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BSE Ltd
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Good evening, ladies and gentlemen. Welcome to the BSE's Q3 FY '20 Earnings Conference Call. My name is Rajesh, and 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 the Q3 FY '20 results. This is Yogesh, Head Investor Relations. Joining us today on this earnings call is BSE's leadership team consisting of Mr. Ashish Kumar Chauhan, Managing Director and CEO; Mr. Nayan Mehta, Chief Financial Officer, Mr. Sameer Patil, Chief Business Officer; Mr. Girish Joshi Chief Trading Operations and Listing Sales. Do 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. I would now request Mr. Ashish Kumar Chauhan to give a brief overview of the company's performance, followed by a question-and-answer session. Please note that BSE does not provide any specific revenue or earnings guidance. Anything said on this call will reflect BSE's outlook for future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risk the company faces. With that, I would like to turn the call over to Mr. Ashish Kumar Chauhan.
Thank you, Yogesh. Good morning, good afternoon and good evening to all of you wherever you are. Let me start with providing you with certain updates on our business and operations. BSE continues to march ahead in its growth of business in StAR MF platform. Total number of orders processed has risen by 55% to 393 lakhs during the 9 months ended October 31, 2019, as compared to 253 lakhs in corresponding previous 9 months. The platform received a record 53.65 lakhs orders in the month of January 2020, surpassing the previous best record of 49.56 lakhs order in the month of December 2019. The total number of orders received in the month of December 2019 is higher by 51% as compared to orders received in the month of December 2018. The platform processed a record 10.10 lakh transactions on a single day on project, 10, 2020, surpassing the previous best record was 8.76 lakhs on November 11, 2019. Continuing the growth momentum, the platform registered 1.13 lakhs new SIPs amounting to INR 32.48 crore for the period 1st February to 10th February, 2020. The current StAR MF book size for SIP is 36.81 lakhs amounting to INR 1058.28 crore. The total number of XSIP registered under this segment increased by 38% to 16.35 lakhs for the 9 months ended 31st December, 2019 and from 11.86 lakhs for the 9 months ended 31st December 2018. The total value of orders processed in the Mutual Fund segment increased by 31% to INR 1.49 lakh crore for the 9 months ended 31st December, 2019 from INR 1.14 lakh crore for the 9 months ended 31st December, 2018. BSE launched StAR MF app in May 2019 to enable mutual fund distributor process transactions on the go using mobile. The mobile app has been well received by the investment community, and it has processed over 2.26 lakh transactions till 31st January, 2020. BSE's relentless scaling up of mutual fund distributors and IFA's network along with its technology drives the growth in StAR MF platform. During the period from October 2019 to January 2020, BSE appointed 1,450 IFA's stock members taking the total to 56,000 as on 31st January 2020. This network is over and above BSE's, 1,400 members, backed by over 2 lakh authorized representatives covering length and breadth of our country. The net income earned after considering provision for receivables in the StAR MF segment increased by 58% for the 9 months ended 31st December, 2019. Income earned in this segment has contributed to 12% of the revenue from operations for the 9 months ended 31st December, 2019, as compared to 7% from operations for the 9 months ended 31st December, 2018. Seeing it differently, the income earned in StAR MF segment now is equivalent to 64% of the income earned by BSE's Equity segment during this period. BSE continues to remain positive on growth of this segment. BSE's market share in this segment for the 9 months ended 31st December stands at 71%. You would be glad to know that BSE-Ebix Insurance Broking Private Limited, a joint venture of BSE with Ebix Fincorp Exchange Private Limited has obtained insurance broking license from insurance regulator, Insurance Regulatory and Development Authority of India, IRDAI. The company is in the process of appointing its intermediary network and commencing its business. The company successfully launched -- beta launched operations on 7th February, 2020. The venture will enable distribution outlets, wealth management advisers, point of sales, persons to sell life and nonlife insurance products on the single platform. It is expected that network of insurance broking business and mutual fund distribution platform shall complement and leverage and either both strong growth over time. BSE holds equity stake of 40% through its subsidiary, BSE Investment Limited in this venture. The turnover at BSE subsidiary, India International Exchange, also known as India INX and IFSC Gandhinagar, has been growing at a pace -- at a fast pace. Average daily turnover in India INX witnessed growth of 211% to USD 2.1 billion for the 9 months ended 31st December 31, 2019 from USD 694 million for the 9 months ended December 31, 2018. Turnover comprises of significant contribution by Equity Derivatives Segment. Equity Derivatives Segment contributed 92% of average daily turnover and the Commodities Derivatives Segment contributed 8% of this. It achieved a major milestone on October 7, 2019, when its cumulative total trading turnover crossed USD 500 million mark driven by substantial jump in its trading volume, which increased to 37.15 million contracts. India INX's market share for the 9 months ended 31st December is 83% in GIFT City. In December 2019, ONGC established USD 2 billion medium-term note program on its global securities markets and listing of USD 300 million notes issued under the program at a coupon rate of 3.375% due in 2029. Further, in January 2020, state-owned Power Finance Corporation Limited have listed global notes on India INX Global Securities market. India INX's Global Securities Market continues to remain [indiscernible] IFSC's leading primary market platform, raising funds from global investors. Listings are of USD 750 million worth bonds at 3.950% due under USD 5 billion global medium-term note program. Over past 2 months, the government and the regulators have taken various measures to enable derivatives trading of Indian rupee with settlement in foreign currency. On January 20, 2020, RBI issued directions for introduction of rupee derivatives and IFSC. Further, as per SEBI circular February 3, 2020, allowed currency futures and option contract, enrolling Indian rupee with position limits for eligible market participants settlement in foreign currency. In our budget speech on February 1, 2020, Honorable Finance Minister, Shrimati Nirmala Sitharaman stated that in recent years, there has been a surge in trading volumes of Indian rupee in the offshore financial centers and that the government and RBI has taken various measures to permit rupee derivatives to be traded in the international Financial Service Centre at GIFT City Gujrat. On 3rd February 2020, the Securities and Exchange Board of India, the regulatory board of stock exchange and [indiscernible] IFSC has approved all recognized stock exchanges and clearing corporation in IFSC, launch currency futures and options contracts. Government also in the recent budget allowed for 1% concessions in withholding tax on the bonds listed on India International Exchange. The IFSC Centres Authority Act 2019 came into force from December 20, 2019. The act inter-alia provides for setting up a unified authority, regulate all financial services in IFSC in the country, been approved by both houses of parliament. It aims to set up a world-class unified regulator for International Finance Service Centre, combining powers and functions of RBI, SEBI, IRDAI and PFRDA amongst others. Currently, the banking, capital market and insurance sector and IFSC are regulated by multiple regulators such as RBI SEBI. The dynamic feature of business in the IFSC necessitates its high degree of inter regulatory coordination. It also requires regular clarifications and frequent amendments in the existing regulations. Government regulation services -- financial activities in the IFS. The development of financial services and products in IFSC would require focused and dedicated regulatory interventions. A unified financial regulator via IFSC in India would be able to support the growth of global financial markets in IFSC.The current derivatives segment at BSE continues to provide a very liquid platform for trading in currencies. The average daily turnover of currency futures for the 9 months ended 31st December, 2019 was INR 11,192 crores. And the average daily turnover in the options for the 9 months was INR 17,867 crore. Our Market share for the period of BSE was 43%. On 27th January, 2020, BSE signed a licensing agreement with Intercontinental Exchange, which is listed on NYSE, a leading operator of global exchanges and clearing houses and point of data and listing services for the use of ICE Brent Index as the final settlement price for BSE's rupee denominated brents which is contract. In the Commodity Derivative Segment, BSE facilitates trading and derivatives of gold, silver, Oman Crude, copper, guar seed, guar gum, cotton futures, turmeric, castor seeds, chana and soya bean. In a short span of a year, BSE has become the dominant action for trading in derivatives and cotton with a market share of 30%, and guar seed, the market share of 30% for the -- 32% for the quarter ending December 2019. The total number of the member admitted in this segment is now 276. Average daily turnover for the 9 months ended December 31, was INR 203 crore. BSE SME platform has 315 companies listed on its platform on 29th January, 2020. Further, the number of companies listed on SME platform has grown by 12% over the past 1 year from 280 companies to 315 companies. Of the total number of companies listed in BSE SME, 75 companies migrated to the BSC Mainboard as on 31st December, 2019. The total market capitalization of companies listed on BSE SME platform was INR 18,289 crore. And total fund raised was INR 3,279 crore. Number of market makers with BSE as on 31st December was 129. The companies listed on BSE segment, SME segment have shown outstanding growth over the past 7 years. The SME IPO Index, which was launched on 14th December with 100 as base has increased to 1,770. It measures the performance of any IPO for 1 year only. BSE's market share in listing of company and SME segment stood at more than 60% as on December 31, 2019. BSE launched platform from electronic bond distribution mechanism, BSE Bond on July 1, 2016. This platform facilitates issuance of debt securities on private placement basis as well as on public basis. Issuers in this segment include renowned corporates from public as well as private sector in India. During the 9 months ended 31st December, 189 issuers successfully raised over INR 2.3 lakh crore through this platform. The total debt raised under this platform till date has crossed INR 10.44 lakh crore. BSE's market share stands at 61%. The trading volume in the equity segment at BSE has generally found to be correlated to the macroeconomic growth and many other factors. As such, certain volatility has been historically observed in the volumes in this segment, which is affected inter-alia by the level of activity in capital markets in India. BSE's Equity segment stabilized and Equity Derivative Segment is also growing, reflecting the quarter-on-quarter improvement in the operational performance of the company. The average daily turnover during the quarter ended 31st December was INR 2,535 crore as compared to INR 2,447 crore in previous quarter. Over the last few months, Equity Derivatives business has been focused, and the average daily turnover in SENSEX Futures contract has grown from INR 1,001 crore in month of December to INR 2,266 crore in month of January, 2020. The segment recorded turnover in the segment of INR 4,050 INR on 10th February, 2020. BSE shall continue to make further efforts to increase its business in Equity Derivatives Segment. Interoperability amongst Clearing Corporation facilitates the efficient order execution by enabling any order to be executed at more than one actions and thus reduce the slippages in execution without the need to maintain margins at multiple clearing corporations. As more and more members of the investment community are insisting on base price execution across exchanges from their trading members, a positive impact on the liquidity and turnover on liquidity and Derivatives Segments is possible. BSE along with PTC India and ICICI Bank filed a petition with the power market regulator, Central Electricity Regulatory Commission, CERC on September 7, 2018 for grant of license for setting up a new power exchange. The CERC approval is currently awaiting. This proposed institutional exchange, subject to necessary regulatory approvals, would leverage on the experience of expertise of its stakeholders in that respective fields, knowledge of the power sector, funding of power projects and associated infrastructure, setting up and running various exchanges and platforms in India and offer the market participants a credible power trading alternative. BSE has a stake of 41% as of 31st December, 2019 in the proposed power exchange with wholly owned subsidiary BSE Investment Limited. Same stake would have to be brought down 25% for the receipt of grant of license or for products before that. With respect to listing in securities, the number of companies registered with the equity and capital on our exchange are -- and available for trade, are 4,015 as on January -- as on February 6, 2020. BSE has the highest number of companies listed on any exchange around the globe. Market capitalized enough companies listed on BSE is above INR 159 lakh crore. The total number of unique investors listed on BSE exceed 3.07 crore. On 26th November 2019, BSE has announced the framework for listing of commercial paper, enabling the listing on BSE for commercial paper issued on or after 27, 2019. Housing Development Finance Corporation Limited, Tata Steel Limited, Reliance Jio Infocomm Limited, [ BLS India Limited ], IIFL Wealth Finance Limited made an application to list their commercial papers at BSE for issue size of [ INR 50 ] crores, INR 2,500 crores, INR 1,000 crores and INR 300 crores, INR 200 crores, respectively. Post process, the effective date of listing for the same at BSE is 17 Jan. The total listed CP on BSE has now gone above INR 2 lakhs crore. The weighted average yield of this issuance is 6.52% with average turnover of 148 days. BSE has been undertaking calibrated increase in listing fees for the last few years and made the same experiment to the charges levied by competing exchanges as well as to cover increasing cost of compliance. With the effect from April 1, 2019 BSE increased its annual listing fee charged to exclusively listed companies by INR 50,000, in the listed capital, up to INR 100 crores, and by INR 25,000 between INR 100 crores and INR 200 crore listed capital. BSE is required to divest its equity stake in Central Depository Services to 15% over the next 3 years. In order to avoid risks related to dispersal of requests taken at one go, BSE sold 4% equity stake CDSL in the month of November 2019 through offer for sale mechanism. BSE accounted a profit of INR 91.58 crore on stand-alone basis and a profit of INR 32 crore on consolidated basis of the same during the quarter ended December 31, 2019. During the quarter ended 31 December, 2019, BSE also provided for a onetime liability of INR 3.62 crore over service tax payment under Sabka Vishwas scheme. It may also be noted that BSE made a provision of 50% double digit investment made in secured debentures of Ilfs till previous year. Considering the unlikelihood of receiving any redemption amount in future, further provision of INR 5.33 crore has been made in the financial for the period ended December 31, 2010. On a consolidated basis, the profit attributable to shareholders of the company for the quarter ended December 31, has grown by 24% to INR 45.57 crore as against INR 36.69 crore for the previous quarter. The operational revenue for the quarter ended December 31, has grown by 1% to INR 109.92 crore as against INR 108.89 crore for the previous quarter. The percentage of operational revenue to total revenue for the quarter ended 31st December, 2019 has risen to 74% from 68% in the previous quarter. Total revenue for the quarter ended 31st December decreased by INR 10.92 crores to INR 148.66 crores because of decrease in investment income by INR 11.17 crore. It may be noted that the main reason for the decrease in investment income compared to previous quarter is outflow of INR 476 crore on its buyback of shares undertaken by BSE in the month of September 2019 in addition to the dividend payout, which was also large. On a stand-alone basis, the net profit for the quarter ended 31st December has grown by 151% to INR 98.5 crore as against the INR 39.22 crore for the previous quarter. Operational revenue for the quarter ended 31st December has grown by 30% to INR 93.15 crore as against INR 90.47 crore for the previous quarter. The percentage of operational revenue, total revenue for the quarter ended 31st December, 2019 has risen to 75% from 63% in the previous quarter. Total revenue for the quarter ended 31st December has decreased by INR 19 crore to INR 124.94 crore due to decrease in investment income by INR 21 crore. As on 31st January, 2020, the total balance line in settlement guaranteed fund maintained by Indian Clearing Corporation is INR 419 crore. With this overview, let me welcome all of you once again, and invite you to -- for question-and-answer session. Thank you.
[Operator Instructions] The first questions come from Mr. [ Amit Saxena ] from [ PBS ].
Yes. Okay. Am I audible?
Yes. You are audible.
Sir my question is related to the PDSL [indiscernible]...
Sorry to interrupt you, sir, your voice is too low.
Is it better now?
Sir a little bit louder, please.
Am I audible?
Yes. You are audible now.
Yes. Sir my question is related to the CDSL stake-sale where you have divested 4% [indiscernible] stake, I wanted to understand BSE's tax structure and no need of cash at this point of time. And given the fact that you had already divested 26% because of the regulatory norms, what is the rationale behind divesting the 4% stake in the last quarter?
Amit, that we have already covered in the speech. We need to bring down about 3% to 15% in next 3 years and we had at 24%. So rather than waiting for the last minute to divest our stake and risk any market variability, volatility, we decided that we should do it in tranches. That's the reason we did it.
[Operator Instructions] Next we have [ Mr. Saji Kapoor ] from [ Kapoor and Company ].
Yes, sir. My first question is regarding your investment in Calcutta Stock Exchange Limited. Last phone call also, you gave some clarification that we're looking to diverse this stake or we are looking to do some action on this accounts. Because this exchange is also defunct almost, and we have made a good amount of investment. So what is your strategy on this regional stock exchange? Sir, if you can give your thoughts on it, very kind of you.
We had invested INR 6 crore in 2007. Unfortunately, they seized operations -- exchange operations a few years ago. And we have written down the entire investment. And we are selling it at residual value right now in our books.
So what is your -- what is your strategy for this stake -- investment money? You have write down, now you will not do anything?
The thing is that all options are open. In case there is something -- in case there is some interest from any counters, we can think about that. We can consider that.
Sir, Actually. I'm from Kolkata, if I can update you, if you are kind enough to cross verify also, sir, that already a matter has been filed in the high court. Now that is sub judice. Now what is the necessity of this action? This has been basically the prima facie the question. So are we representing ourselves in this matter so that we can get the clarity of thought that what will happen to this stock exchange as well as -- as to our investment on this?
See there are larger issues. And I think we should not be discussing specific written down situation in a public call.
Okay. I appreciate that, I appreciate that. The last question regarding competition, what we are seeing in our sector, sir? And please throw some light, sir, what is our view on it? Sir how we are going to create more value for our shareholder? I can appreciate that we have significant cash on our book, but keeping into account the significant competition we are facing, sir, if you can throw some light on it?
So the Equity Derivatives, we are doing some good sizable volumes. And commodities also we are picking up. We look forward for other instruments in commodities as well. So mutual funds, we are doing well. So all in all, looks good as well.
My final question, I appreciate, yes, you are correct that your new segment you are doing very well, my good wishes are with you. But if you compare with our NSE volume with any script, which has being traded on stock exchange that is on National Stock Exchange and Bombay Stock Exchange, the volume in NSE is far more greater than that of BSE. So what is our view? And various scripts are also in BSE, that is if I have been allowed to use that -- it is defaming BSE because various scripts are getting -- all of a sudden getting suspended. So that is maligning our good name, the hard labor which you are putting into create our goodwill, sir. So what step are you taking in that direction, if you [indiscernible]? This is my final question, sir.
So basically, the suspension part is relevant to the compliance with the listing guidelines, which were LODR under SEBI regulations. And if the companies don't maintain those disclosures particularly and then they are suspended. There are other different guidelines for even price bands and all, which are -- all of these are applicable to all the exchanges. But as you know, traditionally, BSE has -- smaller company names are large in number. Whereas as we have selected only few out of that. And so we will continue to have this exclusively listed companies, many of them may have some issues. But as and when they become compliant, they are also -- removed their suspension. So also in terms of increasing our trading volume. Now they are [ typing ] 50, 60 of you are sitting -- have been on, listening to this, I'm requesting you also to trade on BSE because what I...
Hardly we get volumes, sir. That's very kind of you, Mr. Chauhan, that you are very frank in your submission. But sir, don't take me wrong. Any company which if an investor looks, he asks 2 questions that [Foreign Language] there's a fear, sir. Don't take me wrong, sir. You have been so frank in your submission, that why I've been very frank with you. That there is a fear. [Foreign Language].
Yes, yes. Reliance is also listed on BSE. That's why I'm saying that -- and whenever...
No, no [Foreign Language], sir. Only listed on BSE. [Foreign Language]
Yes, I am not trying to argue with you. But Reliance, when you buy as an individual, you don't buy tens or lakhs of shares, right? You are probably going to buy hundreds or thousands.
[Foreign Language]
And that liquidity is available on BSE. So my request -- humble request to all of you who are shareholders of BSE or interested who are on this call please look at BSE also, it charges you less, gives you faster response.
I appreciate.
And hopefully all of you will come on this. Of course there are other businesses where BSE is doing better than NSE. And I may be able to compare myself only on where they are good, then it's a different world rather I become -- me too. There are other areas in which I am good, it's like you maybe -- somebody else maybe a very fast runner. But I may be a good boxer, right? And if I start only running. I may be losing only. So idea is to know where we are good at and still not leave running, right? We will continue to run, we will run for the money to all the competition, but in a fair way, and hopefully people will realize. We have done these things in currencies. Indian Rupee is also listed on BSE, and I'm sure none of your customers say that don't, I mean, worry about Indian rupee. But effectively, there are many, many things, even on trading, which BSE is doing well and will continue to do well.
Next, we have Mr. Amit Chandra from HDFC Securities.
Sir my question is the -- is firstly on the interoperability of the Clearing Corporation. So in the last call, you said that it can lead to some increase in volumes. So if sir, can you please update on that because we have been losing the cash market share there? So this is the first question. And second would be on the one-off expenses that we have recorded in this quarter? And third, would be on the StAR MF realizations. So with the rising volumes, can we see rest of the pricing than the realization per trade or per transaction come down from here?
So interoperability of Clearing Corporation. So basically the -- it has given us some flip in the derivative side. If derivatives become significant, probably, you might see some upside on the equity side also because derivatives and equities go in a way hand in hand. In terms of the -- whatever the issues we are facing, the vendors, although both actually started -- it took us some time, almost 3, 4 months for everything to stabilize. But now that things have stabilized, the vendors have not been ready. It's the front office and back office vendors. And of course, if we were ready though so asking for some exorbitant amount to the stockbrokers, assuming that they -- this is one way in a dying industry of broking to squeeze people -- to ask for money. And of course, brokers have to see some real volume before they commit additional money for buying those terminals, licensing and all. So it's kind of a chicken and egg, we are trying to resolve. I have been told that one of the larger software provider to broking industry in front offices has declared today that they are ready with the interoperable software because they have to be able to give you the real time offset, you buy some in one exchange, you sell on another exchange. I mean you had to pay double the margin in that software. Now you can pretty much pay single -- I mean it'll be set off, right? So those things are slowly coming in place. There is not any stage such, what I call, arm twisting tactics by the...
Vendors.
Software vendors, but then that is India for us. And hopefully, everyone will come on board at some stage, and that will happen. On one-off expenses, I'll tell Nayan to...
So Amit, there are 2 major expenses items. One is the payment, which is -- we have provided for making to [ service check ] authorities. There was some old matter, which came up with audit observation. And to -- and it was a gray area. So our consultants advised that you should pay off an -- net wallet. So we paid INR 3.6 crores and -- under the Sabka Vishwas scheme. And we have provided INR 2.6 crores towards Ilfs but we have -- we will have to do one more tranche of its provision in the next quarter. After that, our Ilfs investment will be valued at 0 in books.
And StAR MF realization, basically with some more, what I call, SIPs, our realization comes down per transaction on a blended basis because more SIPs means a much lower realization. But of course, the number of transactions are increasing even on the lump-sum basis. So overall, it still is in that INR 8, INR 9 per transaction. And I think the acceleration has been phenomenal, given the deceleration in the entire industry. So BSE StAR MF has been pretty much the engine of growth for the industry. And that's how I see that, overall, this is becoming even more dominant going forward.
Okay, sir. What was the realization this quarter and the revenue from StAR MF for this quarter?
So the total -- the revenue from StAR MF till the 9 months is the INR 32.76 crores. And in the current quarter -- sorry, let me correct myself, it's INR 35.96 crores. And for the current period, it's INR 12.22 crores.
INR 12.22 crores. Okay. And sir, lastly, on the LES scheme that you're running, both on the INX and for the derivatives [ around fix ] to like boost the volumes in the derivative side. So what is the visibility there? Till what time we will continue using LES scheme? And what benefits we are seeing there? And because we have earlier also tried to boost volumes by using LES. So how is it different this time?
It's currently, early days. It will last at least for 1 year going forward because we have just started. We have spent almost nothing and very low amount per month. And so we think we have seen some early traction and more brokers coming in, and this interoperability happening at the vendor and also probably we'll see more traction. And let's see, currently, we are looking at a year at least from now.
Any amount that you have budgeted?
We just -- basically, normal, what we are doing currently. We do allocate, but we don't announce that.
Okay. And sir, on the INX side, a lot of announcements have come in the budget. So with the currency, it is also getting permitted. So can we see the INX to -- volumes are also trending higher and the number of trades are also been consistent at 50,000 to 60,000 trades per day. Now -- like do you think this is the right time that we will start charging for INX because it's weighing a lot on the P&L, and we have been spending huge amounts on INX for the last 2 years? So when is the right time that you think that we will start charging on the INX platform?
So basically, NSE has a habit of acting anticompetitive. And they have lost a case against MCX-SX also. In many segments within India, they do this aggressive 0 or close to 0 pricing and bring down everyone's revenues and that they are doing in IFSC also. And that is where basically -- till the time NSE doesn't charge, we can't charge unless we have real big market power. So till the time NSE continues to act anticompetitive using their large heft in revenues, we will have to continue to match that or better that to ensure that people continue to come on BSE platforms, and as and when they did it in mutual funds also, but at some point in time, we had a good market share to start charging. And that's what -- it's not -- basically, most of this will depend on NSE's sort of charging or not acting anticompetitive rather than our own abilities most times.
Okay, sir. Do you have the time line in terms of when we'll start -- or it will only depend on NSE charging?
Yes. Once I have checked with NSE, I will let you know.
Next we have [ Mr. Kishore Sonegar ].
Yes. In last call, you updated, sir, that Energy Exchange can be -- we can get an approval in the next 3 months. So what is the status on that?
Energy Exchange.
Energy Exchange, we have applied CERC, had their review, kind of a hearing last month. And there the Competitive Exchange (sic) [ Competition Commission ] raised some issues. I think one more hearing will be conducted sometime soon. So still we have not got the licensing. And as and when, CERC gives license, we should be able to start within a few months of them.
Next we have [ Mr. Sakit Kapoor ] from [ Kapoor and Company ].
Sir, firstly, sir, regarding -- the RBI has earlier told that it has taken initiative to develop the bond market where they can be a greater retail participation. So in that extent, what role can the exchanges like BSE can play so that it could act as a facilitator?
There are 2 markets broadly in bonds. One is what we call government bond market, other is what is called corporate bond market. Corporate bond markets, again, divided into 2 parts, one is call PSU bonds, other is the non-PSU corporates. BSE is pretty strong in the IPO of the corporate bonds. The government bonds are usually done on auction basis and traded within the, what I call, world garden market of Ind AS and CCIL. The non-world garden part basically requires repository framework for ease of trading, which is still in the works. So as and when that happens, probably more government-related trading can happen. Till that time, BSE is also trading and issuing or helping RBI issue sovereign gold bonds and other things, which are more retail oriented. But effectively, today, also, BSE would have done settlements of -- reporting is probably more than INR 4,000 crore. So there is enough and more traction on bond trading in BSE, INR 4,872 crore today, that is almost double that of the equity market volumes as of now today.
Sir we find this government securities market also a lucrative one because if we go through the banker's point of view, the size of it and the vagaries, which investors had to go through it are a cumbersome one. So if we could go for the CDSL account also and at least through which -- if we open our -- as we are operating our trading account, we could directly participate in the DCS market also. And how that can be done with the exchange and the regulator RBI getting in sync because it is the initiative of RBI only that want more detailed participation in the DCS market?
Correct. So we are working on it for last several years. So as and when it is done in a way that retail participants can easily operate on that in a interoperable way, across exchanges, across repositories, then -- otherwise, people come in and get stuck, may not be that advisable.
The right way.
So that's why we are working with RBI, with other people. And hopefully, we will have enough simplification of the processes going forward.
Sir, one more point. Sir currently, our -- in the union budget, the dividend distribution tax has been scrapped. And now the dividend would be taxed at the hand of the recipient, and a lot of people have come up with suggestions wherein we investors would be at a disadvantage than to the foreign investors since dividend won't be taxed at their hand. So sir any kind of representation from people of your fraternity or the -- in fact, the exchanges, making some kind of PowerPoint presentation also to the finance ministry explaining the merits and the demerits so that they can take the final call since it is -- still not the act has been -- I mean it is not being as of now final bill has not been cleared. So any take on that? Are we working anything on it?
Basically, this issue was actually demanded by the market participants only. We wanted DDT to go and then we have asked for now modification. So Honorable Minister of Finance has been going with our entire team across large metros over last 1 week, and I was party to one of the meetings with our -- and our team and my CFO was party to another meeting. So there are like 3 or 4 meetings in Mumbai, both -- I mean both of us participated pretty much the entire day one after another. And we realized that literally 60% of all the speakers throughout the day, including journalist talked about this and heard on it. And the issue has been, what I call, discussed at least in Mumbai, very well. And whatever needs to be told has been told. Now decisions will have to be of the government, what they want to do with this going forward.
We have done our court, definitely. Sir in fact, even for the point of disinvestment, we find that last year, the government set a target of around -- of INR 1 lakh crore and for whatever the vagaries of the market ended up with INR 8,000 crore in the figures. And now they have up the target to 210,000 crore for this year. So sir, we -- the certainty should also come up and devise the ways in which you people can help the government in achieving the target. It is not always that the bureaucracies that has to play the role in government achieving actually the targets there. People like you [indiscernible] just addressing Mr. Chauhan. People like you, who have seen these -- the developing of the market, the market risk would suggest means in which -- this INR 2 lakh crore target could be achieved in the best possible way. That was my suggestion that if everything depends on bureaucracy, there could be fallout also. So in whatever way exchanges should play their role in doing it. And the last point was sir regarding the conference call, sir. Conference call has now become a very new -- I'm already participating a call for BSE now -- right now. So it has become a very strong thread in investors getting an understanding about these subjects and industry in detail. But we -- but as earlier also requested, if we could do some sort of handholding for smaller companies having a capitalization of INR 600 crore to INR 700 crores, wherein a better investor awareness can be created. Since that they're coming up with their numbers in bunches and no press release, no management commentary is followed. It makes life difficult for small investors to get even an idea of the reasons why the company has reported the numbers plus, up or down. So if any kind of handholding or rules being framed that companies would be mandatory for them to come up with releases on explanation also why the division in numbers have been. It's a request, sir, and it's only up to the regulators like you who can take the issue forward.
So disinvestment part, we have been in constant touch with our regulators and also the disbursement commission, when it was there. So like this ETF for PSU, ETF of bonds, these are all ideas which were given by BSE earlier. And so it is -- basically it's not that all our ideas get accepted and immediately also, sometimes they take years to discuss. And that is the correct way to do it. You cannot be sort of doing this in a very sort of short haphazard way. And so BSE will continue to contribute to the entire discussion when going forward. In terms of small companies making this sort of conference calls. In all, it's a good idea. I am not sure how to make it mandatory for people to discuss this, but in our corporate democracy, it is imperative that any company, which is having aspirations or having aspiration to at least have good governance, must try to sort of engage with the investors current and potential as well as media in continuous and consistent way. So that is, I think, imperative for everyone, but probably we will also take up with the regulators, how to make it a little more comfortable for people to do this. But companies that also provides AGM for the same reason, but that's an old technology of meeting in person. Now cost has reduced drastically and this is not a bad idea at all. I would certainly take this up with the regulators, but my humble request to all of you is to also write to the regulators and also the policy makers about the low-cost ways to reach out and explain, which is an absolute must for every company.
Right. It should be a [ conducive ] way, that is, for investments, sir. We are aspiring now for a $5 trillion economy. And whatever be the reason stock market will be the biggest contributor in -- and it will be having a multiplier effect going forward. So -- and regulator is the one, sir, who can frame the rules tomorrow and give a deadline that it has to be implemented. And people who are promoters, I'm not using that phrase, but people who are ignorant to these suggestions when we deliver to the corporates, [ casual ] also fall in place when it is mandated. So that was -- that's all from my side.
We have Mr. Jayesh Gandhi from Harshad Gandhi Securities.
While I appreciate your endeavor in increasing the revenue, till we are successful there, have you thought of reducing our expenses? I mean is there any scope and exercise going on there?
Basically, all the endeavors are done to do the same thing at the lowest costs. So if you look at BSE's IT systems and their capabilities, we're very similar to MSEs. But they are done at 1/10 the cost of the competition because of the reason that we do it rather much lower cost. Similarly, employee cost at each level is different, but there is a minimum amount required, minimum amount of people and technology required to run this business. It's like a fixed cost business, right? So we have tried to do this, we continue to do this. And hopefully, we'll be able to be successful because we are also getting into newer areas. So that requires fewer people and so on and so forth. But if we reduced the manpower cost, probably services will go down, which may not be acceptable to the regulator and also of -- to the people. Similarly, if we reduced the cost in technology, which is another cost. Then another -- again, there might be issues. So to run this large, very complex sort of framework under the current Indian regulations, we need to have a security operation center, we need to have disaster recovery site, and we need to have many, many more things which are only heard in sort of stories, whereas they are actually implemented here and in a very stringent way. So currently, I do not see any ability to reduce the cost on absolute terms. But in terms of the capabilities per unit, probably BSE would be the lowest cost service provider in the world.
Next we have Mr. Shivam Gupta from CWC Advisor.
I have a couple of questions. First one is, StAR MF, last quarter we made a provision because the -- some of the few AMCs are not ready to accept the hike. So what is the update there?
So what has happened, Shivam, is that a part of it, we actually booked as our, I mean, nonreceivable and adjusted it from the revenues this time. And to that extent this time the provision is less after adjustment of the amount which we already transferred to our [indiscernible] revenue. Otherwise, there is no further change on that, our -- with this thing, provisioning.
So the [ 122 ] number is net of the provisions?
Yes.
And in terms of the stance, I mean because generally, if I recall, it was supposed that usually around quarter 4, the discussions progressed. So with that cyclicality, what's your expectation there?
In the 18, funds have agreed that they are paying the newer fees. Other slowly will end up paying. So it's basically, what I call, people wanting all the services at 0 cost and slowly they have different reasons. They get together, which is bound to happen in every industry when we started charging after 8 years -- after 7 years, when we start charging, they did not pay for 1 full year. And up -- next year, again, they started paying for a variety of reasons. Again, there's this -- this will be a, what I call, constant negotiation struggle. So I think on the other side, they pay MF Utility pretty much 10x more than what they pay us. On the NSE side as I told you because they are able to use their revenues in one side, that is derivatives and equity side to basically create anticompetitive measures on other sides. So here on mutual fund side, they actually use camps but don't charge. Right? And so it's a strange thing in which we are currently operating. But given the -- what I call, the superior services we provide, people continue to build on us their portfolios, their customer business. And that's what gives us. So let's say, some point in time, what I call, commercially reasonable charges will be paid by the mutual funds and the services being given to each of them individually, not collectively. And so I think the rational people, the fair people in the industry understand that. But everyone wants to squeeze the other guy, right? So that's how India works, and we'll have to find our way within that.
The other question I have was on the Equity Cash segment. The normal rate part of the business. So I just want to know, so effectively if I look at the total turnover that you guys did, sequentially that is actually gone up and the revenues have gone down. So where is this rate impact we are getting there?
So if you -- sequentially, if you see our turnover in -- last quarter was INR 2,400 crores. And this quarter, it was 2 4 -- [Foreign Language], so that has been the improvement in the turnover.
Correct.
And to that extent it is reflected in our income to minor -- in a very minor basis. So our income from transaction charges has actually increased from -- just 1 second. There is only one particular place where you know last year, last quarter, we had OTV, which was more than INR 1 crores offer to buy. And this year -- this quarter, we don't have any such income. A very major income we had. So that is creating this type of disconnect. So otherwise, on the numbers, our routine operations, basically we have earned more.
Okay. And then OTV was worth about INR 1 crore you're saying?
Yes. Last quarter we had done INR 1.27 crores in OTV. This quarter, it was only INR 10 crore -- INR 10 lakhs. And even in the specific group, our volumes has increased.
Understood. And the last question I had was that if I combine the employee cost and tech cost, which is effectively your infrastructure cost. So -- and just assume how to model those out for the next 2 years? What is the kind of inflation or growth rate should one consider?
See in case of technology, obviously, means there are AMC costs, which obviously, we have to pay year-on-year there are regulations. So 58% is very reasonable in technology costs. In employee cost again, it can vary from anywhere between 5% to 8%, which you can consider.
[Operator Instructions] Next we have [ Mr. Solapur Wala ].
Sir, revenue from Commodity Derivatives?
Currently, we are striving very minimal amount, token amount towards Commodity Derivatives. So it is very insignificant.
Okay. And what are the plans to increase it? .
This eventually -- when the business grows, then we will explore that possibility as well.
Once again, we have [ Mr. Kishore Sonegar ].
Sir because the new change in dividend distribution tax and last -- this quarter, where we -- last quarter, we did the buyback, so going forward, investors can expect a higher dividend?
See basically, BSE dividend policy is very clear. It pays out more than 95% of the operating profit as dividend, right? So that will continue.
Yes. But the -- there was the taxes on that -- the dividend distribution tax has eliminated from the company side, and it will come to the investor side. So the amount of money can be more towards the investor side, right?
Naturally, naturally.
Pardon?
Naturally.
[Operator Instructions] At this time, there are no further questions from the participants. I would like to hand you back to Mr. Yogesh Joshi for the final remarks. Over to you, sir.
Thank you all. Thank you very much for joining the investors call.
Shall we conclude the call, sir?
Yes, please.
That does conclude your conference for today. Thank you for participating on the Reliance conference bridge. You may all disconnect now. Thank you.