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BSE Ltd
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Ladies and gentlemen, welcome to BSE's Q3 FY '18 Earnings Conference Call. My name is Vasu, and I will be the moderator for today's conference. [Operator Instructions] Please note that this conference is being recorded today.I now hand over the conference to Mr. Yatin Padia, the Chief Investor Relation Officer BSE Limited. Thank you and over to you, sir. Please go ahead.
Hello everybody and welcome to BSE's earnings call to discuss the Q3 FY '18 result. This is Yatin, the Chief Investor Relation Officer. Joining us today on this earnings call is the BSE's leadership team that is now Mr. AshishKumar Chauhan, Managing Director and Chief Executive Officer; Mr. Nayan Mehta, Chief Financial Officer; Mr. Neeraj Kulshrestha, Chief of Business Operations. Do note that the conference is being recorded and a transcript of the same will be available on our website during the duration of the quarter. The financial results and the investor presentations are also available on our website. We also have with us Mr. V. Balasubramaniam, MD and CEO of India International Exchange Limited.I would now request Mr. AshishKumar Chauhan to give a brief overview of the company's performance, followed by Q&A session. BSE does not provide any specific revenue on earning or earning guidelines. Anything said on this call will reflect the BSE's outlook for the future or will be -- which could be construed as a forward-looking statement must be reviewed in conjunction with the risk of the company faces. With that I would like to return the call over to Mr. AshishKumar Chauhan.
Thank you Yatin. Good morning, good afternoon and good evening to all of you wherever you are. At the outset, I'm very happy to share that BSE has posted 35% year-on-year growth of roughly from -- to INR 58.67 crore from continuing operations on consolidated basis for the quarter ended December 31, 2017, as against INR 43.36 crores for the corresponding quarter in previous year. Further, the profit on consolidated basis attributable to shareholders for the quarter ended 31 December 2017 rose by 11% to INR 58.67 crores as against INR 52.77 crore for the corresponding quarter in previous year. The Board of Directors have recommended a payment of interim dividend of INR 5 per equity share of face value of INR 2 each which is similar to last year.Over past few years, BSE has been receiving suggestions and requests from investors to return a part of the excess cash lying in its books in form of dividend or buyback of shares. The board of BSE has in meeting held on January 15 approved buyback of shares through open market route and with open market route, the company buys back its shares from open market on secondary market over a period of 6 months at market price not exceeding the predetermined maximum buyback price. The board's decision reflects its confidence in BSE's future and its commitment to delivering values to all shareholders and strong balance sheet.As allowed in the company's act, the board approved the buyback of shares to the extent of 10% of equity and free reserves amounting to INR 166 crore. The maximum buyback price of INR 1,100 per equity share was approved by the board after considering various factors including trends in the market price of equity shares of the BSE shares listed on NSE during the 1 month and 6 month's [indiscernible] of the board meeting including average of the weekly high and low of the closing share price, the equity shares of the company on the stock exchange and the net worth of the company and the potential impact of the buyback of the earnings per share and other similar ratios on the company.Accordingly, BSE proposed to buy back 15 lakh -- that is 1.5 million shares or more amounting to about 2.8% of the paid up capital of the company at market price subject to a maximum buyback price of INR 1,100 per equity share subject to maximum buyback amount of INR 166 crore. The buyback has commenced on February 1, 2018.India International Exchange listed first bond on its global securities market with Honorable Minister of Railways and Coal Shri Piyush Goyal ringing the gong. The bonds issued by IRFC, that is Indian Railway Finance Corporation, are one of the highest credit rated bonds issued by a Indian corporate and is IRFC's first foray into green bond market followed NTPC Limited, $6 billion MTN program on its global securities market.We are in talks with other public sector undertakings and private sector undertakings subject to regulatory discussions and clearance. Yes Bank became the first to establish MTN program on global security market of India International Exchange at IFSC in India. BSE StAR MF, India's largest mutual fund distribution infrastructure introduced e-mandate facility on January 20.This is completely paperless framework that will reduce the time taken for mandate approval to 3 days from 10 days to 35 days taken for past paper-based mandate approval in SITs. Marketplace Tech Infra Services, a 100% subsidiary of BSE signed an MOU with Thomson Reuters to offer value-added service to its members. Through this partnership BSE members will be able to avail Thomson Reuters-powered solutions, floor trade [ I3 ALCOs ] and bracket order in mobile device as far as digital mediums.Earlier in 2017, BSE deployed BEST, BSE's electronic smart trader, a robust state of the art hosted trading solution built on Thomson Reuters' Omnesys NEST for BSE members and customers and trading segment of NSE for equity derivatives, currency and other segments. Swift India announced that Marketplace Technologies, a subsidiary of BSE will act as a service bureau for securities market in India providing the standardized cost effective robust and security infrastructure to all market participants.SEBI announced that the country would have unified action regime from October 2018. In line with preparing ourselves to launch commodity derivatives transaction, BSE started to hold mock trading session for such products recently. Trading in commodity derivatives shall be conducted on the BOLT Plus trading platform, our new generation trading system.Now I will cover the business update for the December quarter. BSE promoted India International Exchange at GIFT to the Gandhinagar Gujarat had achieved the highest turnover of $405 million and highest number of contracts 23,108 on January 16, 2018. The India International Exchange has 26 active members as on date and over 100 various stages of memberships processes.As on date, 122 products have been introduced on the exchange for trading in commodity derivatives, equity derivatives and currency derivatives. The average number of contracts traded daily for the quarter ended December 31, 2017, was 6,319. India INX continues to be market leader in this segment and the market share for the month of December stood at 71%.Our mutual fund segment which is an electronic online order aggregation platform for investment and redemption of units of mutual funds through broking members and authorized representatives including MFI and MFDs, has been showing [indiscernible] growth since past few years and continues to be another high growth area for BSE. This segment has seen growth of 163% on a year-on-year basis this year.The average monthly number of orders processed during the quarter ending December 31, 2017, were INR 14.7 lakhs as compared to INR 5.6 lakh during the quarter ending December 31, 2016. BSE continues to be market leader in this segment and the market share for the quarter ending December 31, 2017, stood at 77%.On 10 January BSE StAR MF received a record 3.1 lakh transaction on single day worth INR 685 crores. I'm glad to inform you that BSE started receiving fees from some of the mutual funds for its services recently. BSE SME platform has 218 listed companies on its platform on January 15, 2018. 18 companies were listed on this platform during the quarter ended December 31, 2017, as compared to 9 in the corresponding quarter in the previous year.BSE's market share in SME segment stood at 66% as at December 31, 2017. During the quarter ended December 31, 2017, BSE's platform for electronic book mechanism, BSE bond for issuance of the securities on private placement basis has completed 105 issues of bond raising INR 43,680 crores using BSE that platform.Total number of issues completed in this platform since July 1, 2016, is 766. The total amount through this platform raised has been more than INR 353,000 crore. With respect to listing of securities, a number of companies listed with the equity capital on our SMEs as on December 31 available for trade is 3,764. BSE has the highest number companies listed on any exchange around the globe.In the equity segment, the average daily turnover grew by 57% from INR 3,042 crores in the quarter ending December 31, 2016, to INR 4,781 crore in the quarter ending December 31, 2017. Further, the average number of trades grew by 3% from INR 15.5 lakhs in the quarter ending December to INR 15.01 lakhs in the quarter ending December 31, 2017.The average daily turnover in our currency derivatives segment grew by 38% from INR 12,588 crore to INR 17,999 crore in quarter ending December 31, 2017. BSE's market share in currency derivatives segment for the quarter was 45%, and in the month of January 2018 it was more than 50%.Coming to the quarterly financials, the consolidated total revenue for the Q3 grew by 26% over Q3 of FY '17 to INR 173 crore. And our consolidated net profit from continuing operations grew by 35% to INR 59 crore. Our operational income rose by 45% to INR 126 crore in Q3 FY '18 from INR 86 crore in Q3 FY '17.Our EBITDA increased to INR 81 crore in Q3 FY '18 from INR 55 crore in Q3 FY '17. EBITDA margin has grown from 40% to 47% in this period. Further, our net margin from continuing operation has grown from 32% to 34% in Q3 FY '18.Growth in revenue and profits has been strongly aided by growth in operational revenues. The revenues from operations have consistently increased over last few years. Our income from security service has increased by 37% to INR 61 crores in Q3 FY '18. This increase was mainly contributed by growth of 50% in transaction charges income to INR 44 crore in Q3 FY '18.Our income from services to corporates has increased by 63% to INR 58 crores in Q3 FY '18. Total cash balance net of liabilities excluding investment in subsidiaries and committed regulatory capital requirement is INR 625 crore on standalone basis as on December 31, 2017.As on December 31, 2017, the total balance lying in settlement guarantee fund maintained by our clearing operation is INR 350 crore. Of the same, additional contribution made by BSE in accordance with earlier SEBI regulation is INR 56 crore, which would be offset against minimum required corpus requirements from time to time.With this introduction, let me welcome you once again and invite all of you for question and answers. Thank you very much.
[Operator Instructions] First question comes from [ Ayush Kedar ] from [ Prosper Investment ].
Couple of questions, first on investment income. The investment income of BSE Q-on-Q was -- on Y-o-Y also has decreased, so it is due to -- mainly what has caused this? Is it due to end-to-end provision, yield decrease or investment fund -- investable fund decrease? Can you throw some light on that?
Yes, Nayan Mehta here. As far as Q-on-Q and Y-o-Y decrease in investment income is concerned, that is primarily due to M to M. We had made investments in fixed maturity plans where the rate of interest is fixed for over a period of time. However, because of the yield changes during the quarter, this M to M -- we have to market -- mark to market this -- the investments, and that is one major reason. There was one more reason that in the last year we had sold some bonds and in our -- one of our group companies which is no longer recurring in this quarter. So that is the cause for this difference. And that's the reason.
Sir, is it mainly due to mark to market provision?
Yes, mainly due to mark to market provision.
And next, sir, on technology cost. We had seen a rise in the technology cost. So is it due to related to commodity which we are setting up or INX related or other subsidiaries?
IT costs as of -- function of -- means lot of developments which happens and lot of capitalization which has happened over last few years, and so we need to maintain those assets and we need to enter more expectation on the same. So IT costs are basically on account of increased cost on our regular IT requirements.
So is it the -- it will be a run-rate in upcoming quarters or what will be the run-rate for that?
It will remain constant at this level for the next few quarters I believe.
And lastly, sir, on INX losses, how much is INX has incurred the losses in this quarter? And secondly, contribution toward liquidity enhancement, how can it be scale of up to for a quarter?
No, first of all INX has basically incurred a [indiscernible] of around INR 12 crores in the entire period of 9 years -- 9 months and that is in line with our expectation. And what is the second -- what is the other question you asked?
Sir, we had contributed to a liquidity enhancement scheme in November -- 1st November and which has been INR 75 crores -- INR 75 lakhs for the quarter, so --
Yes.
-- up to what numbers it can scale up to for a quarter?
So in the last quarter we did it for 2 months. We spent about INR 77 lakhs in the last 2 months, but as far as this quarter is concerned, we also increased the program to also include options. So we expect about INR 2.5 crores to INR 3 crores spend on the LES side.
And our average tax rate, we understand that the investment income is tax-free, so the net of the operating income which we generate, ideally it should tax lower, so why is our tax rate higher on net operating income? See, the -- does it include the investment income? It is lower around 21% to 22%, but if we exclude investment income, it is higher, so can you throw some light on that, how will be the tax rate?
The investment income includes tax free as well as taxable investment products. So we cannot totally exclude the investment income out of it. And as our operation income increases, obviously our taxable -- tax amount as a rate, effective rate is bound to increase.
Sir, can you more clarify about this because if we consider the part portion in investment income, it's tax-free, the income generated from operating business, it should be -- that is taxable, so what will be the run-rate on taxable EBIT for the quarter?
So for taxable is that the taxable amount, that run-rate for the quarter will be anywhere around 20%.
And lastly sir, on StAR mutual fund update, is there an update on charging the mutual fund, when we will start charging them?
So I think few mutual funds have started paying from this week onwards.
Sorry sir, can you repeat that?
A few mutual funds, AMC have started paying this week onwards.
So the other should be followed in the upcoming quarters?
We hope. We hope.
So this income -- operating income also include the income from mutual funds which in Q4 the income which will be included is -- will also include the mutual fund income?
So in Q4 means in the --
Yes. That is in this quarter, last quarter.
[Indiscernible] this quarter. Yes.
And sir, lastly please post the investor presentation because we couldn't find the investor presentation on this quarter.
I will post it now. We'll just check it out. I think it should have been posted by now.
Next question comes from [ R. Narayan ], individual investor from Mumbai.
Sorry, I just missed on the INX part, how much is the losses currently INX is in and by when we are expecting INX to breakeven?
As I mentioned earlier, the loss of the INX is about INR 12 crores to INR 13 crores for the period for the 9 months. And as far as the breakeven is concerned, obviously we have to let the business actually pick up in the sense that there has to be a critical mass of business which comes to us. And I would request to Mr. Bala who is with us to just throw some light on that.
So in terms of the INX project, when we actually took the board approval last year from BSE, so we had put in a business plan wherein we are looking at a breakeven period of between 3 years to 5 years, so that is basically the estimate which was [indiscernible].
If I may add, like SGX is planning to introduce Indian stock futures very soon, so do we see any kind of impact on that for the INX trading also?
So incidentally yesterday in the budget there have been quite a few SOPs which have been given to the IFSC exchanges which will benefit INX. One of the big things was that in Singapore, foreign investors when they traded in derivatives, they didn't have to pay any kind of capital gain, neither long term or short term. Now the same benefits have been extended from April 1, 2018 in the IFSC exchanges, so India INX will now get a level playing parity with Singapore, so now we can actually look at competing with them on a level playing basis.
And with regards to the long-term capital gain tax which was introduced yesterday, I mean could we actually explain how that would affect us on the equity and cash segment for the non-exclusive segment and -– either ways non-exclusive and exclusive segment both in the cash and derivatives?
We don't see too much of an issue going forward on either side.
I mean I'm just trying to understand how that would translate in terms of the compliance and the operational costs for us?
It reduces our compliance and operational cost drastically because earlier problems of tax evasion where we post on BSE because it was not capped -- if you cap the share for more than a year then the capital gain tax was exempt. So lot of small company prices were moving up and each time anyone claimed a capital gain tax exemption, BSE was blamed by everyone including the CBDTs, Central Board of Direct Taxes officers who were assessing and they were sending us lot of queries, even now every day we would be answering at least 50 to 100 queries from income tax on variety of customers. And so that's probably once they start paying, this entire cost should come down because then the department doesn't have to take us as BSE as people who are encouraging such tax revision methods and we think it's going to be a great relief to us going forward.
Would it be possible to quantify the -- on a per transaction basis how much the cost that we actually saved? Just some sort of rough figures?
It is very similar to quantifying the love and affection.
And last question with regards to the universal commodity exchanges, you mentioned that you had started some mock trading. Where do you see that in down the line and are there scope for any inorganic growth given the kind of cash that we have in hand?
Basically we plan to start as soon as we are allowed which looks to be possible earliest by October 1. We have prepared ourselves for last 2.5 years and have been waiting and now that it is looking possible, we have started doing the mock trading and it will give people hands-on understanding of how it's going to happen in BSE, but we don't have any idea of what kind of numbers that will be attracted to BSE vis-a-vis other income, so inorganic growth, we do not currently see any possibilities, but if any opportunity arises, we'll have to evaluate based on the merit of the case and we may have to figure out, but currently we are not on the lookout.
Next question comes from [ Shish Jain ] from NVS Brokerage from Nariman Point.
This is Nalin Shah from NVS Brokerage. I just want to have some broad question that looking to the various -- I mean the stream of activities like equity, derivatives and what you call the currency as well as now SME exchange and whatnot, what are the growth drivers BSE management is looking to ensure that there is almost you can say that [indiscernible] growth of about 25%, 30% or more on this thing next 3, 4, 5 years?
You mentioned some of them and some of them you did not mention like GIFT City, Gandhinagar commodities, mutual funds and all.
Correct. Yes, why you did not mention...
We have not given anyone any indication that there is going to be CAGR of X% or Y% or Z%, so that might be -- and sort of a conclusion you might have derived out of your own imagination, but BSE has no such indication given to anyone.
No, no, I'm not saying that I have derived any distinctly. I have said that you have given any number. My point is as an investor like we talk to the other companies which are diversified company, we talk to them and we request them to comment on what are the growth drivers they are seeing in their field, so that that can improve the -- I mean the top line as well as the bottom line of this thing. From the inventor's angle I'm talking about.
Correct, correct. So I think you mentioned 3, 4 and I mentioned 3, 4 more.
Correct. I mean why I did not mention about the GIFT City because I think Bala has already commented that it will take at least 3 to 5 years to breakeven and that's why I didn't say anything about the breakeven -- I mean, the GIFT City.
Fair, fair, but the growth can be in volumes also in addition to the --
Absolutely, yes, yes. Yes, yes, correct. So is there any I think areas particularly you are targeting in terms of improving the profitability and the margins?
We are targeting all of these areas.
So there is no specific plan as such?
No, no.
No, okay.
Shall we take the next question sir?
Yes.
Next question comes from Rohit Balakrishnan, individual investor from Delhi.
Could you talk a bit about your strategy on the commodity derivative side that you plan to launch? What are the kind of spends that you're looking at once you start?
Current strategy is to run the new markets on our own technology platform, so our marginal cost of implementing technology for the commodities is going to be pretty close to nil going forward. At the same time to attract volumes, we might have to basically do marketing and sales and as and when we get into that business, that framework will evolve, but it is safe to say that we may end up spending INR 5 crore to INR 10 crore a year on the marketing and sales for commodities for next 3, 4 years going forward. And you can get good traction, then we may be able to recover our money and make more profits out of that.
And would you be also extending the liquidity enhancement scheme there, any thoughts on that and would you also be looking to charge or like the other platform -- other product that you have which you are not charging right now, would you look at margin-wise to begin with?
Yes, basically we will have to -- closer to the date, we'll have to figure out what you said that is possible, what you -- is how and on that basis, we'll have to manage our sort of activities because there are -- our -- these are highly, highly, highly regulated activities. So in certain area they allow us to do a liquidity enhancement scheme, certain areas they don't, and so we'll have to figure out what is possible, what is not and also what is commercially prudent and then we would move around according to that.
Next question comes from Nilanjan Karfa from Jefferies, Mumbai.
Could you comment on the -- what you have planned on the commodity side? How do you plan to attract clients for example because obviously there is one large player already existing and one large player which is going to enter the market as well along with you?
So we think we have a good technology. We think we have similar types of number as so-called large player and so effectively our cost of technology also very low compared to incumbents, and we think the current incumbents don't have great technology. And they are also struggling with the technology providers. Put together this is one area where we think we are able to score even in currencies where there are two incumbents, and today we are larger than both incumbents. And so we think it's possible to do and so [indiscernible] seems to be our main sort of differentiating factors and our distribution framework of stock brokers across the country is going to be another sort of differentiating factor and they're -- sort of ability to trade on easily on BSE because there use to be a spec margin might attract them to BSE compared to other incumbents currently trading this market.
A little more elaboration on what you mean by technological -- where we gain on technology versus another player, if we can get a little more clarity?
Currently our scale of operations is possibly one of the largest. We can handle 500,000 order per second which like 3 crore orders in a minute, like 180 crore orders in an hour and around 1 billion -- I mean around 1,000 crore orders in a day of 6 hours. If you take commodities then it would be even larger because of the larger trading hours. And so those kind of orders requires -- basically they require the speed at which we offer this kind of scale is around 6 microseconds. In one second there are 7 lakh microseconds, 1 million. So [indiscernible] 150,000 second is the fastest in the world. Nearest fast exchange is around 3 microseconds at Singapore. And so we are severely fast, severely scalable. Why it is required? Because in auctions market --
It is 60 I think.
Pardon?
It is 60 kind of different products, right, between the --
Not only that, each time an underlying price changes all those orders have to go in and go out. And so literally you have 60 orders getting, 60 or 120 orders getting canceled and new orders getting in. And if the software of a company or an exchange is not tuned for that, then it becomes very difficult to handle for them options business. To give you an example, suppose you go to -- I mean you must be familiar with Bombay, so if you go to say [indiscernible] which is house to Big Bazaar, every -- or at least they are getting 2 lakh customers or 2 lakh walk-ins in a weekend and 40,000 people buy, that means orders have been raised to by around 5 is to 1, 2 lakh by 40,000. Imagine suddenly on a weekend 2 crore people come and 40,000 people buy, that is the order contribution becomes from 5 to 500, when your income remains still the same. So you'll have to change the entire structure of the [indiscernible], right? And that is what happens in a technology also, our stock exchange when you're suffering auctions, that you are used to 5 is to 1 or 2 is to 1 or 3 is to 1 kind of order to take ratio in futures and stocks. And suddenly you're going to 1,000 is to 1, 2,000 is to 1 kind of numbers. For that the number of computers required, the speed required on different caliber, right? So that's broadly -- although not exactly, but broadly an explanation of why the technology is slightly different at that scheme.
So really using our existing BOLT Plus system, right?
Yes, it is.
So do we -- I mean will this be -- create a different platform, parallel platform or posted on the same -- the data, the data centers and the servers?
Absolutely on the same.
So that means the amount of cost that goes into this may not be high?
As I said earlier in the beginning on somebody's question, our marginal cost of setting up the commercial market will be close to 0.
And on the capital side?
That's what I'm saying, capital side. The operation side used the same trading gain capital right IT people. But for sales and marketing, whatever money we need to spend, we'll have to spend.
And on the margin front that we need to keep, the clearing fund?
Again, the clearing operation is reasonably capitalized, so there is no expected marginal increase from our side to be paid there at least in the beginning.
And we will do only the hard commodities to begin with, right?
Particularly non-agri.
And can I have the size of the balance sheet and the freehold cash that we have, cash and cash equivalents, excluding the un-incumbent part basically, the number of deposit?
See, as in un-incumbent part we have got around INR 1,500 crores in our book and which has [indiscernible] part has been replaced for the buyback.
At this point how much have we used that?
As mentioned in the speech, we are doing a buyback of INR 156 crores.
Next question comes from [ Deepak Malhotra ], [ TPG Consultancy ] from London.
Ashish, just one question. You mentioned on the future growth opportunities, you referred that obviously one way could be just to increase the volumes of the market. What is your view now since the long-term capital gains has come in at 10% which is just -- at a gap of just 5% vis-a-vis the short-term capital gain, do you think it will prompt people to go for more trading and some more volumes?
See, we're sure buy up. But otherwise it is anyone's guess, and what future brings is completely unpredictable.
So you don't really expect that because this will typically propel people not to really now differentiate between the 2 because 5% is neither here nor there?
Fair point, but I don't have personal views on that.
Back in 2004, it used to be 20% if I'm not mistaken, the long-term capital gain, but that is due to indexation?
Fair, so I have no clue on what is going to happen given this -- one of the large shock that has been -- that has been imposed going forward.
One other question on the commodities, what kind of market share you're targeting over the next 3 years to 5 years? I know we still have to just make a beginning, but I'm sure you're all gung-ho over it and you've already made all the preparation for the same, sir?
Usually we don't target anything, we just want high. So will we have the base technology based just on lowest cost and hope people come in, and to give you a perspective on currencies people were asking us and of course they're all laughing on the block in front of us, I think whatever these guys say or not because they have been pretty much a failure, but somehow over 3 years, we've become larger than NSE. And let's hope we look at -- we don't predict, we don't anticipate, we just do hard work.
Next question comes from Rahil Jasani, ICICI Securities from Mumbai.
I wanted to ask that you mentioned that you have started charging the AMCs for mutual fund investments, so I wanted to ask if fee has been now okay with you charging for the services that you provide up the technology and platform for mutual fund investments?
MC is not okay yet.
So then do you expect this to continue or I mean, grow to more AMCs or do you expect this to be only very selective about all the AMCs?
No, no, almost all of them are on BSE. Some 8 people have agreed to pay us despite MC not wanting them to pay. And so it's ultimately you're a member of a club, right, you're a member of club, I mean that club says don't pay to your milkman. And if you're unethical, you will tell your milkman that I don't want to pay you because although I drink your milk, but I don't want to pay you because my club has said I will not pay you. And the agreement is between your milkman and yourself, not between milkman and your club. So basically that's the process in which company says that, okay, they will become practical, and if you bring them milk, we'll pay you for the milk and that's how it's happening, right?
But I think that the way I was asking is you had even done this earlier during the time of IPO I think, so -- but then again you discounted and you've started [indiscernible] will protest to it or...
MC does protest every day, but this 8th guy is somehow have decided one of the reason seems to be that when we were doing IPOs probably we were 8% of the market, today we seem to be 20% of the market. And probably as per the indication we have probably 50% of the new customers coming in. So that gives us some sort of level playing field so to say against people who want other people to act unethically.
And if I may ask what are the charges? What is the quantum of the charge that you do?
Interest rate, what I call slab-based charges, so a fund sort of transfers less number of orders to us or orders through us, and we charge them say INR 25 or INR 30 for transaction, and if it's very large, it could come down to as low as INR 6 per transaction. So it's not an exorbitant number, it is basically saving them close to INR 200 to INR 300 per transaction, but somehow sometimes clubs [indiscernible] just to look fit and stay fit.
And secondly on commodity derivatives you said you started mock trading session. So just wanted to ask how has been the response to the mock trading sessions considering that there is already an income in the market, so how has been the response to your system and your technology?
Yes, these actually will [indiscernible] every day for the currencies and other -- increase in other areas. So they are comfortable with that, it's just how the trading in commodities will look like, I mean how to set up a contract and stuff like that which again were used in currencies also and equities also. So it's not very different or in fact it's not different at all. And so if they're going to have on the same screen even commodities coming up, so whoever gets the time in the evening ends up logging in and I can tell you that they may be trading infinite amounts, but those infinite amounts are actually of no consequence because they're fake. In mock trading, if you take those things seriously then it's what I call it's like Bitcoin being taken as a currency.
Just the last follow-up, so each commodity derivatives that you are introducing, you said you will introduce in non-agri segment. So is there any specific contract that you're looking at, any specific commodity that you are looking at to start with?
No, standard non-agricultural products like bullion, petroleum and crude and other stuff, base metals and few others.
Next question comes from Ashish Chopra from Motilal Oswal, Mumbai.
So my first question was really around the liquidity enhancement scheme. I wanted to know just if you could elaborate on the plan on this scheme in terms of the duration and the amount that you may end up with over years investing?
This is for India International actually, right?
Right.
So on the India International Exchange side -- this is Bala here -- so we have taken a approval from the board for about INR 4.42 crores for spending till April 15, but we are actually spending much lesser than that.
So the plan is not to continue beyond that or would you reconsider it at that point of time?
So depending upon the competition and the situation and what the regulator does, at that time we will react to it.
And secondly I just wanted to get your thoughts on the interoperability of clearing corporations. I think some time around 1 month back or so when SEBI again apparently as per some news floated a paper seeking opinions on it, just wanted to understand how would you weigh a probability on that eventually coming through? And do you see that there are some timelines around which this may see light of day?
This is basically an outcome of the K.V. Kamath Committee which was set up around 5 years back, which submitted their report around 1.5 years or 2 years back, and so these are all long-term processes and it's not easy to predict actual implementation and them getting converted into regulations in a short time.
I understand. But if you could just share your thoughts on what are the problems and what are the benefits of such interoperability which are currently -- which may be debated or mentioned by the experts who've been looking this up?
Basically interoperability is a standard practice now mandated by regulators in Europe, to some extent in US and to some extent the Hong Kong-China interconnect and all are working on the similar principles. There are models available working which are working well and so there are no apprehensions, but usually an income monopolist would run a fix, and the non-monopolist, the smaller ones will want to average. And so depending on who is able to sort of convince the regulators and how the regulators see the situation, things get sort of implemented or not.
Next question comes from Sai Kiran, RW Advisors, Mumbai.
Two things, one from the mutual fund side on incremental market share basis, it seems like the transaction volumes you guys are losing market share. Can you explain the reasons behind it? As a follow-up you mentioned that 8 mutual funds started or agreed to pay you out, so what percentage of your total transactions do the mutual funds constitute? And the second question is on the SME exchange as well, it seems like the [indiscernible] and also the market share is declining -- is in a declining trend. Can you explain what are the reasons behind it?
So SME basically in a sense the market share is declining, but absolute terms are increasing because NSE has also picked up well and that's a good sign for the overall scheme of things. That absolute number will continue to expand going forward. And in terms of mutual funds, it will attract smaller ones, they account for probably 5%-6% of the total volumes. And so it's not very best, but the beginning has been made.
And also can you -- this 5%-6% of your volumes, right?
Right.
And can you explain on the market share as well, I mean mutual fund transactions on an overall basis?
Currently, we do around 19 lakh transactions in a month, which is -- people tell me it's close to 20% in terms of the value accounts of the overall sort of inflow and outflow of mutual fund industry, but I could be off the mark by some points.
And just a clarification, you mentioned in earlier call session that -- what is the cash available on income though? Can you just repeat that please? I just missed that.
That is INR 1,600 crores, INR 1,600 crore.
INR 1,600 crore. Thank you. All the best, thank you very much.
Next question comes from Sri Karthik from Investec, Mumbai.
Sir, could you speak a little bit about our ForEx business because that's been growing well and we have a large market share, but majority of that still remains OTC and there are a lot more regulatory restrictions on the segment. If you could speak a little bit about the direction in which you see the ForEx derivative segment moving over the next 2-3 years?
See, we are directly into organized what I called stylized market, so what remains OTC may still remain, but some of that overflows into the organized market like ours and that is true internationally, so most transactions on -- in terms of values may happen on OTC basis, but many of them are then reflected on to the organized markets because of the ability or need for agent by the people who are giving those transactions to their customers, that is largely banks and others, so that's how this business works internationally.
And the second follow-up question is more on our listing fees and the exclusive segment. We've seen a sharp drop in our number of companies listing. Does that have any impact on our listing fees?
These companies which we've delisted were not paying listing fees for more than 7 years and they had been suspended, that is they were not even trading and they were not compliant. So effectively they were not spending, I mean, giving us any revenues nor any kind of trading at all.
But even then when you look at the listing fees that you charge per member for some cost credits still seems very, very minuscule in the overall scheme of things. Would you agree that you can continuously increase the listing fees over the next few years?
That is a good thought, but India is a poor country and the richest people also haggle on the smallest amounts, especially on the small amounts.
And my last question sir, is -- I mean, there has been some introduction of long-term gains, capital tax et cetera. On the [ STD ] front which has been a huge friction in the overall scheme of things, let's -- hypothetically assuming there's some relaxation on that, would that help us in any way?
I mean, STD going -- STD is the largest friction that is there for last so many years and if STD goes away, basically helps in the liquidity and overall industry, but then...
So it will definitely help the overall industry and nothing specific to us?
I mean, of course if industry gets helped, BSE does get help. So what is good for industry is good for BSE.
Next question comes from [ Ayush Kedar ] from [ Prospero Investment ].
Just one question sir. Has budget provided any extra benefit for the trade activities on INX? The reason behind this is if there is not, the business might shift to SGX. So is there any benefit to the INX or GIFT City?
I actually earlier answered regarding some budget announcements. If you will listen to the budget speech I think they have introduced couple of provisions. One is they have said that basically all the capital gains which will be applicable on our transactions in IFSC exchange will not be applicable in IFSC. So there will be no long-term capital gain, nor short-term capital gain on either derivatives or any depository receipt or any bond. And second move is they also said is that to make IFSC more competitive, the government is also looking at bringing a single financial market regulator there to be more focused to expedite things in the IFSC. So these are 2 moves which will help us in stemming the flow to Singapore Exchange and also this gives us a level playing field vis-a-vis SGX and other kind of markets.
Sir, so just to understand that how will capital gain generate if all other derivative contracts trade with it, no delivery-based transaction, so how the capital gains will arise?
No, in the derivatives case in -- for foreign investors, FIIs for FDIs, any benefit or any loss is considered to be a capital gain or a capital loss. And the capital gain part of it was treated and tax rate probably the business rate which is 30% or 40%. Now that part of it is gone completely for all the non-resident investors.
So it will be taxed at 9%?
No, for non-resident investors who are not even in [ FCT ], they are customers, so they don't have to pay any 9% MAT or anything. MAT is applicable only to the IFSC entities which are the broking firm in the IFSC. So it will be 0 for them. So effectively 0 here, 0 at Singapore, it's the same rule now.
[Operator Instructions] Next question comes from Rohit Balakrishnan, Individual Investor.
I just wanted to get your view on the commodity derivative market that we have. So in your sense, I mean currently the -- I'm talking about non-agri part, so it's about 20,000-22,000 kind of [indiscernible]. So with new players coming in, do you see the market sort of expanding or how do you see that? Just wanted to get your sense.
It should expand, but remains to be seen. I mean, these are all hopes because of which one tries to get into that business, but it should. We have seen it in currencies, we have taken the market share, but other peoples absolute numbers have not gone down much, so overall there has been increase.
Next question comes from [ Mr. Bhave ], Individual Investor, UAE.
There were some talks around increasing the time for the exchanges, so is there any progress on that?
The increases are planned in the minds of the television anchors. So currently we are not aware, but if there is any regulation that comes up, we will look at it at that point in time.
And my second question is we were constantly losing the market share in terms of the equity and the other products. So like is there any stoppage on that or are we increasing the market share, if you can throw some light on that?
So basically I tell you there are around 9 or 10 markets we work on. One of them is equities. Other is equity derivatives, third is IPOs, fourth is listing, fifth is offer to buy, sixth is offer to sell, seventh is SME, eighth is --
Mutual fund.
-- mutual fund distribution through exchanges. Ninth is BSE bonds. Tenth is currency derivatives. Eleventh is interest rate derivatives and there are probably 2 or 3 more. Other than equity and its derivatives, we are actually gaining market share in almost all areas or we have a very large incumbent if we are not getting the market share. Out of 12 -- 11 or 12 areas you have got 1 and you have made a statement which is correct in a way, but it also just wanted to show reflection by saying that kindly look at all the areas and figure it out.
As there are no further questions from the participants, now I would like to hand floor back to Mr. Yatin Padia for the final remarks. Thank you and over to you sir.
This is Yatin Padia. Thank you.
Thank you sir. Shall we conclude the call?
Yes please. Thank you.
Thank you guys. Thank you.
Thank you.
That does conclude our conference for today. Thank you for participating on Reliance Conference page. You may all disconnect now. Thank you.