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BSE Ltd
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Hello, everyone, and welcome to BSE's earnings call to discuss Q4 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; and Mr. Neeraj Kulshrestha, Chief Regulatory Officer. Please 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 presentations 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 the future for -- which could be construed as a forward-looking statement, must be reviewed in conjunction with the risk that company faces. With that, I would like to turn the call to Mr. Ashish Kumar Chauhan.
Thank you, Yogesh. Good morning, good afternoon and good evening to all of you wherever you are. Please accept my apologies for starting this conference call a little late. I have the pleasure to inform you that the Board of Directors of BSE Limited has recommended a final dividend for financial year 2019/'20 of INR 17 per equity share, having a face value of INR 2 each subject to approval of shareholders in an ensuing Annual General Meeting. The total payout would be INR 77.87 crores, and the dividend payout ratio is 95% of the current year profits, excluding the gain on part equity stake sale of Central Depositive Services Limited. Let me start by providing you with certain updates on our business and operations. As it has been discussed in earlier calls, certain provisions were made in our earlier quarters considering that negotiations with many mutual funds with respect to transaction posting rates were in progress and an amount deemed to be reasonable was provided in respective quarters. Due to onset of COVID-19 in India, global economies have suffered severely and investments, including mutual funds, are significantly adversely affected. In view of the same, mutual funds have undertaken severe cost-cutting measures. Considering the competitive pressure as well as the current economic and business scenario, BSE agreed to accept lower rates. And this has resulted in less-than-commensurate growth of income in StAR Mutual Fund platform, notwithstanding the [ suspended ] growth in total number of orders processed in this platform. The agreement has resulted in lending a lot of certainty for future planning and growth in this segment going forward. The total number of orders processed in Mutual Fund segment has risen by 60% to 575 lakhs during the year ended 31st March 2020 as compared to 360 lakhs in corresponding previous year. The platform received a record 70.36 lakh orders in the month of March 2020, surpassing the previous best record of 54.43 lakh orders in the month of January 2020. The total number of orders received in the month of March 2020 were higher by 86% as compared with the orders received in the month of March 2019. In spite of COVID-19, the platform has processed a record 11.58 lakh transactions on a single day on 13th April 2020, surpassing the previous best record of 10.10 lakh transactions on February 10, 2020. Continuing the growth momentum, the platform contributed 61% in net equity flow of INR 3,806 crore out of the entire MF industry's total of INR 6,212 crore in April 2020. The total number of X-SIPs registered under this segment increased by 52% to 24.37 lakhs for the year ended 31st March 2020 from 16.06 lakhs for the year ended 31st March 2019. The total value of orders processed in the Mutual Fund segment increased by 39% to INR 2.3 lakhs -- INR 2.23 lakh crore for the year ended 31st March 2020 from INR 1.61 lakh crore for the year ended 31st March 2019. BSE had launched BSE StAR MF in May 2019 for mobile to enable mutual fund distribution to process transactions on the go. The app has been well received by the investment community, and it has processed over 4.47 lakh transactions until 30th April 2020. BSE's relentless scaling up of the mutual fund distribution and IFAs network, along with its technology, drives the growth in the BSE StAR MF platform. During the period from January 2020 to April 2020, BSE has appointed 1,450 IFAs and members taking the total to 57,060 as on April 30, 2020. This network is over and above BSE's 1,400 members, backed by over 2 lakh authorized representatives covering the length and breadth of the country. The income earned in the StAR MF segment increased by 54% to INR 44.74 crore for the year ended 31st March 2020 from INR 29.02 crore for the year ended 31st March 2019. Income earned in this segment has contributed to 20% of the revenue from operations for the year ended 31st March 2020 as compared to 8% of the revenue from operations for the year ended 31st March 2019. Seeing it differently, the income earned in the StAR MF segment now is equivalent to 66% of the income earned by BSE in its equity segment during that period. BSE continues to remain positive on growth of this segment. BSE's market share in this segment for the year ended 31st March 2020 stands at 74%. BSE also has got recently approval from SEBI to start eKYC in the various segments, including the StAR MF segment. And BSE has also started collecting commissions on behalf of the IFAs who agree for the AMCs who agree to provide this commission through BSE, which will also become an interesting way to add additional income. Insurance broking. You would be glad to know that BSE-Ebix Insurance Broking Ltd -- Pvt. Ltd., a joint venture of BSE with Ebix Exchange Pvt., Ltd., obtained an insurance broking license from insurance regulator, Insurance Regulatory and Development Authority of India, IRDAI. The company successfully beta launched its operation on February 7, 2020, and has booked more than 200 policies until date. The number of 35 points of sales have crossed above 500. The company collected highest-ever fresh premium of INR 6.18 lakh, of which highest collection in a single day of INR 1.1 lakh on 16th March 2020. It is expected that the network of insurance broking business and mutual fund distribution platform shall complement and leverage each other for strong growth over time. BSE holds equity stake of 40% through its subsidiary, BSE Investments Limited. The turnover at BSE's subsidiary, India International Exchange Ltd., also known as India INX at GIFT City, Gandhinagar, IFSC, has been growing at a fast pace. Average daily turnover in India INX witnessed a growth of 195% to USD 2.2 billion for the year ended March 31, 2020, from USD 766 million for the year ended 31st March 2019. The turnover comprises of significant contribution by Equity Derivatives segment. Equity Derivatives segment contributed 93% of average daily turnover, and Commodities Derivatives segment contributed 7% of average daily turnover for the year ended March 31, 2020. India INX is the dominant IFSC exchange in GIFT City with a market share of about 82% in derivatives trading and 100% in bond listing in GIFT City. During the March 2019 quarter, approximately 37% of Indian issuers of debt securities in international markets have already listed on India INX Global Securities Market. On May 8, 2020, Honorable Finance Minister Shrimati Nirmala Sitharaman inaugurated Rupee Dollar Derivatives on India International Exchange, India INX, India's first international exchange based on IFSC at Gujarat. The launch was done virtually by the Honorable Finance Minister, where she rang the bell electronically and declared Rupee-Dollar Futures and Options contract open for trading on INX. The volume in Rupee Dollar Derivatives contract is very encouraging. The average daily turnover in Rupee-Dollar Futures and Options contract until 19th May is USD 55 million and USD 18 million, respectively. The Finance Ministry established the International Financial Services Centre Authority through a notification in April 2020. The body will be headquartered in Gandhinagar, Gujarat as per the notification. The main function of the authority will be to regulate financial products such as securities, deposits or contracts of insurance, financial services and financial institutions, which have been previously approved by appropriate regulator in IFSC. Currently, the banking, capital markets and insurance sectors are regulated by respective regulators such as SEBI, RBI, IRDAI, PFRDA, et cetera. The Currency Derivatives segment of BSE continues to provide a very liquid platform for trading in currencies. The average daily turnover for Currency Futures segment for the year ended 31st March 2020, was INR 11,740 crore, and the average daily turnover in the Options segment for the year ended 31st March 2020, was INR 15,763 crore. BSE's market share for the said period was 40%. On January 27, 2020, BSE signed a licensing agreement with Intercontinental Exchange, a leading operator of global exchanges and clearinghouses and provider of data and listing services for the use of ICE Brent Index at the final settlement price for the BSE's Rupee-denominated Brent futures contract. In the Commodity Derivatives segment, BSE facilitates trading in derivatives of gold, silver, Oman crude, copper, guar seed, guar gum, cotton futures, turmeric, castor seed, chana, soybean and energy Brent crude. In a short span of a year, BSE has become the dominant exchange for trading in derivatives of cotton with a market share of 23% and guar seed with a market share of 25% for the year ending 31st March 2020. The total number of members admitted in this segment is 277. Average daily turnover in the commodity segment for the year ended 31st March 2020, was INR 203 crore. BSE SME platform has 322 companies listed on its platform as on 30th April 2020. Further, the number of companies listed on the same platform have grown by 10% over past 1 year from 291 as on 31st March 2019. Of the total number of companies listed in BSE SME platform, 79 companies migrated to the BSE Mainboard as of 31st March 2020. The total market capitalization of companies listed on SME platform as on 31st March was INR 15,270 crore, and total funds raised was INR 3,318 crore. The company listed on BSE SME segment have shown outstanding growth over the last 7 years. SME IPO Index that was launched on 14th December 2012, base has increased by 1,265% to 1,365 as on March 31, 2020. BSE market share in listing of companies in SME segment stood at 60% plus as of March 31, 2020. BSE launched a platform for Electronic Book Mechanism, BSE Bond, on July 1, 2016. This platform facilitates the issuance of debt securities on a private placement basis. Issuers in this segment include renowned corporates from public as well as private sector in India. During the year ended 31st March 2020, 450 issuers successfully raised over INR 3.5 lakh crore through this platform. BSE's market share for the said platform stands at 58.4%. BSE continues to be an institution for capital formation in India. The total debt raised in this platform until date has crossed INR 11.17 lakh crore as of March 31, 2020. The trading volume in the equity segment at BSE has generally been 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 internally. By the level of activity in capital markets in India, BSE's equity segment has stabilized and Equity Derivatives segment is also growing, reflecting the quarter-to-quarter improvement in the operational performance of the company. Average daily turnover during the quarter ended 31st March was INR 3,024 crore as compared to INR 2,535 crore in the previous quarter. Over the last few quarters, equity derivatives business has been focused, and the average daily turnover during the quarter ended 31st March 2020 was INR 3,639 crore as compared to INR 475 crore in the previous quarter. BSE shall continue to make further efforts to increase business in the Equity Derivatives segment. Interoperability amongst clearing corporations facilitates efficient order execution by enabling any order to be executed at more than one exchange and thus reduces the slippages in execution without the need to maintain margins at multiple clearing operations. BSE, along with PTC India and ICICI Bank, have filed a petition with the power market regulator, Central Electricity Regulatory Commission, on September 7, 2018, for a grant of license for setting up a new power exchange. The CERC approval is awaited. This proposed institutional exchange, subject to necessary regulatory approval for leverage on the experience and expertise of its stakeholders in their fields, knowledge of the power sector, funding of power projects and associated infrastructure, setting up and running of various exchanges and platforms in India and offer market participants a credible power trading platform. BSE has a stake of 41.08% as on 31st March 2020, in the proposed power exchange, which will be brought down to 25% post receipt of grant of license. With respect to listing of securities, the number of companies listed with their equity capital on BSE available for trading are 3,913 as on May 17, 2020. BSE has the highest number of listed companies on any exchange in the world. Market capitalization of companies listed on BSE is above INR 122 lakh crore. The total number of registered investors registered on BSE exceeded 4.99 crore as of date, very close to 5 crore investors. 1 lakh investor will make it 5 crore. On November 26, 2019, BSE has announced a framework for listing of commercial paper, enabling the listing on BSE for commercial paper issued on or after 27th November 2019. Until date, 120 issuers have done 1,385 issues of commercial papers and successfully listed commercial papers worth 5.3 lakh crore on BSE. BSE has been undertaking a calibrated increase in listing fees over the last few years to make the same comparable to the charges levied by competing exchange as well as to cover increasing cost of compliance. With effect from April 1, 2019, BSE increased annual listing fees to exclusively listed companies by INR 50,000 if the listed capital is up to INR 100 crores and by INR 25,000 in case their listed capital is between INR 100 crores and INR 200 crores. During the quarter ending 31st March 2020, BSE provided for a onetime liability of INR [ 18.61 ] crore towards provisional for additional contribution to IFSC and IPF as desired by SEBI. It may also be noted that BSE has made a provision of 50% towards its investment made in secured debentures of IL&FS in the previous year. Considering the unlikelihood of receiving any redemption amount in future, a further provision of 50%, amount of INR 7.99 crore, has already been made in the financial for the year ended March 31, 2020, making it a 100% write-off. On a consol basis, the profit attributable to shareholders of the company, excluding nonrecurring and exceptional items for the quarter ended 31st March, has remained steady at INR 17.34 crore as against INR 17.14 crore for the previous quarter. During the quarter ended 31st March 2020, a onetime nonrecurring provision for additional contribution to IPF, as mentioned above, of INR 18.6 crore has been made. This provision has been made in accordance with the finance conclusion by SEBI with respect to certain observations made in the -- earlier years. During the quarter ended 31st December 2019, an amount of INR 32.04 crore was booked as income on the sale of 4% equity in CDSL, and the amount of INR 3.62 crore was paid over settlement of service tax litigation under Sabka Vishwas Scheme. Above-mentioned exceptional items have resulted in a loss attributable to shareholders of INR 1.31 crore for the quarter ended 31st March 2020, as against income of INR 45.57 crore in the previous quarter. Operational revenue for the quarter ended 31st March 2020, has grown by 9% to INR 119.56 crore as against INR 109.92 crores for the previous quarter. Percentage of operational revenue -- total revenue for the quarter ended March 31, 2020, rose to 77% from 74% in the previous quarter. Total revenue for the quarter ended March 31, 2020, has increased by INR 7.13 crores to INR 155.79 crore. On a stand-alone basis, the profit attributable to shareholders of the company, excluding nonrecurring and exceptional items for the quarter ended March 31, 2020, has gone up by 92% at INR 22 -- INR 20.24 crores as against INR 10.54 crore for the previous quarter. During the quarter ended March 31, 2020, a onetime nonrecurring provision for additional contribution to IL&FS and IPF, as mentioned above, of INR 18.6 crore has been made. This provision was made, as discussed earlier, in accordance with the final conclusion by SEBI for the earlier years. During the quarter ended 31st December 2019, an amount of INR 91.58 crore was booked as income on sale of 4% equity stake in CDSL, and an amount of INR 3.62 crore was paid to a settlement of service tax litigation on the Sabka Vishwas Scheme, as specified earlier. The above-mentioned exceptional items have resulted in loss attributable to shareholders of INR 1.59 crore for the quarter ended March 31 as against the income of INR 98.5 crore in the previous quarter. As of April 30, 2020, the total balance lying in Settlement Guarantee Fund maintained by Indian Clearing Corporation were INR 432.79 crore. Interoperability. Among clearing corporations were implemented from June 29 -- June 2019. After implementation, interoperability members has the option to choose a clearing corporation to clear their trades. Based on the selection, the trades on BSE are cleared by respective clearing corporations. As for the requirements arising out of August 27, 2014, SEBI circular, for contribution by exchange to core SGF, BSE needs to contribute to core SGF of all the clearing corporations through which its trades are cleared. BSE has already contributed INR [ 15,072 ] lakh to Indian Clearing Corporation, which is in excess by INR [ 12,380 ] lakhs as compared to the requirement as of March 31, 2020, of the above-mentioned curricular relating to core SGF. Based on the transactions executed on BSE which are cleared by other clearing corporations, the requirement of core SGF is INR 126 lakh -- INR 1,264 lakh as of March 31, 2020. The Board of companies decided to represent to SEBI for allowing to utilize the excess contribution by BSE lying with the Indian Clearing Corporation to be adjusted with the same contribution to the other clearing corporations' requirement. Clearing operations are also represented to SEBI. By contribution by exchanges towards core SGF of clearing, our corporation may be allowed to be continued in the form of bank fixed deposits or government securities. Companies are waiting clarification from SEBI in this regard. In lieu of the above, no contribution has been made to other clearing corporations, and the company has not taken in charge for the contribution to core SGF in the current year segment of what is was. Before I conclude, I wish everyone in this call to stay safe with their near and dear ones in the COVID-19 times. It is a time and threat which no one in our generation has seen. In the spirit of extreme uncertainty, it's not likely to end with a lifting of lockdown across the globe. It is not possible to predict how strong each country, organization and individual would emerge after all this is over. In this dire circumstances, we have undertaken strict cost control measures, and we'll continue to do the best we can to ensure sustainability and growth of BSE to serve the interest of all stakeholders of BSE. As you are aware, BSE has continued its operations without a single second stoppage during this tough period. With this overview, let me welcome you once again, and I mean all of you, for questions and answers. Thank you.
[Operator Instructions] The first question is from the line of Ravindra Kurwa (sic) [ Ravin Kurwa ] from ICICI Securities.
Sir, my question was around GIFT City. So what will be the -- what is the expense related to GIFT City in FY '20?
This year, we have made total losses of 23 crores on the GIFT City operations, and I think that will continue probably in the future next year also.
Okay. And sir, my second question was regarding the distributable cash. So if you can just help us with the breakup of what is regulatory requirement in SGF and margin money in the balance sheet.
As we said, that there is a Settlement Guarantee Fund of INR 400 crores in -- which is there in line with Indian Clearing Corporation Limited. It comes in our consolidated financial statements. And other than that, what you see as our net worth, obviously, there is an element of certain capital reserve, which is in our network, which is amounting to about INR 800 crores. And obviously, that will be further -- and the remaining amount is for utilization in terms of further projects of BSE and various other things.
So the regulatory requirement will be INR 800 crores?
It is going to the capital reserve, which is there on the balance sheet.
Okay. And the margin money?
Margin money is the liability. It's usually the current liability.
The next question is from the line of [ Rohit Prakash ] from [ Marshmallow Capital ].
Sir, first question is on StAR MF. You did mention that you have taken -- given these difficult times, you have decided to take a price cut as requested by the mutual fund. I remember the average realization per transaction last year was around INR 8 to INR 9. What has it reduced to right now?
From the transactions which have been executed on the mutual fund platform, our realization has been INR 9 in the current year.
But next year, it will come down.
Yes, next year, it will come down.
So what will it come down to, sorry?
It might come down to INR 6 or INR 7 or probably on INR 5 because the breakup of how many transactions will fall in which category is yet to be figured out because the mutual funds have gone through tremendous difficulties in last 1.5, 2 months. And their AUMs have also gone down substantially in the equities and -- on both sides. And that's where all of them are still struggling to figure out what would be the steady-state numbers going forward.
Understood. So that was helpful. So continuing on mutual fund, I mean, could you -- I mean how do you -- given BSE StAR MF being a major pipe for a mutual fund player, I believe you have a great view on what's happening in the industry. So could you give us a sense on, post the Franklin issue, how do you see the flows into the mutual funds from the public at large? Is there a material decline, or do you see it stabilizing? If you could give some commentary on that, that would be helpful.
I think we wouldn't like to discuss more than based on the mutual fund sides. I will tell other mutual funds at some point in time to have discussions with you, guys. But it would be wrong on my part to be discussing what their business is going to, except that our numbers have come down in a month of May. So that is a fact. And that much first 3 weeks of May have seen some decline. It may be small because we cater to the smaller investors, in a way, and the IFAs and all who are still continuing, but that is only -- we have seen some decline. And I don't know about the other channels. But what has happened, which is interesting, is that in this COVID times, the physical channels have been closed down, you might be aware. So more transactions are going through electronic channels, and BSE is pretty much now 60% of all the value on equities on a net basis. Okay? Last year, it was 64% or 65%. This year, in first, April, we were like 60% plus. We were surprised. And that's basically a good sign. We have also started basically collecting -- first, we are calculating what kind of collections -- the commissions IFA needs to have from a particular AMC. And that business might give us some additional revenue when we start collecting -- it's like ease of doing business for the IFA because IFA earlier used to be dealing with only few AMCs because there are physical limitations for them. Now through BSE StAR MF, they were billing it all for the AMCs. And to collect -- calculate and collect the commission from each of them was becoming difficult, so we received some representation from the IFA community. And so we decide to deal with the AMCs requesting them. Around 7 AMCs have agreed to allow us to collect on the commission on behalf of the IFAs, as in the first phase, the IFAs which agreed for us to collect for them. And of course, we will charge them small amounts to ensure that the service is commercially viable to us. And SEBI recently announced e-KYC framework where people don't have to go physically now. This was announced in the budget. And then later on, regulations are going on now, SEBI has around 6, 7 agencies which can do this e-KYC services, and BSE is going to launch this in next week. And so that will be another sort of source of revenue which BSE is going to have in next week. I don't know how far it adds value in the first year itself, but these 2 services we think are tremendous value addition: one on KYC side to the IFA as well as to the AMC; and collections of commissions more to the IFA but also to the AMC that they don't have to deliver it like 58,000 IFAs we have for paying commission. Instead, they can just go to us if they want, and we'll basically settle -- calculate and settle with them and so on and so on. So we'll do the customer complaints and clarifications and all through our CRM framework. So it's a new business in a way we are getting in. We think it's a value addition to the entire industry. And hopefully, this too will sort of get us more in-depth relationships with both sides, the mutual funds and the IFAs.
So that was a very detailed answer, sir. And it's really interesting, the strategy that you're following to increase the switching cost of both the mutual funds and the IFAs with respect to the BSE StAR MF platform. Just a clarification here. So for these 2 new sources of revenue that you are trying to build for BSE StAR MF, would we -- would you be charging IFAs or AMCs or both in this scenario? Or for the commission, that it will be charging the IFAs; while in the e-KYC, it will be depending on where it is coming from, both the AMC and the IFA?
So yes, basically, that is broadly what you said. But one of the first AMCs which has agreed to take our e-KYC service for which the testing is on, the AMC has agreed to take up the entire cost. But that could be AMC's own choice. So it remains to be seen how the revenue model evolves. It was our duty to basically provide this ASAP because, in a COVID time, it's not possible for adding new customers if you don't have e-KYC. And so we wanted to go really fast. And I'm delighted that next week, we are starting. In fact, if you look at the number of investors who are still with us, these are basically what we call not unique customers. Each broker gives code to his own client. And so there is a possibility of duplication in terms of the same client being registered with 10 brokers. But that number is going to reach 5 crore probably within the next week or so. And that is larger than the nearest exchange by almost 100%. It's almost double the near exchange. And if you look at our total number of investors on a [ unique ] basis, that is unique client number basis, we are about 3 crores. This is larger than all depositors put together, all mutual funds put together. And if you [ deal with ] them, they will -- put together, will not be more than, say, 2 crores or in that range, 2 crores and 2.25 crores. Or we are now the largest sort of repository of the investor details in terms of their KYCs and all. And recently, we have also got approval from SEBI to in-principally go into one of our subsidiaries that's got approval to get into KRA business. So that would basically hook into the e-KYC business also going forward as and when it goes live, but that will go through some legal processes before we can sort of move forward on that. But these are all basically connected businesses. And we think we are on a reasonably good trend. Just to give you, since you didn't ask, but I think insurance, distribution is also an exciting situation for us. We have not formally launched it because we wanted to launch it and we have this COVID thing. But we launched it on beta basis, which is actually live. And daily, we are now having 15, 20 new policies that are happening. And we have more than 500, close to 1,000 agents, [ boss ] as we -- it is called in that language, who have registered with us, who are ready and who are doing business. And we have currently started only auto with a couple of companies. But integration is on with general life health. And it is a beautiful technology. So once the COVID thing gets over, I would do probably have some of our colleagues do a video conference or video -- sort of small video setup so that you can know how this technology is going to change insurance distribution in India. It basically takes a couple of minutes to do the -- I mean sell the insurance. Quotations come automatically. And then the insured is able to get the policy in hand within a few minutes. So it's a very interesting technology, and I'm really happy that it has come out that way.
I mean I have to say that the video you have put up on StAR MF or [ with words ] on YouTube was really helpful. So your position on doing something for insurance so that we understand it better is really, really -- would really be helpful, I believe, as well. Moving to equity, sir, when the interoperability started last year, you were quite hopeful of it enabling BSE to gain some of the lost market share in the equity space. So do you -- how do you see -- how has the last 1 year been in terms of how it has evolved versus your expectations?
It has basically not yielded much results in terms of the absolute value of BSE's transaction. It has remained similar. I wouldn't say exactly same. Slightly, it has increased probably. But I would -- I mean I had a lot of hopes. At the same time, we had not bargained for a situation where existing clients' business gets known to the competition through their clearing operation, putting more pressure on those guys to trade on another exchange because they get more information. And so those are the things which are -- something which have come out, and we'll have to live with the realities and create our own niche. I'll tell my colleague Sameer, who heads the business for us, to also make a comment on this.
Yes. And when we started the entire process, there were large software vendors also, third-party vendors, who are not ready with it. So it also took them a lot of time. In the meantime, there was nothing much -- no much yield for us as well on that part because the technology vendors were not ready.
[Operator Instructions] The next question is from the line of [ Romel Oza ] from [ RMO Investments ].
I was wondering what is the cash, debt, mutual funds, CDSL stake. And how much of the BSE building do you own? What is the market value of all of these things? Because I would assume that our current market capital capitalization is less than the tangible assets on the book.And the second question is the reason we bought into BSE is that all of these assets provide a floor price, yet you are into StAR Mutual Fund derivatives, E bond, et cetera, et cetera, which are these growth areas which provide a lot of headway into the future. And this is a long runway. So just to put a floor on the market cap, what is the current value of all the cash, debt, mutual funds, CDSL stake and BSE building, how much of it do you own? And the second question is what are your 5-year projections for StAR Mutual Fund and other growth businesses.
It's a matter of policy, we don't give projections. But it's also difficult to give you the exact amount of value of the assets we have on the networks, but I'll request my CFO to give you some idea on that.
Yes. In terms of cash and mutual funds which we are having in our books, it is approximately INR 1,600 crores or more. As far as CDSL stake is concerned, you know the market capitalization of CDSL is more than INR 2,500 crores. And obviously, we are holding 20% stake. Building obviously means we valued this thing many, many years ago. And probably at that time, it was more than INR 800 crores. And I think the things that -- the area has been developing pretty good recently.
So that is about INR 2,700 crores, whereas your market cap is INR 2,000 crores. So the company is significantly undervalued, and you have a lot of growth businesses like StAR Mutual Fund, insurance, bond markets, et cetera, et cetera. So I think it would be interesting and helpful for investors if in your next presentation, you could put down on a page your tangible assets because, currently, the stock is trading at a deep discount to tangible assets, forget the growth businesses that you add.
No, fair point. I don't know how much we can do, but it's a good point, and we'll try to put that in as much as we can because sometimes people may claim that we are giving wrong information as for the building price and all. So...
No, put down -- just put down the square feet of the building, and we will calculate it on our own. Right now, you have INR 2,100 crores in cash and CDSL stake as the market cap is INR 2,000 crores. So that itself is less. I'm not even talking about StAR Mutual Fund, BSE's annuity business, the bond business, commercial paper, international exchange. These are sunrise factors that you're going to grow tremendously. But you need to communicate that story to investors out there because the stock, quite frankly, is trading at a much less value than the intrinsic value of the stock.
Okay. Fair. But it's...
And you guys -- and I'll give kudos to Mr. Chauhan and his team, you guys have done a great job of venturing into areas which are going to be high-growth areas. But I don't think the story comes out forcefully. There should be a flow on the stock price, which should be INR 2,700 crores or in market cap. And above that, where are your growth businesses? Now you need to communicate that on a slide. It's simple, just sort of table, and put that out, right, like the stock is tremendously undervalued at this point.
No. I mean I agree with you to a large extent, and we are happy and thankful, though, at least you believe in our story. But I'll tell Nayan to also chat up with you later on after this to see how best we can do this so that it doesn't come back with any allegations of misrepresentation.
No, give the audited statements, right? You're going to be audited. Give the audited statements based off of last year and just show us the cash flow because the cash flow of the company is so high, INR 2,700 crore, and the market cap is INR 2,000 crores.
A fair point. No, I agree.
The next question is from the line of Ayush Mittal from Mittal Analytics.
So it's good to see the new areas that we have been seeding and the kind of growth and market share we have been getting. My question is more about the legacy exchange, the BSE equity segment that we have and the drop in turnover we have been witnessing over the last 2 years. Any thoughts how -- what we are doing to revise this?
Basically, just to correct you a little bit, not too much. That volume is not dropping. The market share is dropping.
Yes, both. Like the average daily turnover, [ IFSC ].
It has increased a little bit recently, but those are what I call semantics. I agree with you on broad point that we have not done so well in equities because we have not done so far in derivatives also, equity and derivatives didn't trade well, and that's why we had -- interested on interoperability. It came and still we have not been able to do well. We have recently started the liquidity enhancement scheme. We are seeing some volumes of 6,000 crores a day on that. We are sort of changing it to -- on the same index as what is selling in GIFT City. That is a BSE 50. And that basically tracks -- which is very close to what other index says, so 50 STOXX, and similar numbers and all. So I hope with this trick, we might be able to get some more traction. But we are continuing with our efforts on commodities, on equity derivatives, on equities. And hopefully, some -- I mean the technology which we have, the speed, the flexibility like you might have seen simply in terms of the CME, the brand, the CME -- WTI crude going negative. And other actually has had a problem on negative pricing. And when we announced the negative pricing framework also was in a week. And so that kind of technological progress is what this organization has developed over the last 10 years. And somewhere on the line -- I mean, I think I was hopeful that somewhere, people will appreciate and come here, but obviously, liquidity has a way to -- and there's the large problems happening somewhere. And so currently, we are also keeping off from this cost and working hard. Sameer, you have anything to say?
Yes.
Please go ahead.
Sir, just to -- I appreciate the points you mentioned. But as an observer, I also have a feeling that BSE had the edge by way of higher number of securities which were exclusively listed on BSE, and these were small companies and mid-sized companies. Somehow, there has been no focus towards that space to do something more on that front. In fact, the rules and frames that have been rules which have been introduced and the measures which have been introduced. If you go to Twitter or any of the social platform or you speak to any of the investors who have been into market for several years or decades, they all will be very vocal about the practices which have been detrimental for this space. And perhaps that's the reason we saw the growth until 2018 when there was a boom in the mid- and small-cap space, and now the totally reverse thing is happening maybe.
No, I think you are right in a way. But what happened is SEBI came out with a regulation that mutual funds can hold shares into specific number of or specific type of stocks only. And that was basically the span of...
So just one part of the thing, like other than that, there have been so many other things which I'm sure off-line can be taken up. And anyone who goes to -- or speaks to any major players or investors, one will be very vocal about the rules which have been very detrimental around the small and mid-cap space. And apart from this, there has been nothing been doing to do something around this space. Like they are small, mid-sized companies. If we can encourage more transparency around them, more industry engagements for those companies, I'm sure more value can be created and more value will emerge.
No, I think we can work together. We can hear you out and implement as much as we can and see how we can support the SMEs and small exclusive companies because that's where the growth of India will come from. That's the hope.
Sure, sir. But I have some suggestions I would love to get in touch off-line.
Please do that.
The next question is from the line of Shivam Gupta from CWC Advisors.
I have a couple of questions. The first, around the state of the new IFSC regulator [ if it has the entire control ] for these products which are already approved. So is this kind of an interim management or basically was the wish list of the industry?
I didn't get the question.
So the question I'm asking is that in the opening, as you mentioned, that the new IFSC regulator has the only power to control the products which are already approved by the current regulators, like the RBI or whichever is the concerned regulator.
Okay, for the GIFT City.
Yes, for the GIFT City. So is this like a step towards the full-fledged independent authority? Or this is what you thought?
It is. It is an independent authority. It will be housed in GIFT City. And of course, it will -- it has been authorized to take decisions, right? So it's -- of course, it's a new authority, not yet -- Chairman has not yet been appointed, but I'm sure the government is in the process.
Okay. Sir, let me just ask you again on this. So when it gets fully operationalized, we had some [ business ] operation -- seller, dealers and getting the [ USTI ] [ now up ]. But once this gets fully operationalized, would it have the powers to approve products for the IFSC or not?
That is the purpose. That has been announced. You can check it out on the government website. There are some very good powers. And clearly, that is the purpose, basically with which it has been. So we took almost 3, 4 years for that act to be discussed and debated and all. And so it's a very comprehensive regulation. And it will have very sitting powers, I would say, compared to what currently keeps SEBI is operating in.
[indiscernible] current regulator [indiscernible]
And of course, RBA, SEBI, all of them have gone out of their way to give approval for this rupee-dollar thing despite apprehensions in many quarters, right? So of course, Ministry has also played a very big role. So these are not things which happen like a small thing. It requires tremendous amount of discussions, debates, committees and all. And they've gone through that. They've expedited the approvals. We are really grateful to them.
Great. And sir, the other question I had was on StAR MF. So just want to understand. So since we have commodity -- the fact that [indiscernible] accepted a lower rate. Are there conditions precedent under which you automatically get it higher [ up ] in those negotiations?
Shivam, can you repeat?
All I'm saying is that in StAR MF, you [ said ] for the next year, we have a to slightly lower rates. On transactions DMCs are facing business [indiscernible]. So are there any conditions precedent in that discussion, that as things normalize, automatically, the rates will adjust to higher stats? Or will you go and negotiate?
No, no, no. This is what I call, everyone tries to sort of increase their own profit. And so we'll have to figure out our ways to -- on rather than trying to -- they -- the mutual funds are also under pressure from SEBI to reduce that total cost. And so there is a much complex situations for them. And so we'll have to be sort of practical on our side and continue to add more value, more in depth with the relationships we have. And also, the relationships have to be happy. All sites have to feel there is a value being added, then that relationship goes long term.
Sure, sure. And then if I can push just last one. So near term company interoperability maybe not living up to our expectations as of today. Does that mean we're going to revisit the amount we are doing on -- like in any way, thinking whatever milestones we would set for our market share targets because...
Basically, what happens is we don't create market share targets. In a way, we are basically, what I call -- we figure out what could potentially do things if these things take years of lobbying and sometimes they are approved with some conditionalities or even without condition. When they actually come out, they come out differently. So each act, which comes out, it looks like a sort of short, but it's a 5-, 10-year work and sometimes it may succeed, sometimes it may not succeed. So I wouldn't -- generally, we don't do any market share kind of projection when on -- getting over, but it's a nice thing to have. Directionally correct. And if it happens, it may give you what I call non-linear return. So we try to work on nonlinearity more than pure linearity. Of course, once the business stabilizes, then you can project linear part of it. But these are our nonlinear shorts. Some of them succeed, some of them don't, some of them take longer time and so on and so forth.
The next question is from the line of [ Sanil Kangra from ITO Financial ].
Just one question on the power exchange. So any outlook on that?
Our exchange has been basically mired in some sort of -- what I call opposition from the existing competitors. So whenever there is a hearing by the regulator of that business, some of position comes up, and then they ask for time and all. It's a more of a -- each time we think we have come further, but then we are not able to get that license. So we still keep our fingers crossed when we'll get the license. And then last few months has been discouraging. So hopefully, the license is near, but how much near, I have no idea because it's not easy to predict what happens in that sharing unit.
The next question is from the line of [ Ravindra Korva ] from ICICI Securities.
Yes. I just wanted to know that in the EKYC business, we will be acting as a [ KRN ]?
No, In BSE, currently, there is no plan to do [ KRN ] is to be done in the Marketplace Technologies Limited, which is a 100% subsidiary of BSE. Broadly, you will have revenue again in one of them. But EKYC will be, as of now, done in the BSE.
EKYC will be done in BSE?
[indiscernible].
Yes. So these AMCs will set data from us, right?
Pardon? AMCs will...
This [ available set ] and [ that is to ] set data from us and we'll be charging them some fees?
Correct, correct, correct.
Okay. So what is the fast rate, as of now, living in a mind?
Currently, we are tasked, basically starting next week, on a beta basis, which is mark in a way of -- its a real life, real life data. But only after probably a month or so, we'll we will be able to figure out how much we are able to charge and so on and so forth. Currently, there's all happening on a goodwill basis between the AMCs and us.
Okay. And sir, what will the KYC records with us right now, number of KYC records with us?
See, I had told you on the BSE's database, we have now INR 4.99 crore plus unique [ client ] code from the broker side, not from our side. But if you say plan numbers, unique plans, we are about INR 3 crore.
Anout INR 3 crores. And this will be all physically verified plans, right?
Yes. They are basically customers who have traded once, at least.
The next question is from [ Ron Agarwal ] from [ Loop Capital ].
Ashish, just wanted to ask you, any idea on when the next hearing for the power [indiscernible] direct or indirect?
Our exchange here in next. The dates have not come in because of this [ COVID situation ], but they were supposed to happen every sort of a month or so. Each time, they give out time of a month, but the last 2 months, it has not happened. So as soon as the regulator decides, probably as and when Delhi opens up and things and all office start working, we'll probably be at that hearing.
Got it. And now, what would be your revenue model on the insurance side? So would you be taking a commission from the insurance companies and then providing a part of that to your POSs? I just wanted to know.
That is true. That is true. In that sector, we have 2 entities. One is the distributor entity, which has a license and other is the technology entity, which provides the technology.
Okay. And you are going to earn on both [ of them ]?
As of now, though we have started having the commissions from the insurance companies on the distribution side, and we are also passing on to the...
[indiscernible] is that you typically would be to say, on INR 100 received from the insurance companies. Just a ballpark figure, how should be the percentage that you get to be?
This is what I call a commercial issue, but the commissions in -- on premium basis, as a percentage of premium varies in different types of insurance. So auto will have different vis-à-vis health, vis–à–vis life, and the work required also will be of different types. And also, it's not a one-shot, but this industry has a much larger commission framework compared to any other financial sector distribution framework as of now.
Got it. Cool. Just one quick question. Any chance -- plans for buyback or returning of excess cash to shareholders at time?
Currently, there is no plan to do buyback.
The next question is from the line of [ Rajesh Mandawewala ] from [ Mandawewala Enterprises ].
Sir, the first question is actually on the treasury operations of the company. So do we have any exposure to any of the Franklin Templeton 6 stressed funds?And secondly, can you also talk a bit more about how the treasury is sort of managed and how it's positioned as of today?
We don't have any exposure to Franklin Templeton Mutual Fund schemes. And BSE has a investment committee, which comprises of variable people who are experts in the securities industry. And they meet once in 2 months, and they review all the investments which are made by BSE, including the indirect investments, which comprise in our investments. And from time to time, the directors as to how -- where we -- whether we can take -- we invest in government securities or in mutual funds or in NMB. So it's a very elaborate process. It is documented. It is a lot of [indiscernible] for both, the minutes of those meetings. And that's the structure when we get our investments here.
And the regulator has specified where we can invest and where we cannot. So we can't invest outside of that perspective.
Right. Great. Great, sir. And the second question is on StAR MF. So sir, you actually give the market share data on the presentation every quarter. So sir, first of all, who is the competitive set that this market share is measured against? Is it just NSC MF and MF Utilities? Or are there other digital players, such as PTM [ money ] and the likes as well?
I mean many of them who are considered competitors are actually on us. We are the intel inside of the mutual fund industry. Okay. So currently, what I said in April, we had 61% of the value in April 2020 for the net equity inflow, I was talking about the industry as a whole.
Right. But so on the -- in the presentation, you also gave the market share for StAR MF as a whole.
So usually, that would be because of the data availability only from NSE and MFU. But because the MC announced the inflows for the last year in equities, that's where we could figure out that we were like 66% or something. If they had not declared the inflow last year of the entire industry, we wouldn't have figured out because that kind of radar is not easy coming. So whatever data comes on the -- and I think there is a qualitative difference between the value of X platform versus value trade on Y platform because there is 1 platform which does only, what I call basically kind of very short-term funds. And so each trade would be like INR 10 crore or INR 20 crore for them. And so they might be doing like 10 trades a day, and you might -- it might look like INR 1,000 crores in a day. While it's INR 4,000 crores on BSE, you will require a INR 20 lakh [ phase ], okay? So value, in a way, is a bit of a net number in this comparison, but we are comparing for the [indiscernible] whether we want to show our market share and at least have some consistent basis. And that's where, basically, it's not an apple-to-apple comparison, right? And it's very similar to saying the number of -- Maybe if you have, say, 1 lakh contracts open in currencies in India vis-à-vis equities in India, equities derivatives is INR 5 lakhs. Currently, this is...
75,000.
75,000. So it's like 8x more, right? So they are not apple-to-apple. But people look at the numbers and think both of them are saying. Similarly, BSE's numbers are primarily on equity sort of numbers, which are small transactions by retail guys. And that's where the numbers, in some ways, are misleading because if we are collecting 65% or 62% of the entire industry's net inflow in equities. For me, there is nothing comparable, right, because others are RPAs doing mutual funds, websites doing, other platforms doing and so on and so forth. So this is a revelation to us also because we were made to believe that we are very small. And now only, we have come to know that small means 65%.
Next question is from the line of [ Niraj Pandegar ], who is an individual investor.
Hello, sir?
Yes, please.
Hello?
Yes, sir?
Sir, I have one request. Can you please conduct the conf call on next day? Because we don't have time to analyze and understand the results.
Okay. My apologies. This time, the Board meeting went on for longer. But I agree and appreciate, we should give some time for all of you to analyze before. But since we had predefined the day, time and date, we didn't want to wait for tomorrow when all of you are ready to discuss it today. So please accept my apologies for today's [ thing ].
But [Foreign Language] conf call to give us enough time to understand the results, but may I please request that you are please holding -- conf call conduct both companion that result analyst can make it?
The problem [Foreign Language] If we go for 2 days and most of the analysts would have come out with their reports anyway without talking to the management, which would be unfair to the analysts and answer to the company both. And that's why we do it before the next day's trading starting, so that the analysts can come out with their reports, whatever good, bad, ugly is their perspective. But otherwise, next day, basically, nobody -- I mean, they are only paper on hand, but no commentary from the management. And generally, it is the best practice worldwide to do it on the -- just before the next day starts, but probably you may like to check out with larger companies and how they do it. Although we are not that large, we accept, but we try to follow the [ way structures ].
The next question is from the line of [indiscernible], who's an individual investor.
The investment income has come down in the current year compared to last year on the consolidated. I mean last year, it is about INR 202 crores. This year, INR 158 crores. So any reason for that?
There's 2 reasons. One is that we did a buyback last year. And obviously, that would impact our revenues -- investment revenues. And then there were some capital gains which was booked on sale of certain investments in the earlier year, which did not repeat, that's why.
What about other income also, which has come down?
In terms of [ income ], we had some income tax refund, which was higher. And there's certain miscellaneous entries pertaining to previous periods. But those are minor around -- the main thing was referenced, which we got in the earlier years, which has decreased our other income in the current year.
The next question is from [ Alok Mishra ], who's an individual investor.
I have two questions. One is -- first pertains to the transaction charges, which we basically receive on transactions carried on StAR Mutual Fund. You said that we received on it -- I mean we received around in around INR 7 to INR 8 per transaction in the last FY. So how much of this we actually pass on to the individual financial advisers or that the entire portions belong to us?
Yes. basically, we don't charge any IFA nor they pay us anything. All the money which we receive as of now on the mutual fund side is only we receive from the AMC as a part of our service because the IFA is actually receiving a commission, which is a trail commission on AUM basis, because there is no up-front commission nowadays, there is only trail. That's a different relationship between those 2 and that is also now we are trying to calculate and collect going forward, right? So that's a different model. Currently, we are only like a transport. So providing intelligent transport. [Foreign Language]
Okay, sir. And my next question would be, sir, as the CFO has said that we have around INR 1,600 crores of cash in our books as on March 2020. So if I can get a bifurcation of this on how much is owned and how much would be part of this INR 1,600 crores towards settlement guaranteed fund and [ our own ] deposits?
It still includes our own money.
It is our own money?
Yes.
We take the last question from the line of [ Neeraj ] [indiscernible], who's an individual investor.
Actually, I also have 2 questions. But before I ask my question, I would like to comment on the -- hello?
Yes, please.
I hope you are able to hear me all right.
Yes. Yes, we hear you.
Perfect. So basically, before I ask my 2 question, I want also -- to quote the earlier analyst who actually requested you to put out a slide on your tangible assets, because management's responsibility is to increase the shareholders...
Hello?
We seem to have lost the line. We take that as the last question. I would now like to hand the conference back to the management team for closing comments.
So I hope this give you some idea. And I think we'll take up off-line in case and the probably -- in case he comes back, probably we'll have to put it probably as a part of the transcript so that people don't miss out. But thank you, guys. It's a tough time for the world and tough time for the country also. And I hope India comes out with flying colors, and we have a great growth, and we have great economy running back to full. And hopefully, we'll get some more industry going forward given the news today morning from the U.S. Senate. So with that, I will close this. Thank you very much, and stay safe.
Thank you very much. On behalf of BSE Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.
Thank you.
Thank you.