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Central Depository Services (India) Ltd
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Ladies and gentlemen, good day, and welcome to the CDSL Q1 FY '20 Investor Conference Call hosted by Axis Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Bagul from Axis Capital. Thank you, and over to you.
Thank you. Good evening, ladies and gentlemen, and a warm welcome to the CDSL Q1 FY '20 Earnings Call. From the management, we have Mr. Bharat Sheth, CFO; Mr. Gaurang Shah, Vice President; and Mr. Nilesh Kittur, AVP. Without further ado, I'll hand over the phone to Mr. Bharat Sheth for his opening remarks. Over to you, sir.
Yes. Thank you, Aditya. Good evening to everyone. With me, Mr. Sunil Alvares, from CDSL Venture, also is here; and Mr. Gaurang and Nilesh is also here. I welcome you all to the quarterly conference call for discussing the stand-alone and consolidated results for CDSL Group for the quarter ended 30 June, 2019. Due to various uncertainties in the economy like election, budget, et cetera, and global factors like Fed interest rate movements, oil prices, et cetera, the Indian stock market was in turmoil, which resulted in not many IPOs meeting the market, and overall sentiment was [ rather ] negative. This resulted in the CDSL top line showing a marginal uptrend on quarter-on-quarter basis, however, there was a healthy growth of top line year-on-year basis. In case of subsidiaries, CDSL Venture Limited, the KRA performance is linked to the stock market, which remains weak, resulting in lower KYCs [indiscernible]. However, compared to 1.88 crore KYCs recorded as on March 2019, KRA has 1.93 crore KYCs recorded as on June 2019. Other subsidiary, CDSL Insurance Repository has crossed 5 lakh in insurance accounts and 2.5 lakh policies. CRL has also started to offer its services to health insurance companies. Regarding CDSL Commodity Repository Limited is also making steady progress with 970 registered warehouse service providers, 1,000 clients and 5,500 eNWRs generated as on 30 June 2019. The numbers stack up as follows. Consolidated results on Q-and-Q basis, that is quarter ended June '19 to quarter ended March '19, corporate income up by 15%, that is from INR 50.94 crores next to INR 58.40 crores. Whereas, other income, down by 15%, due to higher mark-to-market gain in March '19 that is from INR 13.74 (sic) [ INR 17.74 crores ] crores to INR 15.02 crores. So total income, altogether, up by 7% that is from INR 68.68 crores to INR 73.42 crores. Whereas total expenses, that is from INR 25 crores to -- INR 25.50 crores to 38.44% -- INR 38.44 crores that is up 51%, mainly due to increase in increase in employee cost. Salary risen by approximately 30% to 32% across the board to bring the salary levels to market levels, and corresponding gratuity and leave actuarial provisions, and other expenses like for projects that pertains to a committee appointed by Supreme Court, we are doing that, and expected credit loss provisions that is frozen for doubtful debts posted in [indiscernible], et cetera. So profit after tax on a consolidated basis on Q-and-Q is down by 18% from INR 34 crores to INR 27.91 crores. Major head of operational income on consolidated basis were annual issuer charges up by 7% on Q-and-Q basis that is INR 17.91 crores to INR 19.23 crores. Transaction charges, hardly any -- negligible due to market conditions from INR 9.84 crores to INR 9.86 crores. Consolidated account charges up by 25% that is INR 1.89 crores to INR 2.37 crores. IPO corporate expense charges up by 28% that is INR 4.16 crores to INR 5.31 crores. Whereas that committee appointed by -- that is a project we have taken, it has increased from INR 2.85 crores to INR 6.93 crores that is up by [ INR 143 crores ]. That is first phase we have completed as such.Comparison year-on-year basis, that is quarter ended June '19 to quarter ended June '18, figures are as follows. Operational income up by 28% that is INR 45.54 crores to INR 58.40 crores. Other income up by -- from INR 5.22 crores to INR 15.02 crores, that is 188% due to -- that is higher mark-to-market gain and interest on IT refunds, what we have received. So total income up by 45% that is INR 50.76 crores to INR 73.42 crores on year-on-year basis. Whereas total expenses up by 72% that is INR 22.38 crores to INR 38.44 crores, mainly due to increase in employee cost, salary risen by 30% to 32%, and corresponding impact on gratuity and leave actuarial and other expenses like cost [indiscernible] reason, et cetera.Profit that is profit after tax up by 27% that is INR 22 crores to INR 27.91 crores. Major head of operational income, that is annual issuer charges up by 23% that is INR 15.66 crores to INR 19.22 crores. Transaction charges up by 2% that is INR 9.66 crores to INR 9.86 crores. Consolidated account charges from INR 2.03 crores to INR 2.37 crores. Online data charges that is KYC that is INR 6.84 crores to INR 7.64 crores. And that committee appointed by Supreme Court, in which what we did it is INR 6.93 crores against nil, that is up by 100%. Now I'm going to stand-alone results. First on Q-and-Q basis that is quarter ended June '19 versus quarter ended March '19. Operational income up by 7% that is INR 37.88 crores to INR 40.34 crores. Other income down by 14% that is INR 13.10 crores to 11.31% (sic) [ INR 11.31 crores ] due to lower mark-to-market gain. So total income from INR 50.99 crores to INR 51.85 crores, up marginally by 2%. Whereas total expenses, INR 20.25 crores to INR 26.84 crores, this is up by 33%, mainly due to increase in employee cost. Salary risen by 30% to 32% to bring the salary levels to market levels, and corresponding impact on gratuity and actuarial provisions and other expenses like it, provision for doubtful debt that's posted in [indiscernible] expenses. So profit after tax down by 17% from INR 24.43 crores to INR 20.35 crores. Major head of operational income that is INR 17.92 crores, up by 7% to INR 19.23 crores. Transaction charges, marginal that is INR 9.83 crores to INR 9.86 crores. Cash charges that is INR 1.88 crores to INR 2.34 crores that is up by 35%, and IPO corporate expense charges up by 28% from INR 4.16 crores to INR 5.32 crores.On stand-alone results on year-on-year basis that is quarter ended June '19 versus quarter ended June '18. Operational income up by INR 36.37 crores -- up from INR 36.37 crores to INR 40.53 crores. Other income up by 181% due to interest on IT refunds as well as higher mark-to-market gain that is INR 4.02 crores to INR 11.31 crores. So my total income up by 28% that is INR 40.4 crores to INR 51.85 crores. Whereas total expenses up mainly 45% due to increase in employee cost that is INR 18.5 crores to INR 26.84 crores. Whereas tax up by -- profit after tax up by 25% that is INR 16.32 crores to INR 20.34 crores. There -- major head of operational income that is INR 15.67 crores of corresponding period to INR 19.23 crores that is up by 23%. Transaction charges from INR 9.66 crores to INR 9.86 crores. Cash charges from INR 2.04 crores to INR 2.37 crores. And foreign investment monitoring, last year, it was not there, during that corresponding quarter. This year, it is INR 54.7 crores. And with this, I'll leave the floor open for questions and answers.
[Operator Instructions] The first question is from the line of Prakash Kapadia from Anived PMS.
If you could give us the status of the appointment of the new MD and CEO, where are we in that phase? And I think we had suggested one name and then SEBI said give us more names, and those were to be approved by shareholders. So is that the status? By when do we see this closure?
Well, Mr. Prakash, when we gave one name to SEBI, they told us to give at least 2 names. So our Board has given 3 names and without any preference. So that is first one fit that is going to get shareholders' approval. So in June 27, we have started postal ballot, and July 27, it has got over. Today, we have received the results. We have updated SEBI about it. And shareholder has to approve panel of names -- panel of the 3 names, and then SEBI is going to decide about it. So we have submitted to the SEBI panel of names, now ball is in the court of SEBI to be fair about it.
Understood. Sir, on the Aadhaar status update, I think Supreme Court came out with a ruling. So is my understanding correct? You can use online Aadhaar as you were doing earlier for KYC, but you have to do physical verification in 1 year. Is that the right way to interpret the law?
My colleague Sunil is from CDSL Venture. He will tell you about it.
So far as Aadhaar -- online Aadhaar is concerned, it can be used only for direct benefit schemes, okay, which is, in -- out of the consolidated fund of India. And all other private parties, okay, except for telecom and bank, [indiscernible] because recently, the Aadhaar Act was amended, promising telecom and banking investors KYC to be done. But for all other parties, they have to do an off-line eKYC, which Aadhaar has come out with the guideline, and we are currently doing off-line eKYC for some of our projects. In case we want to do -- continue doing online eKYC, we have to approach Aadhaar through our regulators. So we have approached SEBI that -- to approach Aadhaar and permit us to do online eKYC as well for the industry. And once SEBI approaches Aadhaar, then there will be some act changes in the UIDAI Act or a permission given by the Central Government, after which, we will be permitted to do online eKYC.
Okay. Okay. So we have to do off-line?
Currently, all private parties can do only off-line eKYC.
Except, you said, banks and telecoms?
Except banks and telecom because the law was recently amended.
And I had one more question. What is the mark-to-market impact of gains on the investment book in the other income? If you can quantify that figure?
Yes, one minute. See, on quarter-on-quarter basis, for the quarter ended March '19, we have got a gain of INR 9.73 crores against with June '19 INR 8.97 crores. But if you compare it with the year-on-year basis that is June '18, gain was only INR 1.9 crores against INR 8.97 crores is there.
And lastly, Bharat-bhai, you mentioned about that INR 6.93 crore revenue stream, saying this is -- we have completed the first phase, the committee, this thing, and there were some expenses pertaining to that. So that was a government project? And how much of that is in other expenditure? If you could just explain that. That's the last question.
The INR 6.93 crore is government and Supreme Court has appointed committee, that project we are doing, and that is the refund of...
Investor fund.
Investor fund. Refund of investor funds. So INR 6.93 crores, we have booked during this quarter.
IEPF-related work? Is it IEPF-related work? Investor Education Protection Fund? Or is it some other things?
Other, some other things. That is the confidence, we can't divulge it that way. So against INR 6.93 crores, what we have booked as a income during this quarter. We have booked expenses also, we have provided for it that is INR 5.48 crores. That's why other expense is [indiscernible].
[indiscernible] goes up, right?
Yes. Because of that, mainly.
So this is a lower-margin business as compared to some of our existing businesses, but because it is a government listing, we are doing it because it is like mandatory.
Yes. Yes.
Okay. And few quarters ago, there was a revenue stream of INR 2 crores, INR 2.5 crores, which we had said it was our government order. So this is the same? Or that was separate?
Same thing, same thing.
Next question is from the line of Harit Shah from Reliance Securities.
Sir, I just had one clarification, one -- just one small data point. The -- sir, eCAS revenue in this quarter was INR 2.37 crores, and in the year ago, sir, it was about INR 1.88 crore?
1 minute. 1 year ago, INR 1.89 crores. And now, it is INR 2.37 crores.
Okay, sir. Secondly, can you just -- your detail regarding the incremental market share on the beneficiary owner account of the -- your main competitor and approximate number of accounts that are there at the end of the quarter?
As on June quarter, we have added net 6,38,000 new accounts against other depository has added 2.17, 2,17,000 accounts. That is our incremental market share is 75% for this quarter.
All right. Right. And finally, the -- can you give the figure for the number of unlisted companies on [indiscernible]? I think it was about 1,400 end of the last quarter.
So in this quarter, a further 633 companies we have added. So it comes to around 2,037 companies as such.
Next question is from the line of Atul Mehra from Motilal Oswal AMC.
Sir, what's led to this doubling of other expenditures in terms of line items of INR 9 crores last year versus INR 18 crores for the current year?
Well, I can tell you major expense is in personnel. Other expenses due to this government project, in which we have provided around INR 5,49,00,000 crores against INR 6.93 crores is our income.
Okay. INR 6.93 crores, is that the income for the current quarter?
Yes. And then impairment loss on finance related that is now we have to provide for doubtful debts there in first quarter only. So around INR 1.62 crores, we have provided for that. That is a major. Then in the KRA that is INR 60 lakhs as well, and system maintenance cost increased by INR 71 lakhs. These are the major areas.
All right. And during the quarter, sir, you also had some recovery, right, from the past -- I think it was not really mentioned. You had a write-back of...
That is for the assessment year 2012, '13, income tax has given us a refund with interest. That is around INR 2 crores, interest amount is INR 2.2 crores.
INR 2 crores. And along with that, INR 2.23 crores...
Is the interest on refund.
So total, you have another INR 4 crores of receivables which have come in this quarter, right? INR 4 crores of written-back amounts for the quarter?
No, INR 2.23 crores. And INR 1.74 crores is the write-back amount. So overall, INR 4 crores, whatever you are totaling in aggregate.
INR 4 crores?
Correct.
Got it. And sir, the other increment is probably a function of booking capital gains, right? The INR 5 crores going to INR 15 crores?
Yes.
Mainly a function of that, right?
Yes. And it includes INR 2.23 crores of income tax refund that is interest on income tax rate.
The next question is from the line of Nitin Agarwala from JM Financial.
Sir, can you place some more light on what exactly is this committee appointed by Supreme Court? And how is it functioning? And how are we earning revenue from that?And going forward, what is the revenue potential from this? Or is this just a short span when we will be have earning revenue from this stream?
Yes. First and foremost, this is a one-off assignment. This is a committee appointed by Supreme Court to ensure refund to investor in a particular company, okay, who are defaulted by the company. And we have been appointed to create a database of these investors, all of the certificates and receipts. Based on that, we will decide on the refunds and then we will credit the refunds to the investor's account. So once this is done, it is a one-off event.
Okay. So till when is it expected to continue, for next how many quarters? Do we see...
See, the contract is for 1 year, okay, but there are large number of investors, about 4.5 crore investors. So we expect it to spillover maybe to the next year as well.
Next year, as in FY '21?
That's right.
And so...
Primarily because of the numbers involved.
Okay. And what is the potential revenue which we can get in this year and next year from this stream?
That depends on number of applications we...
That's -- yes, that's -- see, we are -- we will be billing based on the numbers on a per-application basis, so it all depends on the number of applications which come in. Because it's an old matter, many of the applicants don't have their certificates, they don't have their receipts. So those type of challenges remain.
And what is the fees on per application?
See, everything we cannot divulge. That is why.
No problem. And where have -- which entity are we recording this -- this is not there in stand-alone, so it must be in some other entity.
CDSL Ventures.
CDSL Ventures is the entity.
And sir, my second question is regarding the employee cost increase. So there is a 30% increase across the board. So this is coming after how many years, like such kind of increase? Do we have a set pattern that we -- after these many years, we increasing our employee cost base for?
See, last increment when -- in October 2016, we did it. So every 2 to 3 years, we are doing it.
Okay. Sir, this time it was for this particular. So this 30% increase will be witnessed like throughout going forward in next quarters also year-on-year increase?
No, no. See, there is a onetime impact due to this new encasement and actuarial valuation of leave encasement and gratuity. So around approximately INR 3.5 crores to INR 4 crores impact was there in first quarter, but it won't be there in next quarter.
Okay. So if we remove like INR 3.4 crores -- INR 3.5 crores to INR 4 crores, we are still getting around INR 10 crores to INR 11 crores of quarterly run rate. So that run rate should continue going forward for employee cost?
Yes, that much. The additional INR 1.5 crores to INR 2 crores for -- it comes to that much.
Next question is from the line of [ Privesh Bavarya ] from Kotak Securities.
My question was regarding -- I didn't catch the numbers of revenue bifurcation on a year-on-year basis for the transaction charges, IPO, annual issuer, et cetera. Could you please share the same?
Yes. Year-on-year basis you wanted?
Yes. Yes.
That is annually issuer charges, INR 15.66 crores to INR 19.22 crores.
Okay. IPO?
IPO corporate expense from INR 5.55 crores to INR 5.32 crores.
Okay. Transaction charges?
INR 9.67 crores to INR 9.86 crores.
Okay. What about online income?
Online income from INR 6.84 crores to INR 7.64 crores.
INR 7.64 crores. And e-Voting?
e-Voting from INR 57.85 lakhs to INR 44.86 lakhs.
INR 57.85 lakhs to INR 46 lakhs?
INR 44.86 lakhs.
Okay. And my second question is regarding, what was profitability income from the government projects regards to document verification in the second quarter for the financial year '20?
See, first phase is over. So we have already booked the income for that first phase. When second phase is going to start, that time we have to see.
Okay. So what could be the possible time horizon for the second phase?
No, see, contract is for 1 year. So within this...
Financial year.
Financial year only, we will get something.
Okay. And also, [ what I can see here ] -- could you please highlight the number of cash at the end of first quarter financial '19?
It would be INR 715 crores. All together, INR 715 crores. Again, quickly, we have to make a payment for INR 743 crores of dividends.And INR 30 crores to be paid that refunded -- not refunded -- refundable deposits, so around INR 650 crores.
INR 650 crores net?
Yes.
And also, that -- could you share the information regarding the number of universities enrolled under the National Academic Depository? And the number of records upgraded on the same?
Yes, same. Year-on-year basis, there is June '18 versus June '19. Of those 325 academic institutions we signed agreements, it has -- went up to 515 universities.
Okay. Okay. And it, contrary to -- yes?
And number of academic records loss is from 40.41 lakhs to 1.71 crores records.
44-point?
40.47 lakhs, means [ 47.46 lakhs ] records, it went up to 1.71 crores records.
Okay. And are you not hoping to generate revenue from September 2019 onwards also?
Yes. MHRD is to notify what will be the charges. But once they notify, I think we should be on track. We have not indicated that it has to be -- the free period has to be increased or anything like that. What -- because we are [ continuing ] that they will be notifying us.
Okay. Okay. And could you share the information regarding how the pricing is decided on the same?
See, there are 2 types of charges: one is for upload of records; and second is in case any record is verified, okay, a charge is levied by the verifier. So you have the verifier charges as well as our charges. And like I said, there are 2 charges: one for upload of the record by the university; and one for verification.
The next question is from the line of [ Ashish Sood ] from [ Rashid Capital ].
My question is regarding insurance depository business. So as on date, how many health insurance policies are you doing online? And life insurance policies, can you give break up and charges for them?
They are -- there. Okay. 2.5 lakh policies added. There is one -- around 5,000 health insurance policies added into the system.
Okay. So this is the first time health insurance policies have been added?
Yes. Yes.
Okay. And pricing, what is the pricing on them? [ INR 50 ] or it's different?
No. It's different, no? That is around INR 30 to INR 35?
INR 35.
INR 35.
Next question is from the line of [ Shriram Srinivasan ] from [ Sherman Health Management ].
Sir, [indiscernible].
Sir, [indiscernible] can you speak a bit louder? Your voice is a bit faint.
Sorry. [Indiscernible].
No, so you'll have to speak a bit louder.
Okay. Can you hear me right now?
Yes. Yes. Okay.
Yes.
[Indiscernible] during the quarter, right? [Indiscernible] to that at the end of last quarter?
Last quarter, it has been added by around 893 companies -- 533 companies in last quarter.
533 companies added, right?
Yes. Against 893, now it is 533.
What about the [indiscernible]?
Those details we don't have.
Okay. So in terms of the increase of [indiscernible] into that business?
Come again?
In terms of [indiscernible]...
Why is he breaking?
I'm sorry, Mr. Srinivasan, but your voice is not clear.
In terms of insurance depository, you are already [indiscernible], right?
We're not able to understand your question because your voice is very faint.
You are already doing insurance depository business, right?
That is right. Yes.
What is the [indiscernible] in the instance of [indiscernible]?
See, there are 2 lakh, 50,000 policies are there as on 30th June, against 2 lakh, 25,000 on March '19. So 25,000 additional policies.
30,000 additional policies have been added, right?
Yes. Yes.
Yes. Or we can see the kind of [ initial ] companies. Last time, you are winning around [indiscernible] -- almost 200 or 250 companies we've been seeing every month, on a month-on-month basis. I don't think we can see that same trend?
Yes. Same trend -- no, 633 companies in one quarter, it comes to [ 200 ].
Yes, that should -- we can see the similar kind of things, right?
Yes, yes. Definitely.
Yes. And as well as the -- in terms of [indiscernible], I really expect [indiscernible] under the Supreme Court telling all of us to do some specific projects for investor refunding, right? In such a case, we are made at our [ INR 5.48 crores ] has been provisioned for that business, and you have mentioned the [ INR 6.93 crores ] as an income? That's right?
Correct.
Yes. Is this INR 6.93 crores it may be -- if we refer to income range, but this [ INR 5.48 crores will be provisioned at every quota ]? Or is it one-time?
It's a one-time. One-time. One-time.
For one of the projects. For the Phase 2 of the project, we, again, will have some income and some expenditures, too.
What will the expenses that we can expect? I think we can make it up into the percentage?
No. We cannot -- I mean we are actually in the process of finalizing the vendors and all. So that we will not be able to disclose anything at this point in time.
Okay. Fine. But the numbers -- okay. Fine. It will be much helpful. Sir, in terms of the market share that [indiscernible] the incremental markets that they're holding, right?
That's right.
Yes.
Yes. [Indiscernible] some of the beneficiary [indiscernible].
It was around -- it's like [ 38,000 ] in this quarter were added by us, and about 2.18 lakhs were added against by NSDL.
Yes. Yes. [Indiscernible]. So in terms of university business, [indiscernible] last -- same quarter of last university in the [indiscernible] because of [ no lakh. Now if ] [indiscernible], right?
That's right, yes.
So such business, we have been expecting from the next 2 to 3 quarters are [indiscernible] [ financial ] [indiscernible], right?
Maybe yes. See, we'll be permitted to charge from September '19. That's what our MOU with the MHRD says. Now MHRD has to come out and specifically issue a circular to all the universities saying that going forward, they will have to be pay this charge. So that's how things stand currently.
One last question, sir. In terms of the [indiscernible] [ and charges ], we can see that total number of [ donors are asking ] the [indiscernible] on the last 2 quarters because of the -- respective of the market conditions. [indiscernible] this one, how about the -- in your [ win placing ] this quarter because from June 1, we can do an interest in rate, by a person who can get it -- buy in NSE even he can do BSE, the challenge would be on 110, right? That may not...
Actually, it does not matter if somebody has told the securities that either there will be a debit in one account and a credit in the other account. Our charges are based purely on the debit into the account, irrespective of where you're doing a settlement from which clearing corporation.
So this [ interclearing corporations ] does not impact our business, right?
It does not impact our business much, yes.
The next question is from the line of Hiten Jain from Invesco AMC.
Sir, I would like to understand this other expense better. So if I look at it -- so last year, that is 1Q '19, other expense was INR 9.5 crores, which has now become INR 18.4 crores. So approximately, an increase of INR 9 crores. Out of that, if I remove this INR 5.5 crores, which is you are saying one-time related to this specific project that we have signed up, still despite that, this INR 9.5 crores has gone up to INR 12.9 crores, which is an increase of 36% year-on-year. So I'm not able to -- normally, historically, if I see, you don't have other expense growing at this scale. So what exactly happened this quarter?
See, other expenses, if you remove that INR 6.23 crores in employee expenses, there is INR 16.06 crores other -- see, apart from this INR 5.49 crores in the -- this project -- government project, other than that, INR 1.62 crores we have provided for doubtful debt.
So sir, you would have also provided thus provisions for doubtful debt in 1Q '19 also, right?
No.
Okay. Then why is the specific -- why this INR 1.6 crores? What has changed this quarter?
No, no. See, last year, auditor was different. This year, auditor was different. For the current year income and so, they told us to provide that is expected credit loss. Previously, our [ source ] a simplistic approach. At present, also that. But expected credit loss for the current year income and so generally on par in the fourth quarter, we will provide it. But auditor insists from this first quarter also, we have to provide for it.
Okay. So if I remove that also, still it is up 19% year-on-year, other expense?
Correct.
Normally, we see 10% to 15%.
Yes, yes. But that are expenses like postpaid telephone communication increased by 62 lakhs that is because of this government project...
This project of the government -- project, all communication was by way of SMS. So there was a steep increase on the SMS charges.
So the -- is this project loss-making for us?
No. Right now, no.
No.
Okay. Because...
Even no margin, very low margin, you can say.
But it's a very high volume and low margin.
Correct. No. Because if I look at the revenue contribution of INR 6.93 crores, expense you are saying INR 5.5 crores plus INR 70 lakhs increased due to electricity posted further INR 70 lakhs...
Those are reimbursable expenses, basically. So basically, I incur those costs and those are reimbursed to me on actual.
Correct, correct. Understood, understood.And my second question is, if I heard you correct, you said you take salary hikes after 3 years. Is it so?
That's right, yes.
But if I look at your employee expense over the last 3 years, so even in FY '19, employee expenses grew by 13%; FY '18 also, employee expense grew by 22%; and FY '17 also, it grew by 16%. So always it has grown more than -- around close to 15%, 20%. So why would that be then?
That is on the total expenses you are converting, that is 14% multiple, something like that. Here, see, for the new project, number of employees also -- if you see, in March '19 -- June '19, '18, 235 employees were there. And now it has increased to 253 employees. Then all these promotions, annual increment debt, and also you have to consider it.
So you have annual increment, right?
Yes.
So then what is this 3 years' hike?
That is to compare with the market, year-to-date.
So every year, you give a hike. But after every 3 years, you...
Earlier -- see the earlier annual increment was 2% to 3%. Okay? Which was not keeping in pace with the inflation as well. So that is why every 3 years, we look at having a revision of the pay scale itself because we don't have Dearness Allowance and all.
Okay. So -- okay. And you are saying the employee expense growth that we are seeing is because of addition of new people?
Yes. Yes. Addition of the -- because as the projects have increased, people have increased. Unlisted companies, we have required more people. So overall, the number of people are increasing.
Okay. Okay. So I mean, do you envisage this -- I mean to add more because this is a new opportunity which we are getting revenues from in terms of unlisted shares. So do you expect addition of more employees going forward?
No, no. See, if the volume increases substantially, I think, employees also -- number of employees will have to keep in pace with -- as the business increases. It cannot be that the business increases and the number of employees remain the same. Plus, as we get into new projects, obviously, there will be some additions, so there is -- or say, has the Academic Depository picks up steam, and MHRD permits us to levy a charge. We will require people to market the products. So these things will happen. I mean it's not that it [ is wise to be on standstill ].
Next question is from the line of Amit Chandra from HDFC Securities.
So my question is related to the understood opportunity. So we are adding around 200 companies monthly. Whereas, the competition is adding around 500 companies on a monthly basis. So I would like to understand, if that -- these 500 companies or 200 companies are all on incoming basis? Or are we incurring any cost of -- sales cost to update these 200 companies? And if you want to compete with them in terms of more -- adding more companies, so can you see an increase in costs and sales costs that is related to [ growth ]?
Yes. Whenever there is some incentive, we pass on to the RTAs to admit more of their companies into CDSL. So as we get more aggressive, that cost could go marginally up.
Okay. So...
I would look at it more as a promotional expense.
Okay. So we are providing incentives to the RTA for -- so the...
We just started doing that, yes.
Okay. So these incentives are recorded in other expenses? So it's a part of that?
No. That is business promotion expenses. At present, hardly anything. Recently only we have introduced this thing.
Okay. Okay. Okay. And sir, in terms of the government project that we're doing, so as it has already discussed that the margins are pretty low in that. So can you quantify that -- what exactly the margin's on? Can these margins increase its scale? Or it's just the starting point where the margins are slower? So as we reach scale, so margins can increase? Or how to say it? And foreign -- if you see from a quarterly point of view, the margin's a bit lower. But if you see from a yearly point of view, what are the targeted margins that you look at?
No. I think the margins are pretty okay. It's around 30% -- 30-odd percent, and we have already booked some income in the last quarter. It's not only this previous quarter, but quarter previous to that as well.
Okay. So this 30% margin is so the government project can be [ known ] for the full year, right?
Yes. It's for the full year.
Okay. And first the -- year? Answer to the last question would be on the salary cost. So [ the number ] we have taken the increment of 30%. This is -- includes for the increase that we're seeing in salary costs. Includes only impacts of 3 months or as applicable is also there or [indiscernible] -- it's applicable from January or 6 months' impact. It's there, it's only 3 months' impact?
Amit, one permanent impact, one temporary impact. Now, as on 31st, whatever actuarial valuation on reinvestment or gratuity was there, that has come into picture in this June '19. And it's around INR 4 crores we have impacted during this quarter. It won't be there in second or third quarter. So whatever increase is beyond that becomes 130 , then 30 becomes my permanent one as such.
Okay. So next quarter, the employee costs would be in the range of INR 10 crores to INR 11 crores?
Oh, INR 10 crores to INR 11 crores, correct.
Next question is from the line of Nitin Shakdher from Green Capital.
My question is -- pertains to -- I didn't understand the cash and investments and the general reserves that are around INR 650 crores to INR 670 crores, as what you'd highlighted. So my question is why -- is it possible to deploy certain amount of reserves from the treasury in terms of creating a buyback for the shareholders or improving their dividend yield because isn't that a better use of the cash rather than deploying it at a yield of 7%, 8%? Just wanted to hear the management viewpoints on that.
See, management about our dividend policy is consistent, that is around 60% payout ratio is always there, and on consolidated basis, around 44% payout ratio is there. Regarding buyback of shares and all, now in this budget, everything has gone. Now it is equal to whatever dividend you are giving, it comes to same only. But definitely in near future, near future means -- depends on [ UMD ] to come and then we'll review it, then we'll come back to say all that about it.
Next question is from the line of [ Gaurav Lohia ] from [ Bowhead Investments ].
Sir, have you approached the [indiscernible] for revision in the annual [indiscernible] share fee?
Not yet. Not yet.
Not yet. But are we looking in the near run? Or it will -- probably, it will spill over to...
No, in 2015, they revised the tariffs. So now, this year or next will do.
Okay. And sir, what was the revenue from these unlisted public companies in Q1? And is it a surcharge of INR 19 crores?
It would be around what -- it would be around INR 75 lakhs.
INR 75 lakhs. Okay. And how much of that would be onetime admission fee? That will be much higher, right, out of the INR 75 lakhs?
Okay. 500 and -- there is 500 companies that -- around 15 -- so around 15 -- INR 15,000, so 600. So INR 19 lakhs around, right?
INR 1-9 lakhs? Or 9-0?
Not 9-0.
INR 1-9 lakhs. Okay. Understood. And sir, you had mentioned that around 65,000 companies are there. And out of that, public companies are there. And out of that, about 5,000 to 6,000 companies would have the -- [ to meet ] this thing. Now how many companies would be left with the run rate that we are going out or competition is adding companies?
About unlisted companies?
Yes.
See, around 65,000 unlisted companies are there, out of which are 2,000-odd admitted over here, than whatever you say that is around 4,000 at NSDL. So still 60,000 companies to come. But it is not mandatory, unless and until they issue sales or some transfer of sales [indiscernible] mandatory.
Yes. And any word on the private companies? As in private -- this is only for publicly and listed companies, but any word on private companies?
No. That is a second phase that is -- MCA's going to come out.
Okay. And -- but there is no clarity as of power and that would happen?
Not yet. Not yet.
Okay. Understood, sir. And sir, what was the [ sales ] provision last year? Was there any provision last year? Or there was no provision? It was only in Q3 or Q4?
That is Q3, Q4, it was.
Okay. There was nothing in Q1?
Yes.
Next question is a follow-up from the line of [ Privesh Bavarya ] from Kotak Securities.
Sir, just one more question regards to -- I didn't get the number of revenue contribution from the unlisted space in the companies. Can you please share the same?
See, from -- previously, I made a mistake. But in this quarter, 643 companies added, and we [ own ] income of INR 99.63 lakhs.
INR 99.63 lakhs. Okay.
Thank you. As there are no further questions, I now hand the conference over to the management for closing remarks. Over to you.
Thank you very much to all of you, and keep faith in us. We'll definitely give good results. Thank you very much.
Thank you very much, members of management. Ladies and gentlemen, on behalf of Axis Capital, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.
Thank you.