BSE Ltd

NSE:BSE

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to BSE Limited Q3 FY '23 Investor Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Sethuraman, Head, Investor Relations, BSE Limited. Thank you, and over to you, sir.

[Anand Sethuraman, executive]

Thank you so much. Good evening, everyone. This is Anand from Investor Relations at BSE, and welcome to BSE's earnings call to discuss Q3 FY '23 results. Before I begin, it gives me great pleasure to welcome Mr. Sundararaman Ramamurthy for his first earnings call with BSE after he took charge as MD and CEO on 4 Jan, 2023. He's a highly motivated leader and a consistent performer with a successful track record of 38 years. Prior to joining BSE, he was the MD and Chief Operating Officer in the Indian arm of Bank of America where his responsibilities included global governance and control of the banking entity in India and the security segment. He has also worked with the National Stock Exchange of India for over 20 years as a senior member since its inception where he was responsible for a significant transformation.Joining him today are the other members of BSE's leadership team, consisting of: Mr. Nayan Mehta, Chief Financial Officer; Mr. Neeraj Kulshrestha, Chief Regulatory Officer; Mr. Sameer Patil, Chief Business Officer; Mr. Girish Joshi, Chief Trading Operations and Listing Sales; Mr. Kersi Tavadia, Chief Information Officer; and Mrs. Kamala K., Chief Risk Officer.Do note that this 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 once again 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. And any forward-looking statements that we make on this call today, are based on assumptions, and BSE assumes no obligation to update these statements as a result of new information or future events.I would now request Shri Sundararaman Ramamurthy, MD and CEO, to give a brief overview of the company's financial and business performance. This session will conclude with a Q&A session. Thank you [ so much ].

[Sundararaman Ramamurthy, executive]

Thank you, Anand. Good evening, everyone, and thanks for joining the call today. Indeed, I'm honored and excited to be here as the new MD and CEO of BSE. I'm very well aware of the challenges that lie ahead, but I can assure you that all of us at BSE are working very hard to drive the success of this organization. Let me first start with the financial update. I'm happy to inform you that despite the volatile market conditions, BSE Group delivered a growth of 12% in total revenues of INR 245 crores for Q3 FY 2023 as compared to INR 218.6 crores in the corresponding quarter of last year. Similarly, BSE's operational revenues have grown by 6% to INR 204 crores from INR 193 crores, the net profit attributable to shareholders of the company standing at INR 52 crores as compared to INR 61 crores.This decline is because of added contribution to the core Settlement Guarantee Fund, we call it as Core SGF here, to the tune of INR 16 crores at a consolidated level, which is an increase of 83% year-on-year. This is on account of increase, or rather added contribution to the equity and currency derivatives segment.If we talk on consolidated financials now. I would now share some of the key financial numbers on a consolidated basis for the quarter ended December 31, 2022, as compared to the corresponding quarter of previous year.The clearing and settlement operational revenues increased by 57% to INR 18 crores from [indiscernible] [ INR 11.6 crores ]. Treasury income from clearing and settlement funds has increased by 53% to INR 22 crores from INR 14 crores. Other operating revenue, which includes data determination fees, training income and software income, has increased by 21% to INR 18 crores from INR 15 crores. Investment income increased by 70% to INR 35 crores from INR 20 crores.The operating EBITDA has reduced to INR 39 crores from INR 57.7 crores, with operating EBITDA margin reducing to 19% from 30% earlier. The net profit margin stands at 19% as against 27% earlier due to increase in computer technology-related expenses, and increase in Core SGF, as stated earlier.On the business side, let me start by covering our primary market segment. Fundraising by India Inc. is well off last year's case as geopolitical uncertainty along with other macro factors affected the IPO sentiment. Notwithstanding the revision and your listing fee with effect from April 1, 2022, a slight uptick in annual listing related income is seen.Overall, BSE contributes to the -- sorry, overall, BSE continues to be the market leader for fundraising by India Inc. with a share of 60% for equity public issues, 84% for debt public issues, having enabled issuers to raise INR 3.9 lakh crores. The IPO momentum of 2021 has not carried over to 2022 so far, which has resulted in lower book building income for the quarter.India's equity markets faced various headwinds after record-breaking turnover levels in 2022. Facing the challenges of the current market environment, BSE's performance in trading segments were muted, but the mutual fund segment continued to demonstrate strong growth.For the quarter ended December 31, 2022, the average daily turnover in equity cash segment stands at INR 4,234 crores, which is down 11% as compared to the previous quarter. The average daily turnover in equity derivatives segment stands at INR 1.97 lakh crores, down 13% as compared to the previous quarter. The average daily turnover in the currency derivatives segment stands at INR 26,246 crores, down 18% as compared to the previous quarter.BSE StAR MF, India's largest mutual fund distribution platform, continues to grow at a remarkable pace, its total number of transactions growing by 37% to reach 6.9 crores transactions during the quarter from 5 crores in the same period last year.The platform continues to scale new peaks in terms of transactions, with platforms progressing a new high of 37.75 lakh transactions in a single day and a new monthly high of 2.44 crore transaction in December '22, and then once again, with 2.5 crores transaction in Jan, 2023. Overall, the platform achieved 101% of the transactions processed within 9 months, 18.7 crores so far in FY '22, '23 as compared to 18.5 crores transactions during FY '21, '22.Now I shall cover development at our subsidiary companies. India International Exchange at IFSC. The average daily trading turnover in India INX, the BSE promoted International Exchange at Gift City, Gandhinagar, stands at USD 18 billion with a market share of 95% for the quarter ended December 31, 2022. India INX has about USD 70 billion medium term notes established and about USD 50 billion of bond listings till date.India INX Global Access platform for investors wanting to invest in global securities, has grown to reach a trading turnover of USD 7,369 million, that is $7.4 billion for the quarter ended December 2022.Insurance Broking. On the insurance distribution front, BSE Ebix Insurance Broking where BSE holds a 40% stake through its subsidiary, BSE Investments Limited, is now integrated with 26 insurance companies. The total premium collected is INR 17.1 crores for the 9 months ended December 31, 2022, a growth of 84% from the same period last year.BSE E-Agricultural Markets, we call it as BEAM, a transparent commodity spot trading platform to facilitate spot commodities transactions across the value chain, has now enrolled 1,220 members and executed trades worth INR 43.7 crores in agri and steel segments on the platform during the quarter ended December 31, 2022. The company is working closely with several state governments and their agencies for direct procurement and disposal of commodities.Power Exchange. The trading at Hindustan Power Exchange where BSE has a stake of 22.61% through its wholly owned subsidiary BSE investments, has been relatively modest, and the exchange is continually onboarding new members and exploring new products to be launched, which can result in higher volumes going forward.Before I conclude, I can confirm that the Board of the BSE, the meeting held today has approved the divestment of 2.5% of BSE's stake in Central Depository Services Limited, CDSL, towards meeting regulatory norms.In closing, overall, I believe, we reported a sustained third quarter results amidst a difficult market environment. 2022 was a period of transition for the BSE, and as we embark on a new journey in the new financial year, I believe that a balanced business model will enable us to grow much higher. We are confident of rising to the current challenges and take BSE to newer heights.With these updates, I now hand over the call back to Anand. Anand?

[Anand Sethuraman, executive]

Thank you, sir, for the updates. With this overview, let me now welcome you all once again for the Q&A session. Handling over call to [ Yashasi ].

[Operator]

[Operator Instructions] We have a first question from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

First question to you is on, what are the initial focus areas for you to take BSE to new heights? What will be the key focus areas for you, say in -- the top 3 or 4 things that you would be focusing on? That would be my first question.

[Sundararaman Ramamurthy, executive]

So initial focus areas. What I find is, BSE today has its presence felt in equities and currency. To start with, therefore, my focus area will be to ensure that we are able to concentrate on equity and grow our market share there. The second area will certainly be currency where we have some presence, which we can build upon. That's a short answer. If there are further questions, I can elaborate on them.

[Prayesh Jain, analyst]

One of the key drivers for the business as of -- for the exchanges has obviously been the equity derivatives segment where the actual growth has been coming. The margin norms have really hit hard the cash segment, and the growth has kind of moved from cash to derivatives. So how would you think that BSE can at least garner some market share on the derivative side?

[Sundararaman Ramamurthy, executive]

Yes. That's a very, very sad question. So since you asked for initial focus areas I mentioned equity and currency. And, of course, actually, I should have mentioned one more segment there, which is mutual fund. That's the initial focus area because we have some foothold there. So to develop something there, we have a foothold, becomes easier. And in equity derivatives at this point of time, I find BSE is not having much of a foothold. We need to develop it, while that will be certainly remaining as a focus area, such we will have to strengthen our foothold in equity and currency derivatives and mutual fund where we have a good market share.And as a follow-on and as a process along with equity, since they are related, equity derivatives will be built over a period of time, first concentrating on Sensex, as Sensex is a brand which is known to the entire world and has its [indiscernible] and value and a lot of recall. So that will be the next focus area.

[Prayesh Jain, analyst]

The second question is on this -- more on the financials. This Settlement Guarantee Fund, the increase -- the contribution that has been coming through in the previous quarter as well and in this quarter as well, now, how do we see this going ahead? How should we kind of read into this and how should we kind of module for this? This becomes an element which we are not able to kind of figure it out.

[Nayan Mehta, executive]

Just Settlement Guarantee Fund, as we had put in our earlier meetings also, this fund contitution and increment contribution is dependent on many factors, which include volatility in market, business volumes increase, concentration of positions and many, many other things, and it is determined by an algo on a monthly basis. So to that extent, you would recall, even our earlier MD had said that when we make additional contribution to SGF, that's a sign of progress as far as business is concerned. So while it might look as a hit on our P&L for the company, but it's a one-time hit, wherever it comes. And it comes on increments. When we move onto the next level of business, obviously, there will be some incremental SGF which would come. As of -- sitting today, it is very difficult for anybody, means an analyst or the management itself, to determine as to how much movement or incremental contribution will be there in SGF from year to year.

[Prayesh Jain, analyst]

It is -- extending that point. So if you look at the cash volumes that are down for you, derivatives, we don't have too much of volumes. So what actually drove this incremental settlement guarantee fund? October and November was very weak month and even December were very -- was a very weak month for cash volumes. So just try and explain me as to what really caused this SGF contribution?

[Nayan Mehta, executive]

Yes. Prayesh, in this year, obviously, we also contributed some SGF amount towards Electronic Gold Receipts, which was a new contribution, minimum base contribution required by SEBI. At the same time, currency derivative volumes increased during this year. So obviously, those volumes [ precipitated ] that we do some contribution towards the same. And again, as the number of people -- number of members increase in our clearing corporation, obviously, that's also a big reason why that position led to incremental SGF contribution.

[Prayesh Jain, analyst]

And my last question is on CDSL. We have to reduce it to 15%, right?

[Sundararaman Ramamurthy, executive]

Yes. We have to reduce it to -- it's a very correct question. We have to reduce it to 20% --

[Nayan Mehta, executive]

15%.

[Sundararaman Ramamurthy, executive]

Sorry, 15%. So we are -- we will be getting towards that. There is a regulatory time limit available. So we will offload in transfers to ensure it's a smooth transition.

[Prayesh Jain, analyst]

What is the time limit for that?

[Nayan Mehta, executive]

We have to do it by 2nd October.

[Prayesh Jain, analyst]

22nd October you said 55% stake, August, 2.5% you'll be doing now?

[Nayan Mehta, executive]

That's what has been approved by the board today.

[Operator]

[Operator Instructions] We have a question from the line of Vikram Kotak from Ace Landsdowne Investments.

[Vikram Kotak, analyst]

And my one question has been answered by you in earlier question. The other question which I have for Nayan or you, that, how do we set up this guarantee fund contribution which you are doing by way of increased charges? Because these numbers are looking like a very big number compared to our revenue. So how do we -- what are mechanism to kind of set up this? Do we increase charges or any other way to do it?

[Sundararaman Ramamurthy, executive]

I'll tell you in one particular way. It's just that, when you look at contribution to SGF, you are looking at the expense side, but, means, in the consolidated -- obviously, it doesn't come in the face of the -- this result. It's just that our income from trading corporation has increased quite significantly over the last 1 year, and that is in terms of the margins and deposits which we have got, and also in terms of the transaction charges which our trading corporation has collected. So it's not that it is a one-way expense. There is a corresponding benefit which is coming to BSE, which is getting accounted in our financials.

[Vikram Kotak, analyst]

So you mean then by that it's higher than the contribution which you're doing according to you [indiscernible]?

[Sundararaman Ramamurthy, executive]

In some quarters it'll be high. In some quarters there will be much significant higher contribution. But overall, each SGF contribution increment over a period of time leads to an incremental revenue flow for us.

[Operator]

We have our next question from the line of Santosh Kumar Keshari from Keshri Wealth.

[Santosh Keshari, analyst]

So I have 2 questions. One question is about CDSL divestment that we are doing now. So I wonder that even the time line could have been better because now the market conditions are not good and previously also at most 2-week low. So the realization that BSE is going to get a get against this investment would be much lesser than what we would have had it been setting a year or so back. That's one. Even last time when BSE divested 2.5% from 22% to 20%, they sold at INR 220 a share. After that, the prices [ tuned ] up to something like INR 1,500, INR 1,700 level. So it's a little [ whickering ] to realize that as a shareholder, we are not earning as much from the divestment as the market participants were buying from the offloading of shares by BSE and getting to -- like a lot better profit. That's my first question.

[Sundararaman Ramamurthy, executive]

Yes. So let me give one reply. I don't know how much that will satisfy you. If it doesn't, I will ask Nayan to add. As exchange -- and we want to offload, we have to look at it from multiple perspective. Of course, the return maximization is always there in everybody's mind who has invested into any stock. But as an exchange and we do it, it is also the question of we have to realize, we will not be able to time the market. That is difficult for anybody for this matter. And for exchange it is much more difficult because we need to follow multiple internal and external process of taking approvals before we go to the market. So we will not be able to time the market. In hindsight, it may sometimes come across as a very good move, or probably move that we should have waited. It can come across. So that will be the sum and substance of it. So that's why always things are done in tranches over a period of time to ensure that we are taking care as much as we can in respect of return maximization without being – without having the capability to timing the market. Nayan, you want to add something?

[Nayan Mehta, executive]

No, I perfectly agree with you. We cannot set in -- there's no way anybody can actually time, not about us.

[Sundararaman Ramamurthy, executive]

So the difficulty is there. But your point is valid. Always one should expect to maximize returns. Sometimes it doesn't work for us because we are not able to do that in terms of managing the time.

[Santosh Keshari, analyst]

Yes. I know that, but the point is that this is the second time on the [ plot ] that BSE is not able to realize. But anyway, I take that point. Now my second question is about SGF. So, though many participants raised the question. I just had one limited point, and that is that, the interest that we have now out of SGF, does that accrue to the BSE P&L, or it is earmarked to the fund and it gets collated there? So how does it happen?

[Nayan Mehta, executive]

No. So the interest which is earned in the Settlement Guarantee Fund, remains in that fund, and it is not considered as income in standalone or consolidated accounts.

[Santosh Keshari, analyst]

So you think that is a cost of doing business, right, the contribution to SGF?

[Nayan Mehta, executive]

Yes. And this is obviously according to the current regulations which -- SEBI regulations which we have to follow.

[Sundararaman Ramamurthy, executive]

Yes, just to add to what Nayan is saying, the contributions to SGF, the competition are all regulatorily defined and it goes according to that. Therefore, when NSE contributes this -- the money to SGF which is held by ICCL, any amount of interest earned from the fund has to be retained in the fund as a regulatory requirement.

[Operator]

[Operator Instructions] We have out next question from the line of Amit Chandra from HDFC Securities.

[Amit Chandra, analyst]

Sir, my first question is on the area of investments that we have been going into, the new areas of growth. So we have been investing into the INX, in the commodities, and also into various new products, which are in trial phase or inception phase or initial phases, but not generating any return since, like many years. So what is our strategy there in terms of monetizing these areas where there is scope to generate like revenues, like maybe in the next 1 year? So which areas you think is promising and now you should start monetizing?

[Sundararaman Ramamurthy, executive]

It's a very good question. Some of the investments that we make will be oriented towards national development and overall economic development in mind, which will be the driving force. As a responsible MII, we will be doing some of them like that. To just give you the example of Gift City. When we look at Gift City, we are trying to promote an exchange, which will be the face of India for all the foreigners to help them participate in this country's market and not allowing the Indian markets to be exported outside India. That is the idea behind that. And that is the reason why it's at a very senior level everywhere, thought about has a very good requirement for the country as well for development. And that's the reason why BSE has been the first exchange to get that, to set up its own exchange and clearing corporation there. And it is growing in terms of its size and all.Does it give that money to us in return at this point of time? These ventures many a times, as you will appreciate, has slightly long-term gestation period. Some of the things like our mutual fund platform, if you look at it with minimum investment, it is giving maximum revenue in a short term. Some of these investments like Gift City and all where it's a new proof of concept which we need to provide to the market, takes time. That is the reason why MIIs have to get into it because it cannot be taken totally as a commercial venture alone. It may -- it will be commercial results, but it is a question of time where, after the gestation period only you'll be able to reap the benefit.The same thing will be applicable to Power Exchange or agri markets. You know agri market require a lot of development. How much it can help in national economic development by helping the farmers, we all know that. But it takes time to be -- bring in people, changing behavior, making them understand.So if you ask me, within 1 year, you will be divesting something and making money, it may not be wise to do that in 1 year to divest some of investments. Some of them will be making good sense. Like, for example, take the case of CDSL, which we invested quite some time before. Today, it is [ reaping ] a lot of results. It's a question of we waiting, permitting it to grow, supporting it to grow and then reap the benefit. The same thing will happen with every one of these investments because they are well thought out investments, just not only as a commercial venture, but also as a contribution to the society. That's the way I look at it.

[Amit Chandra, analyst]

And also, sir, you mentioned about [ now ] focusing on the cash and the currency side and also on the derivative side. But this strategy has been there for the last many years, and we have been trying to gain market share in cash with [ pride ] in derivatives. We attained some success there. But again, we are back to around 1% market share. So what has to be done differently there to gain market share? Or I think it's an area where it's very difficult to get some market share [ finally ] because it's going -- it's actually getting bigger and stronger. So what's the views there?

[Sundararaman Ramamurthy, executive]

It's a fair question, but I'm sure you will appreciate, it's just 1 month for me now on the exchange. Notwithstanding that I will try and reply you. Well, it is true that there has been lot of efforts put on by the market and the regulator to ensure -- there are 2 exchanges at least in India. I'm not looking at it as –-Put it differently. I'm not just looking it as growing BSE's market share. You look at it from a slightly macro perspective. Do you require only one exchange in India, do you require to have 2 exchanges in India? One need not be 50% -- 50% is not what probably we'll look at it. But other exchange should be vibrant to take care of many of the needs whenever any circumstance warranted.But I'm sure, principally, everybody has greased now. Principally, people all see having a single exchange is not a good idea. If we start talking in terms of -- in many countries, it's only a single exchange, single -- like why in India there should be more than one exchange. That question no longer remains the question. I think the answer is clear in many people's mind as to why you require more than 1 exchange, which has to be vibrant in existence. So when principally everybody is in agreement, what is the effort going on to ensure the vibrancy for the second exchange, why is this falling short, what can we do to attack it, help it to grow, is the question. That becomes the strategy.What I find is, while Intraday interoperability is required for MIIs, which is not totally implemented by all members for the clients. I think that is a very important requirement. So this is one idea I'm talking about. So we will be reviewing all the areas, and we will be coming out with some product differentiation.In the coming days, you will get to see -- as I told you, it is just 1 month and 2 days in terms of number of days and in the -- [ their ] number of days in office is just 20 days. You will see certainly some product differentiation happening in cash market and in currency. Everywhere you will see. And you will find these are new products being talked about. So -- and you will also see that we going and advocating to the system developers, to the brokers and to the clients, how -- if there were to be 2 vibrant exchanges, it will be on a day-to-day basis helpful for them.For example, if somebody as a client finds a better price in BSE to buy and after sometime he finds a better price in NSE, if the brokers do not enable Intraday interoperability at the front end for clients, they're not going to do it. If they're not going to do it, it's just not BSE losing volume, it's actually the client not making money and the broker not making money.You will earn the money. If the market is on a turmoil, if there is this type of an arbitrage facilitated, don't you think the price decline will be arrested, because now there is clearly a price finding very imminently happening, and very fast off happening. If it does not happen, you'll find the stock declining in a very faster pace to touch the bottom and then climbing up slowly back in one exchange. I hope to understand what I mean.So to cut a long story short, give me some time, I'm reviewing things. Certainly, you will find new product differentiation, product approvals coming in place, and we're talking to brokers to strengthen the entire vibrancy of second exchange. I would not call it as making BSE market share more, providing a vibrant exchange to the economy is today our prime motive.

[Amit Chandra, analyst]

And sir, my last question would be on, what are we planning with the cash that we get from CDSL? So will it be used for investments or will be used for higher shareholder payout?

[Sundararaman Ramamurthy, executive]

So it's a very, very important question that you are asking. See, the question of utilizing the process towards further building capability to deliver to the shareholders or to make payments, will also be governed by regulatory restrictions as to how much what we can do. Clearly, the intention will be to put the money to use for shareholders' benefits. That would be the driving force because it is the shareholders' money which has gone in as an investment. But the what is coming back. The effort will be within the 4 walls of resonation, whatever permitted will be to maximize or rather optimize shareholders' wealth. That will be the goal with which we will be working.

[Operator]

[Operator Instructions] We have a next question from the line of Prayesh Jain from Motilal Oswal Financial Services.

[Prayesh Jain, analyst]

Sir, just a couple of questions on financials. So if I look at depreciation is at INR 17 crores versus much lower run rate in the previous quarters. So what is the reason for the same?

[Nayan Mehta, executive]

Prayesh, in the current year, there have been a lot of investments in IT, hardware and software. So that has resulted in higher depreciation. So that is the -- one of the major results for increase in depreciation.

[Prayesh Jain, analyst]

Secondly, on the tax rate, it's been much higher at -- in the previous quarter, 32%, in this quarter, 33%. How should we think about this tax rate? I mean going ahead, how should we look at it?

[Nayan Mehta, executive]

For going forward, Prayesh, you can consider 33% to 35% as the normal rate for us. The reason being that we are currently offsetting our [ bad ] credit which is available with us. And for that percent -- for that reason, whatever -- means all our focus is towards earning taxable income and -- which attracts the maximum tax rate to utilize the max credit.

[Prayesh Jain, analyst]

And just one last question, a follow-up question on the previous one, was the StAR investment. We have earlier kind of hinted at selling that asset completely. Any thoughts -- incremental thoughts out there under the new CEO?

[Sundararaman Ramamurthy, executive]

This is a good question. But look at it this way -- the entire retail in a big way is looking towards mutual funds this way these days. If you look at it, when FIIs, or rather FTIs, some part of last calendar year, they were exiting India for whatever volatile reasons. We find that suddenly the mutual fund contribution is increasing, right? So there is a good amount of penetration which is happening towards mutual funds because of the clear attraction. So as an individual, I want to have a balanced portfolio to buy 20 shares and 30 shares and create the portfolio, manage it, monitor it. It's not going to be easy for me. As a small investor -- and more and more the financial conscience and the financial literacy increase, I think that mutual fund transactions are going to go up.If that is the case, is it right time to think about divesting and coming out of it? Or is it that we should grow it more organically? Because these were all linked, right? So the mutual fund transition will get linked with multiple things. So should we look at and explore all those areas, what will be on the interest of shareholders and what will create value for the shareholders, is one question which repeatedly comes to my mind. While I may not have clear answers, at this point of time, my inner feeling is that we should do more to develop this -- even bigger platform.The amount -- see, you saw a lot of new highs we are touching on a daily basis. If this is what it is, clearly, the market is loving the product, and clearly, the market feels that we are serving them. That's why they are coming to us, right? So if that is the faith that the [ company ] meeting is reporting on you, is it that you should grow on that faith, or you should encash it, is one question which comes to me repeatedly.I feel at this point of time, the indication is more towards -- now I'm just putting some efforts to see how do we grow it. Well, this is today's view. As some time before Anand said, the factors may be different, and where [ you ] maybe first. But at this point of time, this is a very encouraging area where the faith and love and affection shown by the market to a platform is very high. I'm sure you agree with me.

[Prayesh Jain, analyst]

Yes, absolutely, and mutual fund investment is something which we -- the entire industry is looking forward to. But the challenge is the regulator seems to be kind of in a move to even hit the commissions and distribution expenses out there. So do you see any challenge on your expenses or on your charges that you levy today? Do you see any challenges to sustain those levels? Or do you think that, that should be coming down?

[Sundararaman Ramamurthy, executive]

See, that could be sort of speculative for me to say. I wouldn't know. And whatever -- see, we are working under a regulated atmosphere. Within the regulated atmosphere, we need to deliver value to the investors of us and the investors in the market. We will strive hard there. And we will ensure that we will do things which will benefit everybody, the market, us and the shareholders.

[Operator]

We have our next question from the line of Vikas Kasturi from Focus Capital.

[Vikas Kasturi, analyst]

Sir, I had a few questions regarding StAR MF. So if you could just help me understand a few nuances of this business, sir. So for example, I believe, one clear tailwind for this business is that there is a shift from paper-based application or paper-based transaction to a more digital kind of a transaction. So -- and I have been totally surprised, because every quarter I see a new StAR MF hitting a new high. So I am just wondering, sir, out of the total universe of all mutual fund transactions, approximately what percentage would go to StAR MF?

[Sundararaman Ramamurthy, executive]

About 50%, that's what is my rough estimate.

[Nayan Mehta, executive]

If you [ look ] at the entire universe, about 50% of the transaction goes today through the StAR MF platform. More than 50%.

[Vikas Kasturi, analyst]

And so, the other question is, sir, what is stopping the other 50%? As in, have we not reached those [ towns ]? Or what is stopping the other 50%, sir?

[Sundararaman Ramamurthy, executive]

No, not necessarily stopping. It's like this, you see. Today, even -- just to go back to the era where you did not have StAR MF, right. So some people still prefer to invest only directly, right? So they may go to individual mutual fund websites, register themselves, maintain a user ID, password, very stringently and regularly every second month change it. They like to do that. So that is some type of [ stable ] -- that's what they are used to for the ages. And they do not want the -- they feel that if they directly invest, the return for them is some 2 basis points more. That is one class of investors, and they will continue to be that way. And there are some people who want to go to a single bank and open a bank account and a demat account and a trading account under their trading securities and also which was one with the same bank account.And they have a relationship manager attached to them and the relationship manager comes and tells, you change this portfolio, you do this, you do that, and he gives an advice, and they say yes to him and he goes and does it in the same platform. So that is one of the types of investors. So these are all standard sets of people who have been in existence for quite some time.Now you are having a new paradigm. You are bringing in an exchange platform where you are using the distributor and trading members who are used to this type of platform to make more and more people understand this and access this. So these are all the new set of people in my opinion, you are coming in. That's why you'll, always in my opinion, have all types of people. Like for example, there are some to go to Kirana stores, some people who will go to a mall, some people will do online order entry for getting even their groceries.So I think it's -- this multiplicity of the market is what is making it vibrant and interesting, and I think that will continue. I think we will not be able to say that some point of time 100% of the volume of all mutual fund transactions will come only through StAR MF, because people with different requirements and different preferences will continue to exist. That's actually what in my opinion, helps in innovation. That's what I see in this. I'm not sure how much you agree with me.

[Vikas Kasturi, analyst]

Sir, a related question on StAR MF. So is there -- so does this bring in some sort of stickiness for the mutual fund distributors? Suppose he has 10 clients and he uses StAR MF for his transaction, so is he kind of getting locked into the StAR MF in any way, sir?

[Sundararaman Ramamurthy, executive]

I feel so, because what happens is -- see today, everything is technology. So if somebody is bringing their clients into it, they need to also develop something from that front end. Every technology is an investment. So there is a cost associated with it. So people would like to maximize the benefit arising out of it. So minimally, there is clearly -- and also the clear -- some of the activities which they need to do, they are able to depend on the exchange platform to get that done for them, right? So clearly, there is a benefit for the investor because it's one-stop shop all, right? And for the distributor, it becomes helpful because part of his work is being taken care of by the MII which is operating at. And for MII it's beneficial because it is bringing in more clients to it. Slowly and steadily, they'll also start looking at BSE equities. So there is a synergy capability available here. It's a big set of clientele whom you are serving. Some point of time this may fill over to other segments as well. I t's a question of time. It's a question of how we put it across. So I think -- to answer your question shortly, I feel there is stickiness and that's why people are building on it, and that's why it's growing.

[Vikas Kasturi, analyst]

And one last comment from my side, not a question, but more like a comment. Sir, I've been a shareholder of BSE for over 4 years now. And so, my request to you is that there is a -- please continue to invest in newer products because these tend to give us exponential growth, like StAR MF and CDSL have shown us. So that's just my humble request to you, sir.

[Sundararaman Ramamurthy, executive]

No. Our humble pronounce to you, sir, continue to be our shareholders. We really appreciate the faith that you are reporting in us, and it is our promise that we will do whatever we can in our powers to ensure that your interest is taking care of, and we will certainly always be looking for newer products through which we can serve the market and serve our investors.

[Operator]

[Operator Instructions] We have a next question from the line of Santosh Kumar Keshari from Keshri Wealth. [Technical Difficulty] You can get back to the queue.I would now like to hand the conference over to Mr. Anand Sethuraman for closing comments. Over to you, sir.

[Anand Sethuraman, executive]

Thank you, everyone, for all your questions. Should you have any further questions or requests for any particular data as such, please write to us at [e-mail]. With this, we would like to conclude this call. Thank you.

[Sundararaman Ramamurthy, executive]

Thanks, everybody, for your interest in us. Thank you so much.

[Operator]

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