BSE Ltd

NSE:BSE

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to BSE Limited Q3 FY '22 Investor Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Sethuraman, Head of Investor Relations, BSE. And over to you, sir.

[Anand Sethuraman, Research & Policy Advocacy]

Well, thank you so much. Hi, this is Anand from Investor Relations, and welcome to BSE's earnings call to discuss the Q3 FY 2022 results. Joining us today on this earnings call is BSE's leadership team consisting of Mr. Ashish Kumar Chauhan, Managing Director and Chief Executive Officer; Mr. Nayan Mehta, Chief Financial Officer; Sameer Patil, Chief Business Officer; Mr. Girish Joshi, Chief Trading Operations and Listing Sales; Mr. Neeraj Kulshrestha, Chief Regulatory Officer; and Mr. Kersi Tavadia, Chief Information Officer. Do note that the conference is being recorded, and a transcript of this call will be made available on the BSE website. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Any forward-looking statements that we make today on this call are based on assumptions as of today, and BSE assumes no obligation to update these statements as a result of new information or future events. I will now request Mr. Ashish Kumar Chauhan, MD and CEO, BSE, to give a brief overview of the company's performance, which will be then followed by a Q&A session. Thank you.

[Ashish Kumar Manilal Chauhan]

Thanks, Anand. Good evening, everyone, and thanks for joining the call today. I hope all of you and your loved ones are safe and keeping well. Before I start with the update, I'm glad to say that despite the most recent COVID scare, BSE continues to function normally without any interruptions or glitches and has been able to improve business and financial performance. I'll start with the broad financial results for the quarter ended 31st December 2021. BSE operational revenues have grown by 60% to INR 192.67 crores for the quarter ended 31st December 2021, from INR 120.59 crores in the corresponding quarter previous year. Further, BSE's net profit attributable to shareholders of the company increased by 89% to INR 61.21 crores from INR 32.37 crores in the corresponding quarter previous year. Operational performance has continued to grow across business segments, resulting in higher operational revenues and profits. Steered by our robust financial results and the continued confidence in the long-term future of our business, the Board of Directors of the company has recommended issue of 2 bonus shares -- 2 bonus equity shares of INR 2 each, fully paid up for every 1 current equity share of rupees each fully paid up. This is in line with the company's objective to strengthen its capital structure and enable shareholder participation and its growth. On the business side, let me start by covering our primary market segment. Funds raised by India Inc. continues to be buoyant and BSE platforms continue to remain the preferred choice by Indian companies to raise capital. The BSE BOND platform has enabled issuers to raise INR 5.2 lakh crores through issue bonds, commercial papers, municipal bonds, [ units ], et cetera. And the equity platform, a renewal fund raising tool to [ INR 723 ] crores during the quarter ended December 2021. The total number of investors raised over -- now stands at INR 9.6 crores and continues to move up. I shall update you on BSE's trading segments now, which have witnessed growth in the quarter ending December 2021, reflected in the operational performance in the current period. For the quarter ended December 31, 2021, the average daily turnover in the equity segment increased by 44% to INR 5,217 crores as compared to the corresponding period last year. In the equity derivative segment, the average daily turnover increased by 23% to INR 2.47 lakh crores as compared to the corresponding period last year. In the current derivative segment, average daily turnover increased by 29% to INR 27,124 crores as compared to the corresponding period last year. BSE continues to make rapid growth in the commodity derivative segment and remains the second largest commodity derivative exchange in India. The average daily turnover for the quarter ended 31st December 2021 increased by 80% to INR 4,910 crores from INR 2,730 crores in the same period last year, with market share increasing to 12.5% from 7.4%. The steady growth can be attributed to new and unique products such as Almondz, COTTONJ34, SUFI Steel futures and gold options and goods, as well as continued focus on deliveries and innovation. BSE also continues to bring in expertise, best in liquidity by signing MOUs with more physical market participants in the quarter, including Gems Jewelery Council, Nashik Sarafa Association, South Tamilnadu Jewelers League and India Bullion and Jewelers Association. BSE also sought regulatory approval to launch electronic gold receipts as a new segment that is renewable by trading of spot gold in India. Let me now update you on the BSE's SME segment. I'm happy to inform you that the next month, BSE will complete 10 years of operationalizing India's first SME exchange. This endeavor will support the SMEs and start-ups in India, as seen listing 5 companies on its SME platform and 1 company in start-up platform during the quarter ended December 31, 2021, putting the total companies to 358 and 13, respectively. These 358 SMEs raised INR 3,794 crores, and the 13 start-ups raised INR 58.6 crores via the BSE platform, with now market value of INR 46,659 crores and INR 261.2 crores, respectively, as of December 2021. The end market share in the SME segment stands at 60%. I shall now discuss our mutual fund distribution platform. BSE StAR MF, India's largest mutual fund distribution platform, continues to grow at a remarkable pace, with total number of transactions growing by 106% to reach INR 5 crore transactions during December 2021 quarter, from INR 2.4 crores in the same period last year. Overall, the platform achieved INR 12.82 crore transactions during the first 9 months of financial year 2021, '22 as compared with INR 9.38 crores achieved during the entire financial year 2020, '21. BSE StAR MF platform continues to scale new peaks in terms of single-day transactions, with the platform posting a high of 26.65 lakh transactions on January 21, 2022, up during its previous single-day record of 26.52 lakh transactions on November 8, 2021. It also continues to contribute consistent net equity inflow to the mutual fund industry, with inflow of 21,081 crores. The recent StAR MF app launched in May 2019 to help our mutual fund distributors reach our clients on real-time basis and execute paperless transactions has processed over 45 lakh transactions to date. I shall cover developments of our subsidiary companies now. BSE promoted the International Exchange at GIFT City in Tamilnadu. India INX has been growing exponentially ever since the commence of trading activities on January 16, 2017, with average daily clearing turnover of USD 4.676 million and a market share of 94% for the quarter ended December 31, 2021. India INX had more than USD 58 billion medium-term notes, establishing over USD 34 billion of one listing to date. Owing to investments by certain strategic and financial investors, BSE's stake in India INX has further reduced to 71.81% and 69.28% in India International Clearing Corporation as of 31st December 2021. India INX and India ICC has invested INR 6.75 crores each in India International Bullion Holding IFSC Ltd. holding company for setting up and operationalizing the International Bullion Exchange for its 10% stake each. BSE's wholly owned subsidiary, BSE Technologies, is a technology solutions provider for the International Bullion Exchange at GIFT City for which the mock trading has started, and that is a similar technology we are going to use for starting spot gold segment for BSE in domestic area, as approved by the budget last year and as applied for the regulatory approval by BSE this year. On insurance distribution front, BSE Ebix Insurance Broking, a joint venture of BSE and Ebix Fincorp Exchange is now present in all the 3 key insurance verticals: auto, health and life, and is integrated with 7 general insurance companies, 5 health insurance companies and 4 life insurance companies after onboarding LIC, Life Insurance Corporation of India, on its platform in December 2021. Further, Go Digit, which was in offline mode, is now integrated in BSE Ebix portal. BSE Ebix has over 4,550 active at the point of sales as of December 2021. Total premium collected was INR 1.89 crores for the quarter ended December 2021, a growth of 186% from the same period last year. BSE holds equity stake of 40% growth subsidiary BSE Investments Limited. BSE E-Agricultural Limited, BEAM, a joint venture between BSE Investments and Frontier Agriculture Platforms Private Limited, approach a nationwide electronic institutionalized transport and commodity spot trading platform to facilitate spot commodity [indiscernible] working with industry participants to offer the same. It has already enrolled 788 members, an increase of 98 members from the previous quarter. Trades were INR 79 crores in 3 agricultural commodities. Jowar, Bajra and Bhav were executed on the platform during the quarter ended 31st December 2021. Company is working closely with the governments and government enterprises to announce the efficiency of procurement in sales of the commodities in different states. I would like to update that BEAM are being now received mandate from the state of Maharashtra for carrying out auction on its platform, bringing the market an opportunity in this platform that we expected to grow at a faster pace in time to come in agriculture -- normal agricultural segments. As informed in our earlier call, the [indiscernible], Central Electricity Regulatory Commission [indiscernible] legislation on May 20, 2021, to plan out the solutions limited to establish an operator power exchange. The company name was changed from Pranurja Solutions to Hindustan Power Exchange Limited in November 2021, planned itself was a power exchange. Subject to regulatory approvals, the company was to commence operations in the last quarter of financial year 2021, '22. BSE has a stake of 22.61% in the proposed power action through its wholly owned subsidiary, BSE Investments Limited. Currently, the exchange is doing internal market trading for its technology to test the integration of all its software programs. BASL was incorporated in March 2021. It is known as BSE Administration & Supervision Ltd. The company received approval from SEBI to administer and supervise investment advisers in June 2021 and has now received approval as an accreditation agency for investors in December 2021. As of January 5, 2022, BASL has onboarded 9 private investment advisers on its platform. In addition, BASL has also onboarded 4 equity investors as of January 2022. Being allowed to act as a regulator to regulate and conduct a group of intermediaries in the financial markets through a subsidiary is a strong reflection of BSE's capabilities and regulators' confidence in the governance of BSE. As mentioned in our previous call, SEBI had accorded in principle approval to BSE Technologies, a wholly owned subsidiary of BSE for Know Your Client registration agency, KYC KRA. I'm also pleased to inform you that BSE Technologies also received an in-principle approval from RBI for signing up and operating trade results, discounting system, TReDS, under the Payment Settlement Systems Act 2007. TReDS is an electronic platform for facilitating the financing and discounting of trade receivables of SMEs through multiple financials. We are hopeful that with the launch of this TReDS platform, BSE will be able to address the financing issues of MSMEs and contribute to their growth, in addition to raising funds in equities for them for the last 10 years. There is no added capital infusion required from BSE for these businesses. The KYC KRA and TReDS businesses will commence only after the receipt of final approval and certificate of license from the respective regulators. Now I shall brief you on the financial results of the -- for the quarter ended December 31, 2021. For the quarter ended December 31, 2021, as compared to corresponding quarter previous year, on a consolidated basis, BSE's operational revenues have grown by 60% to INR 192.67 crores from INR 120.59 crores. Transaction charges, revenue has increased by 99% to INR 62.98 crores from INR 31.71 crores. Listing related income increased by 19% to INR 57.31 crores from INR 48.27 crores. Book billing fees increased by -- to 219% to INR 21.81 crores from INR 6.83 crores. The clearing and settlement operational revenues increased by 85% to INR 11.59 crores from INR 6.26 crores. Net profit attributable to shareholders of the company increased by 89% to INR 61.29 crores from INR 32.37 crores. The operating EBITDA has increased by INR 55.33 crores to INR 57.5 crores as against INR 2.221 crores, with operating EBITDA margin increasing to 30% from 2% over year. The net profit margin increased to 28% as against 22% earlier. With this overview, let me welcome you once again and invite all of you for questions-and-answer session.

[Operator]

[Operator Instructions] The first question is from the line of Devesh Agarwal from IIFL Securities.

[Devesh Agarwal, Assistant Vice President]

And congratulations on a very strong set of results. Firstly, sir, I wanted to understand this -- the SEBI regulations on -- around margin segregation and monitoring, which was [indiscernible]. What is an update on that, if you have it all? And what is the expected impact of that on the volumes? If my understanding is correct, will the cash component of margin requirement will go up even in the cash segment? Or what will be the impact of that?

[Ashish Kumar Manilal Chauhan]

There won't be much impact on BSE's operations because our subsidiary that [indiscernible] clearing where the margins are kept also provides the interest on the cash margin is calculated. So usually, in case the margins actually increase in cash, there is also an outgo that is similar to our comments with it, and that's why it won't be too much of an impact.

[Devesh Agarwal, Assistant Vice President]

Okay. And any update on -- sir, on the likely implementation of this?

[Ashish Kumar Manilal Chauhan]

Basically, on -- somewhere on -- it should happen soon.

[Devesh Agarwal, Assistant Vice President]

Okay, sir. Secondly, sir, in terms of our new product, we have been waiting for the monetization of the same. So any more clarity among the various products that we have started and where we are gaining traction, whether we will be monetizing any of those new revenue streams?

[Ashish Kumar Manilal Chauhan]

The Board -- in terms of monetizing, I mean, clearly, thought of selling off those businesses, Board had approved kind of monetizing framework for the mutual fund StAR MF platform. We have not yet found a suitable buyer for that. We are -- in a way, we have also announced earlier for last several quarters that we have tried to request the potential suitors to also consider any possible structures they want. But we have not yet found anyone yet who is willing to work with us on the valuation we want. And so it's still currently pending. No other platforms, other than StAR MF, we are searching for active partners yet.

[Devesh Agarwal, Assistant Vice President]

No, no. Sir, actually, I did not probably frame the question in the right way. What I was trying to understand in terms of creating new revenue streams, with the commodity platform or any other platform, where we can start charging tariff and creating new revenue streams for the business?

[Ashish Kumar Manilal Chauhan]

Currently, we charge for SME listing and also transactions. For mutual funds also, we do that. For equities, we do that. Listings fees, we charge. For the commodities, we have not been able to yet charge. And in fact, there is a liquidity enhancement program that is going on. Similar before equity derivatives, there is liquidity enhancement program that is going on. And we do not see anything happening in the immediate future on that. .

[Devesh Agarwal, Assistant Vice President]

Understood. And we'll continue with the liquidity enhancement programs, at least for the foreseeable future in both the [indiscernible]?

[Ashish Kumar Manilal Chauhan]

In currency futures, we have been able to gain some market share in the last quarter compared to previous quarters, so that is also happening. But for the commodity liquidities derivatives, we plan to continue doing liquidity enhancement schemes.

[Devesh Agarwal, Assistant Vice President]

Okay. And one last one, sir. In terms of the power exchange that we are coming up, you said that mock tradings are on to test the technology. So has BSE provided the technology? And do we -- would we earn any revenues on that for providing technology or it's a third-party vendor technology?

[Ashish Kumar Manilal Chauhan]

A large portion of the technology has been provided by BSE, and BSE will also provide support for trading and operations and technology. So it's going to be revenue accruing as and when it starts trading for the BSE itself in addition to the exchange. The same or similar technology with some minor modifications, BSE will also use as and when the futures are allowed. So in some ways, this was also kind of a strategic call that electricity future will be allowed somewhere in distant future when this power action was conceptualized, and BSE should be ready with its technology and other things, like what BSE did for the GIFT City based, the spot gold exchange that BSE became ready for that. And BSE offered its technologies to the joint venture of all exchanges there, which has made BSE ready for the gold spot exchange for the domestic area also. Similarly, the power exchange technology, which BSE has made, will help BSE trade electricity futures also as and when it sells out. You might have read a news article that electricity futures will be regulated by SEBI, while as the spot exchanges in power are going to be regulated by CERC, and it's currently the case. And so electricity futures also are on the annual, probably this financial year -- next financial year or this calendar year. And we would be ready compared to other exchanges, as we are currently working on that for the spot currency -- the spot electricity exchange.

[Devesh Agarwal, Assistant Vice President]

Understood, sir. And one question for Nayan, sir. So just wanted to understand the tax rate better. So what is the expectation for effective tax rate for -- at the consolidated level for FY '22?

[Nayan Chandrakant Mehta, Chief Financial Officer]

So currently, Devesh, our net effective tax rate is around 28% for the last quarter -- for the last 9 months. And since we have met credit liquidity [indiscernible] a while means we have stopped investing in taxes, and it is shared around this level going forward for the next few years.

[Operator]

[Operator Instructions] The next question is from the line of [ Ojesh ], individual investor.

[Unknown Shareholder]

Congratulations, Ashish, sir, for the strong results, first of all. So I wanted to have a quick insight from you. On the recent MOU dated the 22nd January 2022 for a JV between India Inc.'s IFSC and Torus Kling Blockchain IFSC in GIFT City, for ETFs apparently on bitcoin, also I'm quoting a reputed fund manager who twitted last month from his verified Twitter handle that there was a possible crypto exchange in the making where, say, BSE or NSE would act as the other body and would regulate other crypto platforms and work in tandem with SEBI and other regulators. So there is a lot of grapevine around the government, say, coming out with a crypto bill later this year, which could pave way for another blue ocean business for us. And I'm assuming that this would be a very high-margin thing if and when it works out. So would you like to comment on it? Or would you term this as an untrue and baseless rumor? Am I just being -- so is BSE, in any case, working towards this with the regulator? Also with the digital rupee being announced, do we think us as an intermediary, Bombay Stock Exchange, will have a role to play there?

[Ashish Kumar Manilal Chauhan]

So in some ways, it's easier to answer the India and transaction part. There is basically a test kind of a framework, which the GIFT City has for testing newer products in which an application has been made by the entity you mentioned, and they have proposed that they be traded on whatever they want to trade. It gets traded on the India International Exchange. So that's where basically that memorandum of understanding, or whatever it is called, has come into play. But I don't think the approval has yet come. And as and when approval comes, the technology of BSE Group is reasonably robust to allow trading off any type of products, be that cryptocurrencies also. So if they are allowed, as and when they're allowed, they will be, basically, ready at India INX, too. And if that would be the case, as and when it is allowed in India, currently, we are not aware of any move of any type by government agencies or regulators to allow trading of cryptocurrencies on domestic exchanges, and that's why I would say it's a matter of speculation. And similarly, digital rupee for us will be another type of payment mechanism. BSE, as you know, is very, very strong in payment technologies also. And so we should be able to handle as and when the digital rupee comes into play. But we are currently not aware of the details of what is in store. Incidentally, BSE is also becoming one of the promoters of the ONDC. It's a not for profit for the transaction -- e-commerce transactions -- physically e-commerce transactions in goods like the internal -- I mean, the -- like what you do with Amazon or Flipkart, there is going to be interoperable transaction platform or a standard, which is being defined by ONDC, and BSE is becoming kind of one of the early contributors to that. Of course, it's not for profit, but BSE is, as usual, contributing to the nation building for last 147 years, and that's where the Board decided that it should also contribute to ONDC and participate with all its might to create these protocols for ensuring that the e-commerce also takes off amongst smaller people, like what happened to the UPI. And that's what -- but BSE will continue to be at the forefront as and when any new products are allowed. BSE will be there early compared to other exchanges because BSE owns its own technology and maintains and operates and develops its own technology. It has more flexibility to allow newer products and newer type of instruments going forward.

[Unknown Shareholder]

Okay. And my next question would be with the trade receivable discounting platform with the MSMEs, when do you expect it to become sizable enough to contribute to our top line? Or will it burn a lot of cash initially?

[Ashish Kumar Manilal Chauhan]

Our strategy is always to go for a technology, which is our own or our partners, create partners who can bring strategic strengths to the table by way of technology or business or both. And that we have done in BEAM, that we have done in BSE Ebix Insurance. And so effectively, the money bond is hugely limited to very small amounts compared to what a similar sized organization would spend in any new activities. And actually, the e-commerce type activities were literally organization of bond in billions of dollars. We don't believe in burning too much, and that's where we continue to control our overall spend by using our technology or our partner's technologies and sort of hard work. So that's where I don't think the amount of burn will be anything significant on that count.

[Unknown Shareholder]

Okay. My third and last question would be on any particular time line by which our international exchange at GIFT City would start charging like sizable -- I mean, sizable charges -- transaction charges?

[Ashish Kumar Manilal Chauhan]

Currently, there are no plans because NSE also doesn't charge in IFSC, and they continue to pay for order flow in NSE, IFSC. And because of that, we also have to match their incentives. And because of that, we don't see any current plans to do that. But in listings of bonds and all, as I've said, we have more than $54 billion, $58 billion of bonds listed and a large portion of -- a large amount of money already raised. That is where we have started earning some revenue. We also have a framework called INX GA, that is Global Access, INX Global Access, where many brokers have started participating by way of connecting to it, to route their foreign exchange orders through that platform. And so that's happening. So at some point in time, if that becomes large enough, that is outbound investment from India into other countries, then that INX GA becomes much more profitable. Currently, it's having a few brokers trading on it, but I have seen a very large number of large brokers going through that as of now and tying up with them to take their -- India to foreign country outbound orders through that platform.

[Operator]

[Operator Instructions] The next question is from the line of [ Haresh Kumar Gupta ], an individual investor.

[Unknown Shareholder]

Yes. Sir, I just want to ask a question. Like this year, suddenly, there has been like a sharp increase in the transaction charges, like around 100%. But earlier years, this was not the trend. So what do you think that like, is it because of [ dormant ] accounts are opening or like this is related to particular this year because of bull market? Or what do you think about the sustainability of this growth?

[Ashish Kumar Manilal Chauhan]

Broadly speaking, to answer your question that the value of transactions increased when there is a bull market. That has been sustainable -- sustained the bull market. And so market continues in its own position, then you will see a lot of growth into exchange transactions across India, actually including exchanges, and that is pretty much it. But on top of that, BSE has been able to increase the transaction numbers for the StAR Mutual Fund platform, and that has also given a good flip to the transaction side of increasing. And if that trend continues, then, again, BSE will benefit. And of course, in currency futures, also BSE has done well this quarter compared to even -- this year compared to last year, and that has also basically helped BSE. So there are 3, 4 factors. But still, most of them are connected to the bullishness of the market, and that's what you need to keep in mind.

[Unknown Shareholder]

So like considering the current situation, what is your estimate like in the next 5 years? How much CAGR we can accrue as a company?

[Unknown Executive]

I think, basically, we tend to work more to provide best facilities to the investors, and it is up to investors to trade on that. So it's very difficult for me to predict any CAGR on such things.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible], an individual investor.

[Unknown Shareholder]

Congratulations on a good set of numbers. I have 2 questions. First is related to currency derivative. I'm seeing the trend is that we are losing the market share in currency derivative. It seems like that after income, the currency derivative segment is losing the market share. I don't know what's the reason, but I'm also trading some times in the currency. I can see brokers are -- even though they are not setting like -- even though I am able to [ view ] the BSE currency derivative off from my side, they are showing a position side as under the NSE. So I feel -- I don't know what BSE is going to check on validating on broker side, whether their trades are exhibiting at probability level or it is always [indiscernible] to NSE level. And we are charging very negligible compared to competitor on currency derivatives. I don't think so that charging less will increase the liquidity. I think that if you have to increase the liquidity, interoperability has to be right there. If [indiscernible] equity segment, the liability help us [indiscernible].So are the charging lift beneficial? I would say we are using those from the revenue stream over there. Only we have to focus on the interoperability side of -- from currency derivative side. So this is the first part from the currency derivative side. On second is equity derivative. I'm seeing that we raised one thing on the same [ set of ] derivative last year. I feel I haven't raised that question properly or I don't recommend that solution properly. So what I was saying at that time was can we create a separate index on SENSEX 30, like a SENSEX 30 tracker or something like that, which will be like 110 for SENSEX 30? So the -- because right now, even we have launched SENSEX 30 several times, but we lose the track of it because of the number -- it's a very huge number, and people will lose the track of it, and we haven't started it initially. So I was recalling why can't we create a simple -- like a smaller index, which will track SENSEX 30 because most of the people talk about SENSEX 30, and this is the most well-known index, which we have, and we are investing quite a lot on SENSEX 50, but I'm not saying it's not a bad idea. But what we should do is that we should also -- whichever thing we have, we have to use that index and try to give one more try. Because we already invested quite a lot, we should give it one more try and create another index and launch a derivative on that one. The figure will be around INR 6,000 or something like that range, and that is very good for investor or retailer to trade on that index. So these are the 2 questions, which I have from my side.

[Ashish Kumar Manilal Chauhan]

Thank you. So currency derivatives, as I mentioned in my speech, we seem to be increasing the market share this year, vis-a-vis last year. Last year due to the COVID, the banks actually stopped having their own people going to their banks, and that's why we were basically depending on the larger banks who were clearing on us. And they, in a way, some of them reduced their activities. That's why our market share has gone down. This year, our market share is going up because the banks have started functioning well, and some of them are also price-sensitive customers. So despite your feeling that people are not pricing, some of them are. And we will look into it again, as your observation. Similarly, our observation of cutting SENSEX down by 10% to -- rather by 90% to 10%, which, again, that position has come for last -- almost 20 years since the equities derivatives have been in place and actually took a large market share there. We have tried many things. This also, in a way, is worth trying for once they give you the approval. And so we have through many systems. Once it comes, I'm sure we will -- in case it is allowed, I'm sure you will trade and your friends trading back.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible] from Ashwani [indiscernible] & Company.

[Unknown Analyst]

Congratulations on a good set of numbers. My question was mainly regarding the sharp fall of investment on BSE. Even though our top line has been very robust, the revenue of operations have been robust. But the only fall we have seen is investment income, which has been reflected also in our PBT and PAT. Do you have any comments on that why it has it happened? And what that primarily consists of?

[Ashish Kumar Manilal Chauhan]

Nayan?

[Nayan Chandrakant Mehta, Chief Financial Officer]

Yes. So the reason for the sharp fall in investment income is because of the accounting standard, which requires that whenever you invest in any investment, which is not long term, and it doesn't have a fixed maturity, we have to mark-to-market it on a quarterly basis. So this results in a situation that when we do mark-to-market, the market value of the [indiscernible] up and down, depending on the market perception of the rate movement. In the last quarter, especially, what has happened is that the market started anticipating the rise in interest rates across globe. And now whatever is that, that we have invested a lot of money in SMEs, which give us predetermine return, and that comes to us, irrespective of whatever the interim movements are, and that money is one of the bigger number SMB -- period of SMB.Now the other thing is that we [indiscernible] have major funds also. And the thing which we have to keep in mind is that BSE has to invest only in verified securities as far as investment policy. And obviously, no company would like to risk the public fund by bringing investment, which are very risky in nature. So we invest in liquid schemes, and because we're expecting that the rates are likely to rise, we have to keep that in short term also. But because of the yield pressure coming in the month of December, the mark-to-market has gone down, and that's the main reason why you will see that -- you have seen that our investment income has gone down on a consolidated basis. On a standalone basis, the last quarter, we had done INR 90 crores of dividend income from our associates CDSL. So that is the main cause of a big difference, which you are seeing in standalone accounts.

[Unknown Analyst]

All right, sir. That answers my question very well. My second question is regarding that. Is there any way we can monetize the StAR MF better given the tremendous growth we have there along with the lion's market share?

[Ashish Kumar Manilal Chauhan]

In a way, the MC negotiates on where we have. And so after almost 12 years of operations, and the first 9 years of 0 revenues, we have come to a level where we are able to charge. And the competition actually still continues to spend much more money. And this is a very profitable business for us. And so we have come a long way, but we have a longer way to go. So what we have got is, despite what I call cutthroat pricing, which a highly profitable monopolistic competition ends up doing, and despite that, because our services and technology, we are able to give better quality of products. And that's where people have mutual funds, which are, again, highly sensitive on pricing. Our pain and all disputes have been resolved. They have jointly decided on the pricing. And so currently, we'll continue on this framework. Going forward, we'll see how to increase that revenue from different areas.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible] from Samalkha Group.

[Unknown Analyst]

Congratulations for the wonderful set of numbers. My question is with regard to the succession planning for the MD and CEO, what we have been reading in the media and that it might be ending in the next financial year. So how is that lined up?

[Ashish Kumar Manilal Chauhan]

It's a good question. Basically, the new SEBI regulation, which restricts the CEOs come to maximum 2 terms of 5 years each. And so I'll be completing it this calendar year sometimes in the fourth quarter -- early fourth quarter. And so we have already put in place a framework, which the Board is going through as per the SEBI requirements, as for the SEBI SOP, which was jointly decided by exchanges and, in a way, given to the SEBI at least 6 months before the CEO is to retire the selection processes to start. And so BSE as a conservative organization started even before that, and we have applied to SEBI for a specific input from their side. On the other side, the details relating to the sub agencies and all are also going on. So effectively, BSE has formally started its process for hiring a new CEO, and BSE's next layer, what we call Executive Management Committee, is stable and well entrenched into the system. Each of them are more than 7 years old into the system -- 5 to 7 years old into the system. And they have their teams, which are also very highly experienced. And so we have a succession planning for each of the Executive Management Committee member also. So we have a succession planning for the next 3 layers on -- and each person is identified other than the CEO, because CEO selection is a public process, and we have to go for interviewing and advertising for outsiders and so on and so forth. That's why other than the CEO, the succession planning within the organization has been conducted and continues to be conducted every year. People identified to take up places for the people who are retiring or even otherwise. And they get interviewed. The Board and, obviously, the nomination -- and the Nomination Committee also looks into up to a 2-layer kind of a process. So effectively, it's a very well defined process. And for the CEO, the process has already begun. And so as and when a new CEO is selected, of course, there will be some handholding period and so on and so forth. And that is currently the plan.

[Unknown Analyst]

And sir, so you have got the 2-time extension or 1-time extension?

[Ashish Kumar Manilal Chauhan]

Is -- the term day -- I mean, say it again, you can have maximum 2 terms of 5 years each. So this -- I will be completing my second term, which means 1 extension of 5 years. But earlier also, it was 5 years.

[Operator]

[Operator Instructions] The next question is from the line of [ Avino Mehrotra ] from [ Strike Capital Management ].

[Unknown Analyst]

My question is about StAR MF platform. So every loss-making startup is able to find a private investment into this market. But beyond that, sir, last -- in the last conference call, you had mentioned that you will even look into IPO in StAR MF in the IPO market. So is there any progress on that?

[Ashish Kumar Manilal Chauhan]

No. There is no progress.

[Unknown Analyst]

So is it still open? Or is that option [indiscernible]?

[Ashish Kumar Manilal Chauhan]

It's already open.

[Operator]

[Operator Instructions] The next question is from the line of [indiscernible], individual Investor.

[Unknown Shareholder]

So just wanted to check in on another question. So as we have come out with the bonus of 2:1, do we sort of have a hit on the dividend payout ratio for this FY? And do we as an organization continue to sort of look at creating more shareholder value in the coming years with more such decisions like bonuses and all?

[Ashish Kumar Manilal Chauhan]

In a way, basically, we have started policy on dividend that whatever we earn, 95% to 100% on the main company will be issued out as dividend. So that's a clear-cut stated policy, and it will continue. So if the profits continue to grow up, the dividend will continue to grow up, right?

[Unknown Shareholder]

And do you think with the liquidity dying up a bit, will it have an impact on our equity segment? And will it affect our top line in the next FY or in the current quarter?

[Ashish Kumar Manilal Chauhan]

I didn't get the question right.

[Unknown Shareholder]

I said that with the global liquidity coming down a bit and the transaction volumes lowering down on a sequential basis, say, in quarter 4 this year, like with the current global market, do you see that the transaction volume and consequently are the top line getting affected by that?

[Ashish Kumar Manilal Chauhan]

I think it's a matter of conjecture because I always worry about the U.S. market going down drastically just on announcement, and I think that sort happened. So it remains to be seen how these things work out. Although the U.S. interest rates as of now are -- as of now, for term rates, it's 1.965%, which is almost 3x, 300% jump from, say, previous year. And so there has been a lot that has happened, but it is yet unclear whether it is going to generate that kind of, what I call, tightening that is expected. And whether the tightening would reduce the equity prices, that also needs to be seen, right? So these are all matters of conjecture. And usually, being a regulator first, we tend to be more about practical realities and immediate rather than tend to predict future too much.

[Unknown Shareholder]

Yes, yes. And as we were talking about your transition, so is there a cool-off period in the SEBI clause where you currently associate the exchange post your stepping down? Or can you be associated in some other way?

[Ashish Kumar Manilal Chauhan]

No, I can -- in a way, this will all be subject to regulatory requirements and regulatory approvals. And also I -- currently, whatever way it is comfortable for all parties, we will work on it. But first and foremost, we have to find the best suitable person for BSE, and that is what I call of utmost importance.

[Operator]

The next question is from the line of Sri [ Valam ], an individual investor.

[Unknown Shareholder]

Sorry, just last question. I would like to know what BSE is doing to check how interoperability is implemented on broker side. Because we are saying that we are pushing for interoperability, but whether investor can report that there is no interoperability from your end, which whenever we say -- we check the trend, are you going at broker side and validate that from your end? Because I have seen that you have created some SEBI regulatory that if broker doesn't implement this one, then you are charging a fine, something like that, which is fine -- implementing fines and how you are tracking all those things, that's what I was a little bit curious about, if you can put some light on that. That's only the question I have, the last question.

[Ashish Kumar Manilal Chauhan]

Thank you, [ Sri Valam ]. I think it's a very interesting way to look at it. We rely largely on the broker declaration. And also we know the broker using a particular type of software vendor. And so there are versions of particular software, which provides interoperability is tracked. So if they have older version, usually, they wouldn't have the interoperability. And the newer version, they would have the interoperability. That is an assumption. And -- but we use those 2 things, broker declaration and the version used. But when our people go for inspections, they also try to check for that. But it is a good idea that you have given us, that in case any investor wants to complain, we would create a framework on our website for you as an investor to make a complaint against a member who is not giving you either the best price execution, because that's also important, and also interoperability in 2 sense. So -- and you can give us all the proof with the data loaded, and then we can go to the broker and check at a site, whether it is 2 or not. And so I think you've given us a good idea, and we will try to implement that going forward.

[Operator]

Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Anand Sethuraman for closing comments.

[Anand Sethuraman, Research & Policy Advocacy]

Thank you so much for all for attending the call. I think we can just close this call now. Thank you so much.

[Ashish Kumar Manilal Chauhan]

Thank you, everyone. I appreciate.

[Nayan Chandrakant Mehta, Chief Financial Officer]

Thank you.

[Unknown Executive]

Thank you, everyone. Thank you.

[Operator]

On behalf of BSE Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.