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Central Depository Services (India) Ltd
Earnings Call Analysis
Q2-2024 Analysis
Central Depository Services (India) Ltd
Central Depository Services Limited (CDSL) has seen a notable increase in demat accounts, with their total count reaching 9.62 crores out of India's 12.96 crores by September 30, 2023. This robust growth signifies a 33% rise in daily turnover for Q2 FY '24 in comparison to Q1 of FY '24, which is an encouraging sign of both financial inclusion and active investor participation in the Indian capital markets.
CDSL has demonstrated a strong financial performance, with a consolidated total income ascending by 35% to INR 230 crores, and net profit also up by 35% at INR 109 crore in comparison to the same period last year. Half-yearly figures also saw a healthy uptick with a 28% rise in total income at INR 404 crore and a 32% uplift in consolidated net profit.
On a stand-alone basis, CDSL's quarter numbers were equally impressive, showing a 29% increase in total income at INR 182 crores and a parallel rise in net profit by 28%. Similarly, half-yearly income improved by 18%, with net profit gaining a 14% rise, underscoring CDSL's steady financial health.
CDSL's subsidiary, CDSL Ventures, experienced a stellar 67% increase in operational income for Q2 FY '24, with a total income of INR 47 crores, illustrating a significant jump from the same period in the previous fiscal year. The net profit for CDSL Ventures surged by a substantial 61% to INR 22 crores.
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Ladies and gentlemen, good day and welcome to CDSL's Q2 FY '24 Conference Call, hosted by HDFC Securities.
[Operator Instructions] Please note that this conference is being recorded. Ladies and gentlemen, please note that CDSL does not provide specific revenue or earnings guidance. Anything said on this call which reflects CDSL's outlook for the future or which could be constituted as forward-looking statements must be viewed in conjunction with the risks that the company faces.
I now hand the conference over to Mr. Amit Chandra from HDFC Securities. Thank you.
And over to you, Mr. Chandra.
Yes. Thank you, operator. So good morning, everyone. On behalf of HDFC Securities, we welcome you all to this CDSL Quarter 2 FY '24 Earnings Call.
We have with us today the management team of CDSL, represented by Mr. Nehal Vora, MD and CEO; Mr. Girish Amesara, CFO; and other senior leaders.
We will start with a brief overview of the results by Mr. Nehal Vora and then we will start with the Q&A. Thank you.
And over to you, sir.
Thank you so much, Amit. A very, very good morning to all the listeners and participants. And welcome, everyone. I hope each of you and your loved ones are safe and healthy. Thank you for joining us today to discuss CDSL's financial results for the second quarter for the new financial year, FY 2023, '24.
We posted a detailed investor presentation on our website for your reference. I'm joined by the CDSL Group's leadership team. Let me start with the industry highlights and then take you through some of the key aspects of our performance.
During the Q2 FY 2023, '24 the overall Indian capital markets demonstrated a healthy growth. The total demat accounts as on September 30, 2023, stood at INR 12.96 crores, of which CDSL's share was at INR 9.62 crores. The net demat accounts opened in India in this quarter was at 91.58 lakh, of which 80.28 lakhs were registered with CDSL in the Q2 FY '23, '24. The comparative numbers for CDSL were 52 lakhs for Q1 of FY '23, '24 and 48 lakhs for Q2 of FY '22, '23.
The total market capitalization of the market increased by 8% as on the end of this quarter, reaching INR 319 lakh crores compared to INR 296 lakh crores as on June 30, 2023. Furthermore, the daily turnover for Q2 FY '24 witnessed [ a 33% ] increase when compared to Q1 of FY '24. These positive trends reflect the financial inclusion and more -- and an increased participation by the investors in the Indian capital markets. These positive trends in the markets also attributed to the recent industry advancements and regulatory measures. We believe these measures will benefit the industry in the long run by protecting the interests of retail investors and reducing the systemic risk.
The 25 -- the 25th year of operation is also very special for us, as we celebrate the 9 crore demat accounts milestone in July 2023. And further, I'm delighted to announce that CDSL has received a recognition for its excellence in digital execution. In October 2023, we were honored the TechCircle business transformation award. As we reach the midpoint of our 25-year journey, we remain committed to enhancing ease of doing business and instilling trust within the financial ecosystem. Our ongoing efforts have yielded promising results. The current financial year is also a representation where we have experienced a sustainable and healthy business and financial performance as a -- results of the efforts of all the market infrastructure institutions.
Before I hand it over to our Chief Financial Officer, I would like to take a brief moment to place our appreciation and gratitude to all our stakeholders, the beneficiary owners, the depository participants, issuers and regulators, employees and other market participants for their constant faith in us. We extend a heartfelt gratitude to our investors and the people of India whose unwavering faith continues to guide us. Our focus remains steadfast on building value for our stakeholders and securing a robust Indian digital financial ecosystem. Thank you for your continued support and trust.
Over to you, Girish.
Thank you, Nehal. Good morning to all of you.
Speaking on the quarterly performance. On a consolidated basis, the total income for the quarter ended September 2023 is increased by 35% to INR 230 crores, as against INR 170 crore for the same quarter during the previous quarter -- previous year quarter. The net profit for the quarter ended September 2023 is increased by -- is also increased by 35% at INR 109 crore, as against INR 81 crore for the same quarter during the previous year.
Speaking on the half yearly numbers. On a consolidated basis, the total income has increased by 28% to INR 404 crore, as against INR 316 crore. The consolidated net profit for the 6 months ended September 2023 has increased by 32% to INR 183 crore, as against INR 138 crores during the previous half.
Speaking on a stand-alone basis. The total income for the quarter ended September 2023 is increased by 29% to INR 182 crores, as against INR 141 crore for the same quarter during previous year. The net profit for the quarter ended September 2023 is increased by 28% at INR 88 crores, as against INR 69 crore for the same quarter during the previous year.
Speaking on a half yearly basis. On a stand-alone basis, the total income is increased by 18% to INR 352 crores, as against INR 298 crores during the previous half. The consolidated net profit has also increased, by 14%, to INR 180 crore, as against INR 158 crores during the previous half.
Now I shall hand over to Sunil Alvares to give an update about operations of the wholly owned subsidiary CDSL Ventures Limited. Thank you.
And over to you, Sunil.
And good morning to all the participants.
So far as CDSL Ventures is concerned, the Q2 FY '24 operating income was higher by 67%, as compared to Q2 FY '23. The operational income was 43 crores in this quarter, as compared to 26 crores in last -- same quarter last financial year. The income -- other income was at 4 crores, as compared to 3 crores in the previous year. The total income was at 47 crores, as compared to 29 crores in the previous -- quarter of the previous financial year.
And so far as the expenses are concerned, the expenses were higher by 66% at 18 crores, as against 11 crores as compared to the previous -- same quarter in the previous financial year.
The profit before tax for this -- for Q2 FY '24 was 29 crores, as compared to 18 crores for Q2 FY '23, which was higher by 63%. And the net profit was higher by 61% at 22 crores, as compared to 13.44 crores in Q2 FY '23.
And with this, I hand it over back for taking the -- question-and-answers.
[Operator Instructions] First question is from the line of Swarnabha Mukherjee from B&K Securities.
Congrats on a great set of numbers...
[indiscernible] coming a little muffled. Can you please speak through the handset?
Yes, yes. [indiscernible] is this better?
Yes, yes.
Yes. Great performance for the quarter. 2, 3 questions. First one, on the IPO, corporate action line item. So I just wanted to understand. How much of this growth can be kind of sticky? So if you could give us some color or a quantifiable breakup on how much of this has come due to IPOs, how much through [ eAGMs ] et cetera and how much through corporate actions, so as to give us a flavor whether some part of this can be retained or whether there is a substantial seasonal element in this. So that's the first one. Secondly, on the KYC KRA business, if you could give us a sense why this -- the performance has been very strong. So whether the share of fetch transactions has increased. Or is it like the mix is relatively similar and volume-driven, because of which the growth has come?
And thirdly, on the cost side. So if I look at the tech cost -- and so about a year back, it was somewhere around 9 crores, 10-odd crores. It has steadily moved up to 15 crore run rate in this quarter, so are we peaking out, I mean, in terms of the run rate? Or should we expect further [ inflation ] in this given that you have previously also highlighted the technology-intensive nature of the business? And on the other expense increase, if you could highlight. In the stand-alone business, what is driving that? I understand [ that made ] some inter-KRA charges [ placed in ] KYC subsidiary, but in the stand-alone business, what is driving that? That's all from my side, sir.
Okay, thank you. On your first question, on IPO and credit -- corporate actions, it's kind of market-driven, so it's kind of difficult to predict. And we don't give any future [ period ] reference points, so we would -- not able to kind of give a picture of the future. That's for you to assess. Your second question was on the KRA charges on fetch and -- so I think it's broadly driven by the buoyant market conditions; number of demat accounts growing; and participation growing both in terms of delivery volumes, et cetera. We don't generally give the bifurcation on how much is fetch versus -- it's a consolidated number -- sorry. Your third question was...
Sir, before that, if I could just ask you. I'm not -- if -- even if [ a quantifiable number is not ] possible, but -- if you could -- maybe some -- highlight whether [ this is deliberately more ] fetch because -- given their usual penetration on the other financial products are also increasing, et cetera. So I mean, is that an outcome of this? So...
Again it's difficult to predict what has caused this outcome. It's kind of the overall buoyant market conditions. What has led to whether it's fetch or increase [ of ] KYC opening? It's a culmination of variety of factors and it plays one upon the other, so it's difficult to give a answer which would be -- absolutely give the reason. It's a multiplicity of factors which leads to this, and hence, we are not able to give you a specific answer on that.
Okay. Sir, on the previous question, on the IPO and other [ eAGMs ] and corporate action, I don't want to have forward-looking guidance, but if you could at least give us a breakup between how much is due to IPOs and how much is due to other things which will -- at least on a year-on-year basis...
Yes. So basically this is IPO, corporate action is income itself. [ The head ] itself is based on the IPO that comes in the market, so it is totally market-driven activity. Higher number of IPOs, we will be able to process higher number of...
So it's mainly due to IPOs. Your answer is right.
So basically that's the answer.
Okay, all right, sir. On the costs, if you could...
The costs. On technology, cost is something which is constant for that. We are growing in number of accounts. We have to plan. And this is kind of a market infrastructure company, so it has to plan for the [ rise and ] growth. And then infrastructure takes time. And technology infrastructure, especially, needs to only -- not only be built with what the current trends are but what are the future sophistications which are coming into the market, so it's going to be a constant investment which we will continue to do as we move forward. This will be in sync with what is expected both from the regulators and the market, to ensure that we are able to give the best-in-class performance as we move forward. In terms of other expenses, I'll ask Girish to answer that...
See, largely the other expenses -- if you look at our cost structure, payment to SEBI is again related based on my profitability and billing done for annual issuer income. So higher the profitability, higher the income, there will be higher cost on these accounts. Again if you look at inter-KRA expense, it could be directly proportionate to the business, the earnings that I do on a top line in terms of KRA income. Proportionately there will be higher [ KRAs in the ] KRA charges. Having said this, certain costs will move in proportion to the movement in the income. [ That's the submission I ]...
Okay, sir. So on the regulatory [ bit ], you -- what we said, other expense -- or I was talking in terms of the split that you have given in the presentation, where I think the regulatory cost is booked separately. So excluding that, I was kind of interested in understanding for the standalone. So for the KYC KRA, we have an understanding. For the remaining business, ex of regulatory cost was what I was pointing towards.
So largely the -- regulatory cost largely is on account of CDSL, okay? And these are -- this is driven by the regulation, so we can hardly do anything about it.
Yes. So sir, outside that, if -- the breakup you have given. So there is one regulatory cost. The other hand is other expenses, which has moved from last quarter at 41 crores to this quarter at 52 crores. And I think in fourth quarter it was at 30-odd crores, so I wanted to understand that movement, if you could help me.
See, this being second quarter, okay, our e-voting business would also have cost equivalently incurred. So e-voting expense are there. Then we have consolidated account statement-related expenses. Then such kind of expenses are there, which would be there in second quarter mostly because the income corresponding is higher on -- in the second quarter.
Understood. So it is largely granular. There is nothing lumpy about it...
Yes. You're right.
Yes, yes.
Next question is from the line of Amit Chandra from HDFC Securities.
Sir, my question is on the account addition, demat account addition. So obviously we have seen a lot of traction coming back in terms of the additions. And it has gone to the, I think, peak levels, but if I see the revenue per demat, it has been coming down. And if I see the revenue per incremental demat, it is also coming down, so how do you see the, like, newer account additions that are happening? So these are not contributing much to revenues, so how do you see this?
And secondly, on the private companies demat opportunity that has come up recently, [ whether there are around ] 14 lakh MCA-registered private companies. And taking the lower slab, that comes to a bigger opportunity, so is there any time lines in terms of these companies getting, like, demat-ed? So if you can provide some overview on that.
On the first question, Amit, it's more of the building blocks getting created in terms of number of demat accounts. How the investors will react to -- as a group or as a collective group will be dependent on how the market conditions are, et cetera. See, we are in the business of creating the right building blocks. So for the people, to invest whenever there is an opportunity for them to, they would like to really invest. And that for me is the biggest victory, that from a financial inclusion standpoint, more and more people are coming into the ecosystem. And that will kind of play out over the long term, so we are not on a quarter-to-quarter game plan that -- what will be the revenue increase. It's more of a long-term sustainable game plan creating the right ecosystem and creating the right building blocks for us to take it forward from there. So that's the answer to the first question. On the second question: MCA has just recently put out this regulation. I think the time lines [ are given by September 24 ], if I'm not mistaken. So I think we are -- anyways, have been doing this for a long time, so from a technology and system point of view, we are ready to go. It's for them to now kind of really -- kind of approach then depositories for taking it forward.
Okay. And sir, on the e-voting and eCAS revenue, if you can provide the breakup. What was the e-voting and eCAS revenue in this quarter? And also, in terms of the private company opportunity, obviously [ the timing is of September ], but is there any incremental cost that will incur or any incentive schemes that -- we earlier used to have incentive scheme for getting companies because we have a lower, like, market share there. So are there any plans of investing in -- like in [ that piece ]?
So the first question, I'll ask Girish to answer, but the second question is on the -- see, we have been very transparent. And that's been the foundation of our entire ethos, so whatever schemes we have, we put it out on the public domain. And I think it's the costs will be a function of, as more and more people join the ecosystem, the technology infrastructure has to kind of be enhanced, in sync with the increased participation, and to ensure that the service levels remain of high quality. And therefore, there will be a constant assessment done and a constant investment done as to what is necessary and required to be put in from a technology standpoint. So again I would like to repeat that we are not in a quarter-on-quarter target point of view. We are more on a long-term sustainable business. We are in that business of creating a market infrastructure like building a road and the value proposition will then kind of come over a longer period of time. So that's how we see ourselves as we move forward. First question, I'll -- Girish to answer.
So the eCAS income for the quarter is 7 crore, as against 5.5 crore in the same quarter previous year. E-voting [ is -- stood ] at 15 crore in this quarter, as against 14 crore in the same quarter previous year.
Next question is from the line of Prakash Kapadia from Anived Portfolio.
Most of the questions are answered. I just have one question. If I look at annual issuer charges, they are at the run rate of around 63 crores, which is a huge bump-up on a year-on-year basis. Even last quarter, I think we were at this rate, so if you could give us some qualitative flavor on what is leading to this. Is it larger unlisted company revenues? Is it more folios given buoyancy of capital markets? Is there some pricing impacts? If you could give us some flavor.
See, pricing impact is obviously put out in the public domain. It's there is no change there, but it's a combination of both the first 2 factors. It's the increased number of private companies coming in into the fold as well as number of folios increasing which leads to this increase to take place, so the point is that, as any growth is concerned, we are kind of -- our endeavor is to have multiple touch points to ensure that the growth remains very sustainable.
Touch points in terms of business development activities where we are ready for the opportunity as it comes is what you are hinting at, Nehal...
No, both things, also ready from a technology point of view but also ready from an ecosystem point of view, that as more and more opportunities come -- and multiple sources of this, whether it be folios, whether it be private limited companies. So there are multiple sources of how the revenue would grow. So based on that, that is basically how we are planning ourselves.
Okay. And if it's possible to just quantify the revenues from unlisted companies maybe at the year-end or in the first half, if you can just share a number...
We generally don't share these numbers, so it will be difficult for us to do that.
Next question is from the line of [ Paresh ] from [indiscernible].
Nehal, congratulations to you and your entire team for a fantastic performance yet again. Most of my questions, Nehal, have been answered, but really a couple of clarifications. And before I ask Girish clarifications on the financial numbers: Nehal, do you have thoughts on the demat...
[indiscernible] we are losing your audio.
Just one second. All right, is this better?
Yes, yes.
Yes. So Nehal, it is again on the larger question, longer-term question. You're having all the financial assets in one place. Where are we in the journey? We've seen what -- the private companies, the private listed companies, [ from these announcements that ] come through. A clarification on that: What will define a small company? And the newspaper article mentions the number of small companies is just about 50,000 out of, say, 13 lakh, 14 lakh companies which are on the private space. A clarification on that. What will be the definition?
So we have to wait and watch because the regulations have just come in. The rules are yet to be notified, so I think that will -- is going through the process. And we are also kind of really examining this, but that intent is that -- it's like any regulatory approach, it's basically a top-down approach where the larger companies are first subjected to the reform. And then as the success grows, the knowledge grows, it's kind of [ the meter ] would go to the remaining part of the group. So that's really the intent behind and that is how they have gone about doing this.
Okay. So Nehal, on the other asset classes basically, whether it's insurance, whether it's commodities or whether it's mutual funds, any update on what is the progress? Or any -- what's the update on that?
So insurance is, anyways, permitted through our subsidiary, insurance repository. The mutual funds are on a voluntary basis. And I think the important thing from an India point of view -- and that's how we look at ourselves, that for us, India is the prime most focus. It's that there's a unique identifier of PAN and PAN-Aadhaar combination which kind of gives it that unique identity. So if it needs to get aggregated at some point -- and even the account aggregator system is something which has also been rolled out. So that will give a lot of information and data on the investor to kind of pull for his or her consumption and for further analysis. And that's how we will see how the system evolves, matures and is taken forward, but the right building blocks have been created to create a very strong foundation on which this entire structure can be built.
Okay. [ When are we deciding ]...
[ Paresh ], sorry, but we are losing your audio...
Your audio is not clear.
[ Yes ]. We are not...
I just wanted to -- is it better now?
Yes.
Yes.
Yes. Really just wanted to seek clarification whether you started charging the account aggregator in terms of a full basis for the information that they seek.
Not yet.
Okay. And then just some questions to Girish as well. So Girish, our revenues and profit both have grown by 35%, but actually other expenses grew by about 44%, so do we have any one-off on those expenses?
No, there are no one-offs in the expenses.
Okay. And then regarding the SEBI charges, Girish, I saw that that's gone up by 50% even though the revenues from our depository side [indiscernible] 33%. Has there been any change? Or what actually led to a faster growth in SEBI fees this time compared to our depository revenues?
See, SEBI fees are basically based on the collection and not revenue. So if we have collected, say, revenue of previous year or before 3 years, then we have to pay 2% of those collected amount to SEBI. So basically that's the reason how it works.
Can you clarify that once again, Girish? For some reason, I don't understand. I thought the percentage of the revenue...
[ See, SEBI fees ], the mechanism. The SEBI circular specifies that, whatever annual issuer income that you levy to your customer, you collect that. And whatever is the collection amount, 2% has to be paid to SEBI as a fee. Now suppose in this financial year we have collected, say, for previous year or previous 2 years. So the incidence of tax would happen in this year.
Okay, sir, understood. So whatever the pending receivables are, they get added on this year, okay. And...
Yes, yes, yes. So basically our collection has improved. That's the answer.
Understood, understood. Sir, have you had any write-backs because of that because you normally provide for the annual issuer charges?
No, no, no.
Okay. So Girish, just one more clarification on the same thing. For example, when there are transaction charges, [ there are certain fees that's also included ] and be part of the SEBI fees, right?
No, only annual issuer fees.
Only annual issuer, okay, okay.
Next question is from the line of Supratim Datta from Ambit Capital. .
[ Sir Nehal ], for the first question. If I look at your employee costs -- and I am talking about the stand-alone business. The employee costs have stabilized vis-à-vis the first quarter. Should we assume this to be the run rate going forward as well? So that's the first question before I go into my other questions.
I think it will be difficult. We don't give forward-looking statements, but the important thing is that this is a specialized business. We need really the specialized personnel. And as we embark on our growth journey, we will need to kind of earmark more and more people also. Besides the technology increase, even the human resource needs to be enhanced to ensure that it's able to handle the increased growth.
Perfect. On the MCA and the notification by MCA. So, like, people, they have [ different also discussions ]. There are around 14 million, 15 million companies -- 14 lakh companies, 14 lakh, 15 lakh companies. How -- out of this, how many would fall into this bucket of above INR 40 crore turnover? Do you have any sense around that?
We are yet analyzing this. It's just come in, but it will be the small companies which are kind of out of this [indiscernible]. I don't think there is that number there at this stage, but this is something which we are analyzing, so I will -- I'm not able to give you a definitive answer at this stage.
Got it. And typically we have seen that unlisted players have gone with NSDL, as compared to CDSL, so are you working to -- on certain aspects to better target these companies as and when they come for demat services?
As I've said earlier, I'm not in a quarter-to-quarter game. I'm not in a competition game. I'm gearing for a long-term value proposition for India. And that has been our thoughts as a management team, that you prepare -- you put in -- you put across a platform which gives the best-in-class services to the people and let the market choose whichever are the -- is the better platform. Like we've seen in demat accounts, we were lower. We've increased. That has been the culmination of a long-term, I think, strategy. Same thing is what we will follow in terms of -- in this particular space also.
Got it, got it. And last question from my side: So on the KRA charges, could you give a breakdown of how much of this will be coming from mutual funds and -- mutual fund account opening versus the demat account openings?
We generally don't give that number. I'm sorry I'm not able to show it.
Okay, but could you give a broad sense about which would the bigger...
It is -- [indiscernible], if you don't give it, we will not give it.
So it's actually difficult to say because there are many brokers who offer credit of mutual fund securities in the demat accounts. So if there is a record pertaining to a mutual fund which a broker is doing, okay, that would actually go into a broking account or [ spread charts ] pertaining to that particular record. So it will be difficult to say whether a broker is doing it either for a mutual fund or for [indiscernible].
Got it. And final question from my side, on the insurance repository business. One of your peers is working on launching an app which would not only be an insurance repository but provide additional functions as well, as in you could have all your policies at the same place and other services, so are you also looking at enhancing the service? How are you thinking about that business ecosystem...
We have a new management team now. We have a new MD and CEO who has joined the insurance repository, and he would be driving the entire strategy. I am pretty confident he will be driving basically the digital journey, so that is something which we'll have to see in future.
Next question is from the line of Arushi Shah from Sushil Financial.
Am I audible?
No, ma'am. Can you please speak through the handset?
How about now, better?
Yes.
Yes. Sorry for the inconvenience. Just one question from my side. The transaction charges which we see in our financial performance consolidated, which have increased substantially from Q1 to Q2, is this because of new accounts are being opened? Or the absolute charges have increased. If you could throw some light on that.
We don't charge anything for account opening. It's only on a debit transaction that we charge.
Okay -- no. My -- what I meant, sir, was that just new accounts are being opened. So like also per account, whatever, or per transactions, what we charge -- so since more transactions are...
[indiscernible] -- yes. I'm just coming to that. So therefore, it's a culmination of both existing as well as new investors. And that can be showcased, as I have given the industry highlight, as to how the daily traded volume, the delivery volume, et cetera is growing quarter-on-quarter as -- of this quarter as compared to the last quarter. So that kind of showcases the increased participation but difficult to really bifurcate between whether this is from new investors or from old investors. It's a combination.
Okay, okay. And also like, per transaction [ or a meeting ], our transaction charges have [ also risen ], like, in absolute terms. Like if we were charging INR 1, we charge INR 1.5, something like that.
We've actually brought it down, so...
Okay. So it's reduced.
Yes. We have -- actually have introduced a additional layer of transaction charges. We have a layer-based transaction based on your -- basically slab-based. So we introduced a lower slab.
Okay, okay. So it's not like a volume play, right? That's the correct way to read.
Yes. So more the volumes, the lower the charges you pay.
Next question is from the line of [ Miraj from Marian Capital ].
Congratulations on a great set of numbers, sir. I have 2 questions. First one is regarding the announcement that came some time ago regarding the settlement, T+1 hour settlement, which the SEBI is aiming to do by January. And later subsequently, by October, they are planning an instant settlement. I wanted to understand that, any infrastructure layout that needs to be put up, the expenses are supposed to be done by us. If yes, then have we incurred anything in this regard yet? And secondly, I wanted to understand that -- is this idea of introducing T+1 hour settlement more towards increasing volumes, or is there any other goal for this? This was my first questions, sir.
Yes. So this is going to be a constant process of investment. As reforms happen, we need to kind of -- and each market infrastructure institution will have to incur its own costs of implementing these changes. And whatever share is of, both CDSL and NSDL will have to incur it themselves. So that's something which is something. The intent is it's going to be on an optional basis. It's very clearly put out by the SEBI [ Chair ]; is giving more power to the investor to choose and -- if him -- he or she would like to get instantaneous settlement, moving towards an instantaneous settlement, thereby reducing the -- basically the risk which is there in the system, where he or she can get the funds immediately. So it is moving, giving more products for the person to opt for. Somebody can offer a T+1 or a T+0. And finally moving to really an instantaneous settlement.
Understood, sir. Sir, in this regard, from our end, have we incurred any expenses yet to set up T+1 hour or instant?
Yes. It's a constant process, as I said, that we will have to -- we are in a constant process of investment. Our technical team is obviously working towards it to ensure that it's able to -- it is satisfied time lines which would be prescribed by SEBI in this regard.
Understood. And my final question, sir, is that on the annual issuer charges revision part, if I'm not wrong, it is currently [ 11 ] annual issuer charges -- has there been discussion on the revision part?
Not yet. It's a constant process, so we've not yet. And we generally don't discuss our regulatory matters in this forum, so that's something which is a separate discussion.
Next question is from the line of [ Santosh from Kesari Finance ].
Am I audible?
Yes. Please...
Okay. I had 2 questions. One is that typically -- the number of additions that we are seeing in the demat accounts. So looking at that, if you can share like what is the incremental revenue we get out of every demat account that's -- get added. Because typically a customer is getting charged something like INR 500 [ per year ], if my understanding is correct, but some brokers do not charge as much. For example, Zerodha is charging just INR 200, so we are not getting a sense, but how much is the CDSL revenue from each incremental demat account that comes? If you can just throw some light...
We don't charge anything for the retail, so for retail, it's completely free. And the nonretail corporate accounts, it's about INR 500 a year.
Okay, so by retail, we mean [indiscernible].
Yes, yes, yes.
And corporate is private sector -- private companies and FIIs and things like that, right?
Yes, yes, yes.
Okay. So any reason that you don't charge for demat? Because you are providing such a valuable service to -- and it's -- and you have been saying and maintaining all along it's such an infra service, such a big, huge infra service. Any reason that we are not charging? Is there a bar from SEBI? Or [ we are behind ] about the charge...
[indiscernible] bar from SEBI. It's more to do with our responsibility towards the country also. We are kind of contributing to financial inclusion. And whilst commercial aspects are critical, but -- also the market development is extremely critical as a theme for us to continuously grow and our contribution to enhancing the sophistication of the securities market in India. And that's one of the reasons why we want more and more people to come into -- today, CDSL is there at 98%, 99% of the pin codes in India; and there has been a growth which has taken place in terms of number of demat accounts. We want more and more people to join this ecosystem, so therefore, the entry is -- kind of remains, especially for the retail. We are trying to kind of really encourage more and more people to join the ecosystem, and hence there is no charge.
Next question is from the line of Sanketh from Avendus Spark.
Sir, I mean, again on this question of private companies are mandatory to be done, dematerialization of their shareholdings. You -- probably you [indiscernible] of companies which are less than 4 crores with a capital of 40 crores turnover, but in your rough guess -- so how much that number will be, if you have any wild guess on that point number one. And second, given that [indiscernible] charges INR 2,500 on the unlisted company, I mean, if such a big volume come -- whether we can see downward pricing pressure from INR 2,500 to come down, which could have an impact on the potential revenue realization. That's my first question.
So on the first part, I would not like to give any wild answers. I would like it to go through a proper working before I can reveal that. I'm not able to give any numbers on what are the numbers. In terms of the pricing, it's a function of various things. And anyway, the depository pricing is approved by SEBI also, so in terms of that, it will go through its own process. I think it's a fairly low charge. [ Today, our in-house helps ] get paid probably more than this, so I don't think a company should have a problem in kind of paying up these charges. They are very, very, very less; and nominal.
Got it, got it. And the second question, what we -- having said -- what [indiscernible]. So on KYC income, which has done well in the current quarter. So there seems to be a very strong correlation. When the IPO activity is very strong in the year -- or in the quarter, then we'll see a very -- bump-up in KYC income. Sir, just wanted to understand, out of the [ 39 crores ] of KYC income, how much you can attribute to -- or directionally how much you can attribute to the IPO activities. If it slows down in subsequent quarters, will we see a moderation in the KYC income?
Actually that's going to be difficult because, when an entity fetches a particular record or creates a particular record, we have no clue whether it is because of an IPO or because he is using it elsewhere. So that is something we will not be able to track.
But it is safe to assume that KYC -- IPO activity have a meaningful impact on the KYC income growth, right?
Absolutely. Because IPOs will add to the number of demat...
Yes, but again it's difficult for us to predict that it's only because of IPO or it's because of other factors. It's basically the participation in the securities markets which will cause this impact to occur. Now if the participation is due to IPOs or due to secondary markets or due to mutual funds is difficult to predict in future and that's why we are really unable to say.
Got it, got it, sir. And 2 data-keeping questions. I think, in the past, you have disclosed these numbers. First is on impairment cost which has happened in the current quarter. Second is pledge income. And third is annual issuer charges from unlisted entities.
I'll ask Girish to answer.
On -- I think we are not disclosing the unlisted annual issuer fees, but yes, margin pledge, we are disclosing. [ We achieved 4.19 crore ] income during the quarter. And with respect to impairment, the value is 3.3 crore in this quarter.
Okay. So it has gone up compared to last quarter, right? It was 1.7 crores. And so is it due to any specific reason? Or is this a conservative...
If you understand the ECL requirement on the [ data's ] provision, it is basically based on the history of the [ data's ]. Now in 1 quarter, there could be higher collection. And because of that, there could be a lower charge, so it will not -- we cannot derive any fixed formula that, "Yes, in this quarter the cost is going to remain the same. And accordingly, we can make predictions." That would not be possible to do for impairment.
Next question is from the line of Ajox Frederick from Sundaram Mutual Fund.
Sir, one question. You mentioned that online charges are dependent on demat account offering, delivery volumes and the IPOs. So if I do a sequential comparison, demat has gone up by 9%, and delivery volumes by 41%. However, online charge is up about 80% growth sequentially, so the gap, can I assume it to be IPO-driven?
Yes. You can possibly take that as your derivation, but we kind of -- it's difficult to, again, predict that, whether it is only because of this factor or there are a multitude of factors which happened which play upon that. Because one can impact the other factor also, but as a broad thumb rule, probably, what you have analyzed, you can take that.
Just one clarification. The delivery income, due to the delivery volume correlation, would be for the depository business and not KRA business.
Next follow-up question is from the line of Swarnabha Mukherjee from B&K Securities.
Yes. Am I audible?
Yes.
Yes. So I -- on similar lines of what Ajox asked, yes, I just wanted to understand that, if I look at the growth in the number of demat accounts [ what is there ] in first quarter versus second quarter, that growth is around 55%. So given that, that revenue [ weighting has moved ] close to 80%, so -- I could not understand what is the difference of around, say, 20%, 25% growth, remaining growth, so some -- highlighting some levers on that would be helpful.
It's overall the market activity because, see, whatever are the -- we charge for the debits, we charge for the margin pledges, we charge for -- so it's again a multitude of factors. As I said, one transaction and -- so one-to-one correlation on the factors is difficult to do because it's a culmination of these transactions which lead to whatever is the income which is really drawn out of that.
Sir, just to clarify. For the -- under the online data charges, we only book the revenue from the KYC business, right? Or is there anything else also?
That's right.
That's right. That's right.
Yes. So I am not sure. I'm not getting how transactions, obviously, [ or, I mean ], transaction [indiscernible] still also benefits [indiscernible], if you could explain.
No, it depends on how the fetch takes place. And what -- whether that will lead to a debit, whether he has transacted in 1 stock or 5 stocks or 50 stocks or 100 stocks, that's difficult to predict; and whether that will lead to -- whether that is done through one account or through many accounts. So whether the fetch for those many accounts will be much more -- if it's one-account fetch, it will be less, but [ really ] the transaction income will be more, so therefore, 1:1 correlation is not possible to be done. That is the point I was trying to make.
Okay, sir, okay. I'll take this offline for a [indiscernible] understanding.
The next follow-up question is from the line of [ Santosh from Kesari Finance ].
I just wanted to know that -- what is the market share of CDRL [ in the businesses side ]?
CDRL...
Sorry. Your KYC business, CDL, right? CDSL Ventures.
The figures [ aren't published ], but our estimate is about 65%.
65%, okay. And our biggest competitor will be...
[indiscernible] that's only an estimate, so I think that should be very clear.
Okay, 65%, got it. So has there been an increase in market share or decrease in market share, sir, over the past year or so?
It's been more or less constant, I will say.
More or less constant, okay.
The next follow-up question is from the line of [ Miraj from Marian Capital ].
Sir, just a follow-up on the same point I had earlier regarding the T+1 hour settlement. It is planned to be implemented from January onward, so is there any circular on it that SEBI has released? Or is this just -- is there any discussion paper or anything on that?
Yes. I, we should expect something. There will be a circular to that effect, or discussion paper. I'm not able to comment on how really the regulator will do it, but there will be a formal kind of an announcement, so what will be the time lines, et cetera, based on that.
Next question is from the line of Sanketh Godha from Avendus Spark.
One small data-keeping question is how many capital market records we have. Last year, we ended up with -- [ by about 5.5 crore ] capital market records. [ If similar number ], what it could be today...
Pardon -- The question is not clear. What do you mean by capital market records?
The KYC records, what you have with you, which was around 5.5 crores...
At the end of September quarter, we had about 6.1 crore.
Okay, perfect. And the second question, sir, was again a simple question that, given -- in the current year, promoters did a lot of selling, which means that the number of folios probably at the retail level will increase. So that benefit might not be reflected in the current year, right, because what you have charged on annual issuer charges is based on last year number of folios. So that benefit should flow in FY '25, as the number of folios will increase. So my understanding is right there, sir...
Again I'm not able to predict how this will pan out over the next course of the next 2, 3 quarters. It's only [ counted ] by the end of the year, as to how many folios are there. Again these are forward-looking statements. So we don't give any forward-looking statements, so I'm not able to give a specific answer for this.
Got it -- actually my intention was to understand directionally that we charge annual issuer charges...
[ I understand what you're saying ], but tomorrow -- my point is that tomorrow, in the next quarter, there could be [ maybe a ] reversal which could happen and promoters start buying more and retail start selling, so how will I tell you that -- whether this is wrong, right, et cetera? So again, it will be what is, at the end of the year, the folios that -- the formula will be applied as per the numbers on that.
As there are no further questions, I'd now like to hand the conference over to Mr. Nehal Vora for closing comments.
So I'd like to thank all the people for their questions and the participation. Please stay safe and well. Thank you.
Thank you.
Thank you very much. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
Thanks.