved from INR 13.15 crore to INR 53.16 crores. The operating EBITDA margin stands at 28% from 10% for the corresponding quarter last year. The net profit margin remains constant at 29% for the quarter ended September 30, vis-a-vis, the previous quarter in the same -- in the previous year.Before I conclude, I wish you a very happy and prosperous year ahead. Take care and stay safe. With this overview, let me welcome all of you, once again, and we invite you for a question-and-answer session. Thank you.
[Operator Instructions] The first question is from the line of Shalabh Agarwal from Snowball Capital.
Am I audible?
Yes, please.
Great set of numbers. Many congratulations for that. So the question is on INX, if we compare the numbers of our competing exchange and what we are recording. It seems despite spending a similar amount of money on INX, we will be needing to report more than 90%, more than 95% market share on the notional value of traded derivatives. This is -- we are looking at the last year, full year numbers. So the question is, if we have more than 90% market share, then -- more than 95% market share, then what really is stopping us to start charging because the competing exchange hasn't been able to draw volume, despite spending similar amount on INX.
No, it's a good question. Basically, this is a very time-sensitive market, and people compete on a fourth decimal for getting value out of it. And so anytime if you are giving incentive and other party is not, the market actually transfer there. Although, we may be able to efficiently more efficiently do it vis-a-vis our competition, that doesn't mean -- basically, we can make it start charging and those people continue to pay, the market will shift to them. That is for sure.Second thing is, we already have a Singapore connect, which is also going to come. And it remains to be seen how it happens and what happens. And then probably after sort of looking at it for a long-ish period, we'll have to take our decision. Currently, you wouldn't want to give up the markets, where you have a largest share. And so I hand over to somebody for a smaller amount.
Sure. Sure. Sir, limited question to that would be, what advantage INX has compared to, say, single Singapore exchange where we see trade happened. Any insight into that, sir?
Come again, what INX has in terms of?
INX advantage. What advantage does INX has compared to a Singapore exchange, where listing trades are currently happening?
Better technology, better services, lower cost on -- currently 0 cost and a product called BSE 50, which is an index, which is a pretty interesting index. You might like to take a look at it. So there are many things which we are playing for, and we hope that our products will continue to kind of overcome all the other things that maybe thrown at the members and the investors going forward. We also, of course, are trying to start a new framework for connecting to other markets through INX subsidiary. So let's see how far we go that also.
Okay. And sir, quickly, Singapore, I think, if I'm not wrong -- please correct me if I'm wrong, they charge around 4 basis points per trade. And I think one of your earlier calls, you have alluded to around 2 basis points whenever you start charging. So is that a number that we are looking at whenever we start charging on INX. Any thoughts on that?
Yes. Basically, see these are all discussions and reality strikes, whether it is 2 basis points or 0.2 or 0.002 or minus 2, remains to be seen. So it would be, for me, very difficult to tell you so certainly about all these things.
The next question is from the line of Suraj Nawandhar from Sampada Investments.
Congratulations on very good set of numbers. Sir, we had a very strong cash flow generation this time. So what is it regarding? If I look at the balance sheet of the financial liabilities, India has gone down -- sorry gone up. So what is it regarding actually?
What we will do with the cash flow? Or why did the cash flow improve?
Why did the cash flow improve in the first question. And the second is, what are you trying to do with the cash?
See, basically, whenever we get any operating profit, we distribute almost the entire thing to the shareholders because as you rightly pointed out, we don't need the cash, right? So that is -- and while the cash flow has improved, it's because the markets are doing well. And because of that, people are trading more, people are raising more funds and things like that.And of course, we have a, what I call a consistent cash flow, which, some of the listed exchanges don't have is the listing fees, right? And so we continue to get a substantial amount of listing fees, which helps us basically defray our cost or compensate our cost of running the operations. So that's where most analysts are not able to even figure out how listed exchanges will need to compare. But effectively, we have a large portion of listing fees, which is consistent every year. It's annuity business.The second part is the IPO part, which have done well. So we have also done them. Then third thing is the transaction charges, which is also done well because the transaction volumes have improved. And our own market share has improved to some extent, and that also helps. And then the mutual funds part is also doing well, which was not contributing that much earlier, slowly as they become large. And so these are 4,5 things, if you look at those numbers, you will come to know. And against that, our costs have not increased commensurately, that's why our cash flow is in our -- net profit is in our control.
So on the balance sheet if I look at, although financial liabilities have gone up from INR 1,957 crores to INR 1,918 crores. I was wondering, what is that change refers to...
Yes, this is Nayan here. See, this negative used in this clearing an settlement liabilities, and they are represented -- and they are offset by the cash on books. So whatever short term that we report, fixed deposit and cash benefit, there are the levels which offset this liability. And this is a very temporary, over night, clearing settlement liabilities, which is a pending settlement of particular settlement.
Okay. Okay. Sir, my next question was regarding around a couple of ones, like we have put out pillar regarding best price execution mechanism. But we had made a mandatory actions which to execute the trades at best price. Sir, any update on that?
Yes. See, basically, there are 2 things. One is base size execution, other is the interoperability. On both these issues, we had decided to charge some penalty because both are steady regulations, which people were not observing and nothing much was happening. And so to some extent, some members have already complied, some members have not complied fully, some members have complied fully. But it is a work in progress, I would say. And as and when it becomes sort of more truly implemented then you will see that BSE also -- the percentage actually starts going up, like what has happened in last quarter, right?
Sir, the penalty you had mentioned in that circular, are you still charging those penalties because the local members are not complying or that circular was withdrawn?
No, no, it is the penalty that is currently in the work. It is not withdrawn.
Okay. So you are charging to the workers, okay. And...
And whatever appropriate penalty that is written in the circular and subsequent updates about those circular, those will be charged. That is getting charged as of now. And that goes to IPF. BSE doesn't run out of the penalty.So many times, the analyst side are used to bring the rights back because BSE's cash flow has gone up, seemingly out of nothing, then it might be due to patent, which is not. So I just to clarify.
Where I was coming from was that, is that -- this implemented you will get chance of getting much, much higher volumes up on trade. I was not much interested in the penalty, but if it can get implemented, then we will get a very high volumes. So my -- BSE -- Okay. So the deadline is March 31, if I'm not wrong, for that circular?
I mean penalties will start charging. It's not that it stops anyone from trading, right?
Yes. Okay. And sir, my next question is on the BSE StAR platform. Are we planning to monetize it by divesting and that kind of thing or listing it separately as it is doing great for us.
BSE had the -- board had approved. We have taken to the Board, Board had approved. In case somebody is willing to give a good price, why not? But we have not found anyone yet. So as and when somebody comes, we will certainly take a look at it.
The next question is from the line of Vikas Kasturi from Focus Capital.
Congratulations on a great quarter and also for tirelessly working for BSE. Sir, I had questions regarding StAR MF. The numbers that you have reported, the volume of transactions, is it only for the equity mutual funds? Or is it for all the mutual funds?
All put together. All put together. The revenue is for all the stuff, but equity is where BSE has some stronghold.
Okay. Sir, if I could ask you this question, sir, what would be our -- sir, how can I -- so if I wanted to understand this better, off -- the universe of all mutual fund transactions and of which some of them go via paper form and some of them via digital form. And within digital, we would have certain market share. Sir, what would be -- would you be able to provide me some numbers like that, sir?
The mutual industry does not disclose that. But if you look at the pure numbers on equities, cash flows, open-ended funds, then we seem to be doing a pretty large portion because the net numbers of BSE in month of November were like pretty much above the net numbers of the entire industry put together, right, by almost 20%, 30%. So we like collected INR 7,000-plus crores in the month on net basis, and the industry collected only INR 5,000 crores, right? So we were like 40% higher than entire industry, which means that industry had a outflow, which means they had transactions which were outside BSE's StAR MF, right?
Right. Sir, actually, I had a question regarding that also. From your previous commentary on this -- when I say previous, I mean previous quarters. So sir, how is it that we are bringing in more into the industry, whereas in certain quarters, there is a net negative outflow from the industry, but we seem to be consistently bringing in more funds into the industry. How is that, sir?
Basically, I mean you can only hypothesize, you cannot be sure about why it happened. Because BSE has around 75,000 distributors, which are connected to BSE directly. And they are put together with the large distributors and e-commerce platforms and all those e-brokers, we have a very large network across India. And we are reaching out to the customers, and we are winning customers to mutual fund industries, which were not there before. right?And so naturally, the new customers or new investors are bringing in funds. The old channels are probably, what I call tired channels. Some of them are taking their money back and things like that, right? They may have other usages for that money, but our channels seem to be bringing in continuously larger and larger amounts because they are reaching out to newer and newer sort of investors in India. And I think this trend will continue for probably the next 5, 10 years. We have -- despite all this, we have probably 6 crore investor accounts out of, say, industry at 10 crore portfolio is currently active, INR 6 crores are with us, right? That's what I've been told. And so we are becoming, in a way, net -- people who are bringing new investors into the industry.
Got it, sir. Sir, one last question, sir. It's on the Ebix, the insurance distribution business. Sir, could you just help me understand what is it that -- could you please help me understand that business model? And what is it that we bring to the table? And what is it that Ebix brings to the table?
Ebix is basically, in U.S., it's a software company and also a market operator for insurance. They provide software to insurance companies for selling their insurance, for settlements and all those of things. So in India, we have this joint venture to distribute insurance products on retail basis using the physical plus digital framework. That is, we have connectivity to several life, general, health, all sorts of companies and customer or whether an intermediary, which is called POS, as per the license, point of sale person, is able to see all the -- he can punch in, or she can punch in the data of the potential customer or, for example, a car, you want to have a insurance for that car, you can -- your insurance agent, who is called POS, punches in data of your car, all the details of that car comes. And then based on the car's conditions with available public data, we send it to 5, 10 companies, which do this car insurance and get you all those quotes of those 5, 10 companies with all the conditionalities and then your agent is supposed to show you that. And then as and when he or she picks order with credit card or bank payment, it happens in real time.And so you get your insurance within few seconds after analyzing the adviser that is the point of sale person, advising you also on what is good. Although something may be cheaper, it may not be correct for your condition. And so you are able to buy life insurance, health insurance, general insurance, all sort of insurance on that, on real time. With your insurance policy also coming to you at that moment only, you don't have to wait. You don't have to go to other websites of an insurance company to actually do it, which is what the menu of this portal seem to be doing, but we have a completely integrated platform.And we also provide our point of sale agents ability to help you in claim processing because it's easy to buy insurance, but try doing claim processing as a normal sort of a person, it becomes very difficult unless you have some handholding. And so we provide this end-to-end framework without burning money, right? There is a framework of splurging money, which we don't believe in, although many of the market participants, even the investors, seem to believe in those.We think money should not be splurged. And so our -- we try to keep our cost controlled. We try to give the best facilities, which are end-to-end, and that's where the BSE comes with its conservative framework. And Ebix basically comes with its own softwares, which we use along with some of the BSE software to provide these services.
The next question is from the line of Manish Tare, an Individual Investor.
Congratulations for a great set of numbers. Sir, my question was pertaining to StAR MF. As you said that we are looking for a stake in and no reasonable valuation, no party has arrived with a reasonable valuation. Sir, are we looking for IPO of -- raising value in terms of IPO?
It's a good idea. Currently, no.
The next question is from the line of Shalabh Agarwal from Snowball Capital.
Sir, just circling back to my earlier question. As you said, this -- the trades on INX are very sensitive to the forth decimal place, and therefore, even having more than 95% share, it's tough to really charge, still our competitors are charging. So the question is, if the competitor has only low single-digit market share, then what is the incentive for the competitor to charge? And if they do charge, then how do we really monetize all that we have invested so far in INX?
Basically, we have started charging for the bond listing, right? So -- and we have listed $54 billion of bonds in INX over last, 2.5 or 2 years, since we started listing. So we will charge at appropriate times. For example, in StAR MF, we started around 2009 end, okay? And we started charging around 2017, '18. And there was tremendous fight till last year. In fact, during COVID only, we finally agreed with -- MP had a very low cost to sort of provide that services to everyone and after that disputes got over.So this is an industry which is very price competitive, price sensitive, and when you get a chance, you will start doing it, but you end up investing over a longer period because you don't invest in plants and machinery, but you basically invest in creating markets. And as and when you think you have a good market power, you start charging what is reasonable. If you become unreasonable, many times people run away. Sometimes they don't run away.And so sometimes it may give you a wrong impression as normal observer, that people, once they have market monopoly, they can charge infinitely. My understanding is that modern world doesn't allow that luxury to anyone. And so whatever we do has to be basically what we call market clearing price rather than people start charging. As of now, it's 0 or negative, and that's how we need to continue to provide our services at that price.
Okay. So will it be correct to say that charging in INX on the transactions is still some years away, probably a couple of years away.
Correct. Correct. But in the meantime, because of those transactions, the listings are coming and possibility is that equity's listing may start happening. And so, there again, people will start coming. And so you make money, like as I told you, even in BSE's case, a very large chunk of our revenues are related to listings.And that helps us defray our costs, right, to a large extent. And that helps us have a very consistent profitability, which is not true with other situations, which are in listed space in Indian markets, right? So you need to keep this all in mind.
Right. Sir, just on the annual fee as you were highlighting, we also noticed that last year, there was a decrease from INR 157 crores to INR 145 crore. And even in this half year, it has been very flattish, which has not been the case earlier years when we look at '18, '19. There was below 15%, 16% kind of a growth. So last 1.5 years, things have been very flattish or down. Any reason?
It's basically due to the way we have started accounting for things. That's -- and we also started delisting a lot of companies. You might have observed many companies have been delisted. So naturally, what used to happen earlier is that we used to charge -- pay GST and then provide for it later on. But then you won't get the GST back, right?So we have started basically not charging after a point in time. And instead, basically, as and when the company wants to be suspended, that time we will charge because the service is not provided during that period. And if the company gets delisted then we won't get anyway. So that's how we have done some changes in our structure based on the auditors' sort of comments on not to charge, pay taxes and then provide for only the revenues, which were not tax, right? So that's where I think there has been a difference.
But there has been no incentives or -- any increased incentives of companies getting listed on the competing exchange, securities getting listed there, but not here.
No, no. I mean even if the list on both actually is fine because they end up paying to both.
No, I'm saying, listing there, but not here.
I have not seen any such company yet. I mean there might be an SME. Because today also we get the lion's chunk of the IPOs. IPO, when it comes from BSE. And the listing fees as a percentage of company's total revenue is like 10 raise to minus 5 or something.
Yes, it's nothing actually.
So insignificant that it doesn't matter to them.
Sure. Sure. Sure. Sir, a question on StAR platform. For AMC, it's an additional cost, right? Because AMC is paying certain fees to work on a per transaction basis, but they are also continuing to place paid distributors, who are anyway getting the money earlier, right? So is it like additional charge? Or is it like AMCs are taking some money from these distributor pool and passing it to the platform?
You are in a, what I call, conceptual world, where you think the manual processes which the AMCs were doing with their distributors was coming at 0 cost.
Sir, that is what I wanted to understand what is the cost made that they making -- they are charging on to us?
My estimate is, each application, physical, the AMCs are paying and we're paying more than INR 300 per transaction.
Okay, which, they are kind of saving by going through the platform.
Correct.
So then sir, our charges are much lower. If that is the number that is getting substituted or getting paid, then what is the reason that on a per transaction basis, why we are pricing it so low for the industry, if there are competing platforms?
Yes, it is very similar to a rich women paying large sums for the designer clothes, but still acting for the vegetable vendor.
[Operator Instructions] The next question is from the line of Suraj Nawandhar from Sampada Investments.
Sir, you said that your energy exchange will start from the Q4 of this year. So sir, any gross calculation that you have done? Like how much percentage of market share you are targeting because currently INX dominates that market.
I mean, for me, the projections are usually away from reality, right? I also told you, our investment philosophy earlier on several occasions, which is basically, we try to invest very little, and we try to buy optionalities, right? It's like paying premium for a large outcome, right? So we don't try to work on this sort of model, and it doesn't work in markets where things can change really scale up. If you are successful, then no amount of projections, which is linear, will help. It is the nonlinearity that comes in, right? And those kind of projections for me are good for what I call traditional manufacturing type of companies, right? And so if this is successful, it would to be immensely successful. If it is not, then our money invested is very little, right? That is how we do these activities, either it's in GIFT City or it is in INX or it is in agricultural markets, anywhere. Because we own our technology. For most people, the cost of technology is humongous. You might like to checkout finally, I said the, if and when. If and when, the new technology is implemented in a competing listed exchange, our total cost was, I think, probably INR 3 crore, INR 4 crore of implementation. And the end-to-end software came to us in probably INR 12 crores, INR 13 crores, if I recall correctly, a few years back. Same software, it's not even different software. You will see like 10x, 20x, 100x kind of numbers. And so we own our technology, we changed it ourselves. And so we are trying to go into newer markets using most of our technology, of course. Where required, we also buy softwares from others, some components or entire thing.In fact, recently, we gave our softwares to start a new exchange in Mauritius, which is a pan-African exchange called AFRINEX. In fact, it was innovated 2 weeks back by the Prime Minister. And so we do own our technology, and we think we are able to provide at least 10x kind of numbers competitive advantage to the new entity, which we set up in any market. And even in operations, we are like very, very smart as a team.And that's where I think some of this business is, if they grow up like what happened to StAR MF, then we are able to operate at a cut through a very low-cost number so that even if we get very low revenue, we are still profitable in those business lines. And then when you survive profitability -- been profitably for long, you are able to reap rewards in the long run, right? So those are the philosophies within which all these new investments happen, including the power action you asked for.
Right. Right. And sir, coming back to the question of best price execution mechanism, was anything also charging to the...
No, NFC is not charging.
To change to that mechanism and NFC is not.
No, they are not charging.
The next question is from the line of Shiva Kulkarni, an Individual Investor.
These excellent numbers, congratulations to you all. So I have 2 questions. So I would like to know where are we with the gold exchange in domestic level as well as in the international coalition exchange level? I heard some news that India INX holds some of the share sticks into that, but I don't know exactly how the company formed with that particular holding company.And second question is related to StAR MF. I hear that we are not increasing the prices or charges for order execution, but we can charge differently with the listing fee of the AMC. We can charge like, we can say that INR 25 lakh or some kind of amount for each and every AMC to list the mutual fund. And we can say, for first 10,000 record -- 10,000 orders, we can charge INR 3.5. If mixed order, this will be the charge.So in any way we can increase the listing on that platform as well as other. So I'm just trying to focus on new things so that it will be a little bit more really out of StAR MF. So it will be best for AMC as well as for BSE in order to generate more revenue. So these are the 2 questions. I hope that might be helpful for BSE -- for StAR MF, for coalition and more of interest of what is going on, on that side also?
I think, on StAR MF, you have some innovative ideas. We take note of that. I don't know how far we can charge things, but these are interesting ideas. We'll take note of that. And gold exchange at Gandhinagar, a new joint venture between India International Exchange, India Clearing Corporation, which are 2 of the BSE's subsidiaries, along with MFE, MCX, CDSL and NSDL have set up a new gold bullion spot exchange. And the technology of that exchange is also even operations are going to be provided by BSE technologies, but it's a joint venture.And so as and when -- it's currently doing the mock testing, and as and when it is innovated, it will start trading. Pretty much all the technical features are in place and mock trading is going on for more than 3, 4 weeks now. And as and when it is integrated based on the convenience of everyone, that is the time we will be doing. And the spot actually in domestic area, the current trading regulation, which announced recently aim to suggest that the exchange is may be able to do it within their existing exchanges itself.And we -- as I told you in the GIFT City also, we are providing the technology. So we are pretty much ready with the technology. So as and when the actual detailed approvals and regulations are in place. we will -- once we get approval, we can start. So I don't know the timeframe for that, but whatever the time, we should be amongst the first few exchanges to launch this market, as we are totally ready for those kind of -- and you might recall, 6, 7 years back, we were the first to move this idea of spot gold exchange in India. And so we have been working since then for that.
The next question is from the line of Chetan Shah from Abakkus Asset Management.
Just one quick question. Sir, in our expenses breakup, this time in other admin expenses and overhead expenses have kind of gone up dramatically, almost 50% on a quarter-on-quarter basis. Is there any onetime thing or anything which was a bit of an abnormal, if you can share, please?
Yes, Chetan, with respect to 2 items, which are carrying on this increase. One is with respect to increasing certain provisions for -- under the expected credit loss mechanism as required under the accounting standards. What had happened is that in the last year, due to COVID, there was a delay -- there was a lag in recovery. And because of the lack in recoveries, we had several heavy decisions which we had to make for the year ended March 31, '21, that's in the first quarter, June. We started receiving the money and a lot of reports are made, and that resulted in reversal of the idea provision. Now what has happened is that now the central provisions efforts have come into play, and that's why there is a difference of around INR 10 crores between negative and positive, which is creating a big difference here, which you are seeing here.
So basically, out of INR 60 crore, INR 10 crore is more like a provision expenses. Otherwise, the normal expense is around INR 60 crores. Is that a right reading, sir?
I don't know. I'd say that -- a part of this will continue. I mean the provisions to overseas is made on the basis of expected credit, there is always on to be -- though we make our best efforts to recover the money from listed companies, say, there is more from listed companies. But there will always be some lag with respect to certain accounts. So -- while obviously, we'll plan as to decrease the provisions over a period of time by consistent follow-up, but this is the one-off -- this is also one of decrease in the last quarter, which resulted into December, the number which you are seeing here.And the second thing which is important is that as those businesses increase, the clearing and settlement charges, which we have to pay as BSE through NFC clearing and other clearing populations because our members may have a clearing account with NFC clearing population. So on all those transactions, we have to make clearing charges to anything clearing population.So there is a significant increase in that also. And these are the 2 main reasons. And again, since our volume of activities have started working, and we have started working from office. So there will be standard increases in our day-to-day expenses. These are the 2 main reasons.
Sir, one last question on the technology side. So we have a consistent about INR 100-odd crores of technology spending on an annual basis. But now the way we are expanding our other businesses, which is outside of a normal BSE business, do we see any major rehauling or any major expenses on a technology side because a lot of things are getting changed in terms of a global technology platform. Plus, we are going to enter into T+1 from February onwards in terms of the settlement cycle. Do we need to spend any extra money for that? Or this is going to be like a normalized way at least for the next couple of years?
It will be normal only. As I told you, we own our technology and we kind of modify it ourselves. So broadly speaking, you will not see any bump up on the technology expenses as of now. I don't see any anything.
The next question is from the line of Pratik, an Individual investor.
Yes. Am I audible?
Yes, please.
Yes. So firstly, I would congratulate Ashish sir and entire BSE team for putting up a good show and margin as well. I have one question, sir. As we have seen a lot of IPOs in the last quarter as well as in the current quarter and in the upcoming quarters, just want to understand how BSE will get the revenues from this IPO listing?
So we charge basically software usage fees. So that basically gives more, MSE, BSE both, some money.
Okay. And is there any number you can share in this quarter from this revenue? I mean, how much revenue you have got from IPO listing?
I don't know.
No. So you are talking about the book building fees, Pratik?
Yes, yes, yes. On the -- our revenue, how much we have got from this IPO listing, as we have seen some of 18 to 19 companies have been listed in this quarter. So is there any breakup we can share?
For the current quarter, obviously, we won't have the total figures for the listed companies in this quarter. We can probably provide you. But otherwise, if you want the total fees which we're earning in the quarter and in the last few years, that is available in our presentation.
The next question is from the line of Shalabh Agarwal from Snowball Capital.
So on the StAR platform, you had indicated earlier that we are also providing some value-added services to the distributor. Any color on how that has picked up, any qualitative or quantitative things that you can share?
Out of 75,000, around 1,000-plus have started using it. And so it's early days of adoption, but this is basically saving them a lot of hassles and cost on software and getting data because we populate the data of -- the data vendors ourselves by paying money to them and also give them all the software features, which they have in -- commercially available software. So many of them are slowly adapting transferring all their portfolios onto our platform, and it's a software-as-a-service, right? Although we are not currently charging, but it's basically, once the adoption happens, we'll see what to do.
Sure. Sure. And sir, just quickly 2 bookkeeping questions. One is, if you can just quickly provide the LES breakup. I think it has not been there at the notes for this quarter and last quarter. And secondly, in these full year numbers, in consolidated cash flow, there was a line item with contribution from the clearing corporation. That was around INR 56 crores last year, which was not there in FY '20. So what is the nature of that number?
Shalabh, just one second. Can you come back with the -- which figure are you referring in the cash flow?
Contribution from clearing corporation. This is in consolidated cash flow statement around INR 56 crores in FY '21, which was not there in FY '20.
Contribution received from other clearing corporation is INR 3.36 crores in the cash flow statement, right?
This is for half year. This is for half year. I'm saying -- yes, so this is -- it is there in the current cash flow statement also, but it was around INR 56.3 crores for the full year last year compared to 0 in FY '20.
If you can refer to which figures in the current disclosures, I can help you out with that.
This is -- currently, it's around INR 3.3 crores, if I'm reading it correctly, INR 3.36 crores contribution in terms of other clearing cooperation consolidated cash flow statement.
So what happens in this case, Shalabh, is that in case there is a settlement, which is happening at both clearing corporations, which is Indian Clearing Corporation as well as NFC Clearing Corporation, from time to time, our members' money that can be a case where some money, additional deposits and margins have to be placed by our exchange to the another nice clearing corporation. So suppose my number -- so BSE members are trading -- having -- they are doing more clearing and doing more trading on BSE and that setting is happening in NFC clearing than probably their margins and deposits and those things will have to increase.And that will require BSE to contribute to co-segment guarantee of the other clearing corporation. So if BSE already has excess money if current clearing corporation, Indian Clearing Corporation, then it can ask Indian Clearing Corporation to transfer some funds to NFC Clearing Corporation. So this is an internal clearing corporation transfer, which happens in the nature of margins and deposits -- for co-segment. It doesn't have a revenue integration as such.
Sure. Sure. Sure. Got it. And sir, quickly, if you can provide the LES takeup for this quarter and previous quarter?
Shalabh, If you see the 3 statements, which we have provided, there is separately mentioned under 5F for both the standalone as well as consolidated.
No, sir, I want how it is looking between INX and BSE derivatives, which used to be provided till last year.
So if you see the consolidated figure, the consolidated figure is INR 7.86 crores. This includes INX figure and BSE figure, and the BSE standalone is INR 4.46 crores. So the difference of INR 3.4 crores is INX.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Hello. Thank you. Thank you all the participants for joining today's Earnings Conference Call. Take care, be safe and wish you a Happy New Year ahead.
Thank you. On behalf of BSE Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your line.