Central Depository Services (India) Ltd

NSE:CDSL

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Results Conference Call of CDSL India Limited, hosted by Axis Capital Limited. 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 construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Bagul from Axis Capital Limited. Thank you, and over to you, sir.

[Aditya Bagul, Assistant Vice President of Midcaps]

Thank you, Margaret. Good morning, ladies and gentlemen, and a warm welcome to 3Q FY '21 results call for CDSL India Limited. At the outset, let me just congratulate the management for a spectacular Q3 performance and wish them best of luck for the coming quarters as well. From the management team, we have Mr. Nehal Vora, Managing Director and CEO; Mr. Girish Amesara, Chief Financial Officer; Mr. Sunil Alvares, Managing Director and CEO, CDSL Ventures Limited; Mr. Swaroopkumar Gothi, Vice President; and Mr. Nilesh Kittur, Assistant Vice President. We'll begin with a short set of opening remarks from the management, post which we'll open the floor for Q&A. Without taking too much time, let me hand over the floor to Nehal, sir. Thank you. Over to you, Nehal, sir.

[Nehal Naleen Vora, CEO & MD and Director]

So first of all, I'd like to thank Aditya for that kind compliments, and thank you for the wishes for the coming quarters. I wish you all a very good morning, and I hope all of you are safe and secure. I welcome you all to the CDSL's quarterly conference call for the quarter ended December 31, 2020, and I trust each of you and your loved ones are safe and healthy. I'm joined on this call by other members of my management team, which includes the Chief of Business, the Chief of Regulation, or the -- basically the Head of Business and the MD and CEO of our subsidiary -- material subsidiary, CDSL Ventures, who will then address your questions later in case if you have any. At the beginning of the financial year, we have stated our vision and our mission, to promote the ethos of Atmanirbhar Niveshak or the self-sufficient beneficial owner or basically the investor. As we reached the INR 2 crore milestone last year in January 2020 and with 2.9 crore investors as on December 31, 2020, it's a testimony of the growth of capital markets and a reward for the convenience and security offered by CDSL and its subsidiaries and its services. It also testifies that a building an authentic and consistent capital market ecosystem with good governance. We hope that with the changing times, individuals and companies continue to start availing digital solutions and online services and grow to be self-sufficient and an Atmanirbhar Niveshak. We will continue to innovate and offer e-services and digital solutions to all capital market participants. Speaking on our business update during the last 3 months. The number of new active beneficial owners account with CDSL has increased by approximately 28 lakhs, taking the total of active beneficial owners to 2.89 crores. The comparative number of new beneficial owners for the quarter ended September 30 was about the same level at around 29 lakhs. So as on 31 December 2020, CDSL has around 589 depository participants offering depository participant services from over 20,500 locations across the country, covering about 96% to 97% of the PIN codes. These depository participants consist of clearing members, banks, custodians and nonbanking finance companies. We have also initiated new services in line with transformation and requirements of the current times to promote the initiatives promoted by the [indiscernible] government. So basically, in addition to our e-voting services, we also offer services to hold the Annual General Meeting through video conferences. To make an Annual General Meeting basically a hassle-free event, but more importantly, a safe event for the shareholders and the company. We also provide e-mail updation services to companies to update their shareholders and to ensure that a determination of the communications to the shareholders is valid, sufficient and productive. To also add, another important initiative is basically the international finance center, where CDSL remains as the only depository to have an international branch. And we are hopeful that as there are a lot of initiative in the current Finance Bill, this is going to be an interesting opportunity going forward. Before I hand it over to our Chief Financial Officer, I want to take a brief moment to place our appreciation and gratitude to all our stakeholders, the beneficial owner depository participants, issuers, regulators, employees and other market participants for their constant faith in us. With this, I'll request our Chief Financial Officer to take through our financial performance. So over to you.

[Girish Amesara, Senior VP, CFO & HR]

Thank you, Nehal. Good morning to everyone attending this call. On speaking on our financials, we have seen a healthy growth in this quarter with a Y-o-Y increase of 150% in our consolidated net profits. The total income on a consolidated basis for the December quarter ended 2020 has increased, in rupee terms, by INR 34.71 crores, which is 51% compared to last year's similar quarter. We have achieved a total profit of INR 103 crores compared to INR 68.49 crores during last quarter. Net profit after tax on a consolidated basis for the quarter ended December 31, 2020, it's increased in value terms by INR 32.42 crores, which is 150%. And we achieved then a profit of INR 54.03 crores from last year's same quarter profit of around INR 21.61 crores. Total income on a stand-alone basis for the quarter ended December 31, 2020 has also increased by INR 29.08 crores in value terms and 56% compared to last year. Total profit as -- total income has increased to INR 81.25 crore from INR 52.70 crore during last quarter. Net profit after tax on consolidate -- on a stand-alone basis for the quarter ended December 31, 2020 has increased by INR 28.96 crores, which is 206% to INR 43.02 crores in December 2020 compared to INR 14.06 crores for the quarter ended December 31, 2019. With this, now I'll request Sir Sunil Alvares, MD and CEO of CDSL Ventures Limited, to give an update on the operations of the wholly owned subsidiary. Thank you very much.

[Sunil Alvares, Executive Vice President]

Yes. Good morning, and a warm welcome to all of you. I'm Sunil Alvares, MD and CEO of CDSL Ventures Limited. On the back of a very buoyant capital market, CDSL's performance was very encouraging for the period April to December. So far as the KYC business was concerned, we added 42.74 lakh KYC records during this period as compared to 18.21 lakh in the same period last year, which was a growth of 134%. In terms of the RTA business, we added another 193 companies, taking the total number of companies to 625. We were doing some processing for the PMJJBY, and the number of records processed out there as well has jumped by 106% from 66,000 to 28,000. On the GSP business side, there was a slight dip in the number of records processed from 1 point -- from -- sorry, from INR 2.31 crore to INR 1.88 crore, a slight dip of about 16 lakh record, but we are likely to see these numbers increase in the coming quarter. On the income side, for the period April to December 2020, the operational income was INR 48.69 crores as compared to INR 41.40 crores for the same period last year, which was a jump of 7.29% or 18%. The total income was INR 58.92 crores as against INR 49.77 crores, which was, again, a jump of 18% or INR 9.15 crores. On the total expenditure side, for the period April to December 2020, the expenditure was INR 21.17 crore as against INR 22.86 crore last year, which was a dip of INR 1.68 crores or a dip of 7%. The profit before tax was INR 37.74 crores as against INR 26.90 crores, and the profit after tax was INR 29.33 crores as against INR 20.01 crores. So with that, we could start off the Q&A session. Thank you very much.

[Operator]

[Operator Instructions] The first question is from the line of Prakash Kapadia from Anived Portfolio Managers.

[Prakash Kapadia, Principal Officer]

Congrats to the team on continuous good performance. A couple of questions from my end. If I look at 9-month revenue for our subsidiary, they are at around INR 490 million as compared to much higher revenue in the depository segment. So I wanted to know, Sunil, is it the SEBI project was there in the base? And in the 3 months, 9 months, what is the SEBI project revenue for this year? And ex of that, is the growth much higher?

[Sunil Alvares, Executive Vice President]

Well, actually, the SEBI project did not contribute much in terms of the income last year. So whereas we got about INR 9 crores last year from the SEBI project, it was about INR 1 crore of in this financial year. So it's basically the KRA business, which has done exceedingly well, okay, as compared to the previous year.

[Prakash Kapadia, Principal Officer]

Okay. Okay. So ex of that, the growth looks okay?

[Sunil Alvares, Executive Vice President]

That's right.

[Prakash Kapadia, Principal Officer]

And this INR 9 crores was more like annual number, and this INR 1 crore is 9 months, if I were to compare, now 9 months...

[Sunil Alvares, Executive Vice President]

Last year, the income from the SEBI project was about INR 9.49 crores, okay? That was for the full year. And in this year, they had planned to open those -- the site again for -- to investors once again, but because of the pandemic, it got postponed. So it will happen, but we don't know when.

[Prakash Kapadia, Principal Officer]

That's helpful. And on the other income part, what is the fall in yields as compared to 9 months of last year? Because I look at other income which is up around 9%. Any mark-to-market gains or losses in this figure, if, Girish, you could quantify...

[Girish Amesara, Senior VP, CFO & HR]

Yes. So the investment income, comparatively, if you see, it has increased by 19%. So basically, this is all mark-to-market gain, which has accrued during this 9 months. I hope I answered.

[Prakash Kapadia, Principal Officer]

I didn't quite get it. You said investment income is increased. The mark-to-market gain should translate into mark-to-market losses because overall, 9 months, the income is -- other income is up around 8% at around 498 million.

[Girish Amesara, Senior VP, CFO & HR]

Yes. Yes. I'm sorry, I was looking at the quarterly numbers. So other income has increased by 8%. And last year, we had an income of INR 46 crores, and this year, we have increased income of INR 49.75 crores. So basically, we don't have any mark-to-market loss overall. It's all mark-to-market gain, and this is the incremental gain amount.

[Prakash Kapadia, Principal Officer]

So yields would have fallen by around 80 to 100 bps, overall yield?

[Girish Amesara, Senior VP, CFO & HR]

Overall yield, on corporate bond sectors, yes, it would have fallen. But our investment in corporate bond is negligible. And most of our investments are contributing into fixed deposits and debt scheme of mutual funds, largely FMPs. So that's about it.

[Prakash Kapadia, Principal Officer]

Fine. And a couple of data-keeping points. If you could give the revenue rate of in terms of the key revenue charges front...

[Girish Amesara, Senior VP, CFO & HR]

So you -- should I give it on a 9 months basis or you want it quarter-to-quarter?

[Prakash Kapadia, Principal Officer]

If you have quarter, the better. Otherwise, we can take year to date, whatever is readily available.

[Girish Amesara, Senior VP, CFO & HR]

Okay. No, I have both. I can give you both. So first, I will give you quarterly details. The quarterly income on operation level, the transaction charge income has contributed around INR 30.90 crores, that is roughly INR 31 crores which is 30% of our operating income. Annual issuer income has contributed around INR 21.69 crore, which is 21%. Online data charges, which is income -- mainly the income of the CDSL Venture, has contributed around INR 13.10 crores, which is 13% of our overall income. IPO corporate actions has roughly contributed around INR 6.95 crores, which is 7% of total income. Cash statement charge is around INR 4.45 crores, which is 4%. And rest of other operating income are miniscule. They are contributing in a range of 2% to 1%, like user facility charges, settlement charges, account maintenance charges, e-Voting charges, foreign portfolio monitoring. So these are all -- this is the breakup of overall income on quarter-to-quarter basis.

[Prakash Kapadia, Principal Officer]

Sure. Sure. That's helpful. And the last question from my end. Nehal, there was a mention in the budget about regulations being taken by the government to consolidate some of the 3 bills. So what kind of an impact do we see going forward? And does this lead to a common demat account and more financialized and depository role getting more and more crucial in the coming years in India?

[Nehal Naleen Vora, CEO & MD and Director]

So the regulatory framework is kind of on a as-is-where-is basis but SEBI is the core regulator. What they are doing is kind of combining the SEBI Act with the Depositories Act and the Securities Contract Regulation Act, which has references of stock exchanges in the SCRA, which is of 1956. SEBI Act is of 1992, and Depositories Act is 1996. So they are kind of combining these 3. The other one is the securities and government securities and the Spot Exchange, the gold spot exchange. These are 2 other interesting announcements made. So until now, government securities was kind of in a combined role of RBI and SEBI, so that they are kind of moving it towards more towards a SEBI kind of role. So it will have the same reforms as other securities market instruments which are there, can be extended for government securities. And the Gold Spot Exchange is another interesting announcement made, which will now be regulated by SEBI. So we'll have a national gold exchange, so the settlement process, et cetera. So these are some of the interesting kind of the announcements which are made. And we see how it is actually panned out further.

[Operator]

The next question is from the line of [ Paresh ] from [ Club Milene ].

[Unknown Analyst]

Congratulations on wonderful performance again, and congrats to the entire team members as well. I trust all of you are healthy and safe. My question is largely on 2 accounts. One is, Nehal, for the first time, I see you've added a new slide called New Services or -- which are under the CVL. Just wanted your perspective on which are the services that look very promising that can be added to the existing [ booked KRA ] products, both on the CVL side as well as the corporate side, right?And the second question is on -- we're doing phenomenally well as far as the retail account is concerned. And what is interesting is we believe to see some traction on the corporate side as well. For example, I understand that last quarter, we had about 15,455 companies. That's now scaled to almost 16,000, so you had good traction over there. What would be the strategy? And how do we kind of get high incremental market share on the corporate side?

[Nehal Naleen Vora, CEO & MD and Director]

Okay, [ Sunal ]. Thank you. I think I'll -- before I hand over to Sunil to answer the question on CVL, on a broad strategic basis, we are kind of focusing more on the digital footprint of ensuring that more and more companies get connected into the depository services through online mode. Recently, SEBI had it also -- SEBI and the ministry, actually, the government has designated CVL and CDSL to use basically the Aadhaar-based authentication. So that is moving towards an online opening of demat accounts, where we will be authorized to use Aadhaar after the Supreme Court order. So we are awaiting the final round of the approval. Everything has been completed. But from an overall strategic standpoint, it kind of makes it the ease of doing business when it's through an electronic digital mode. So be it the -- basically the RTA services, the e-Voting services, the AGM services as well as basically the new demat accounts, which are getting opened, it becomes kind of easy for them to do it. So it's an all-around performance which is done. And that's our focus, that our 3 key stakeholders, be it DPs, depository participants, issuers and basically the investors find it extremely easy to manage the CDSL services through an online mode. That brings in the transparency. And our key theme or motto, as I stated in my opening remarks, is making the investors self-sufficient or really -- they're really Atmanirbhar. So that they can do it themselves rather than really relying on people. That brings in the trust into the system at a higher scale, and thereby kind of basically encouraging more and more people who can join the fold of the ecosystem. As we've seen during the national pandemic, we've opened around significant amount of demat accounts coming from Tier 2, Tier 3, Tier 4 towns also. So they have an opportunity of coming into the mainstream market. And similarly, the issue is also -- have been able to link up. Despite the national pandemic, we have been able to grow our system because we are focusing more and more on a platform for companies to join. I'll ask Sunil to add any points.

[Sunil Alvares, Executive Vice President]

Yes. So far as the CDSL Ventures Limited services are concerned is we've focused on trying and tightening up the existing processes in the sense that there was a lot of manual verification required on the KRA processes. We've tried and automated that as much as possible. And this service should be launched shortly by us, where we would be automating the KRA service and reducing tax significantly. So far as the other businesses are concerned, what we see is that you would have seen the consolidation paper put out by SEBI on the KRA part recently. And there is basis that we are working towards that as well. And what we see is that most of the KYC, et cetera, would be an online or a digital process. And we've already applied for Aadhaar-based license from UIDI and in -- are in the final stage of obtaining the same. We have also registered with the UIDI -- sorry, with CCS for our e-sign license. And we've also launched an online account opening application. So with the combination of these 3, we see larger number of intermediaries can use the online piece as well as use Aadhaar as well as e-sign and open more accounts and add to the KRA business. So that's in a nutshell what we are looking at in the next quarter.

[Unknown Analyst]

Sure. So then on the KRA consultation that you just referred to, a clarification on that. So sir you said that there would be a one-time exercise where we'd reverify all the KRAs. How you -- the reverification would include even the KRAs that we have done or it's only KRAs which are done by others, for instance?

[Sunil Alvares, Executive Vice President]

Yes. It is all the records which are there in the KRA. Whatever KRA record I am holding, we want those records to be reverified. But as I see it is that currently, in CVL, we have a process of verifying all the records as well as there is an audit done separately, and this audit report is placed every quarter to the Board. So to that extent, I think we will not be required to do that.

[Unknown Analyst]

Okay. And just maybe one clarification as well. Nehal, you -- in your opening remarks, you mentioned about being very bullish on the prospects of being there in the GIFT City. Why would that be such a big game changer, Nehal, from a 3- to 5-year perspective or even longer?

[Nehal Naleen Vora, CEO & MD and Director]

See, I think the government focus is creating a Hong Kong in India, and this is like a regulatory sandbox where the regulatory regime is a lot more relaxed. There is -- everything is in U.S. dollars. So it's capital account convertibility issues are not there. So since India is now becoming a go-to destination, as been seen in the vibrancy of the FPI investors investing in the securities market, despite it not being capital account convertible, I see that kind of becoming an interesting market for FPIs to see that we can become a hub for the entire basically the -- every Asian market where, really, the production and consumption is focused in the world. A lot of the price discovery is going to move towards Asia from the west over a 3- to 5-year time horizon. So if you have an ease of doing business, it's kind of easy way of really accessing India as a jurisdiction and not having the risk of the rupee out there. This can be an interesting position for a lot of people.

[Unknown Analyst]

Do you have any figures in terms of how large the opportunity can be? Any rough figures...

[Nehal Naleen Vora, CEO & MD and Director]

It's difficult to assess at this point of time. But I think what you should look at how well have Singapore, Dubai, et cetera, grown. We can probably kind of really basically overtake that. So Hong Kong, Singapore, Dubai are the 3 markets which have grown in basically Asia, and this can become an interesting opportunity. And also, the current volumes on the exchanges in the GIFT city are seeing some real vibrancy in terms of volumes. So as things start getting to really ease up, you are going to have more investment-related products coming in, and that's going to be more of the sticky volume which is going to remain.

[Operator]

The next question is from the line of Aditya Bagul from Axis Capital.

[Aditya Bagul, Assistant Vice President of Midcaps]

Just wanted to ask a couple of questions. One is on our transaction revenue, right, we've seen a steady pickup, which was a run rate of about INR 9 crores to INR 10 crores a quarter last year. We moved to almost a INR 30 crore a quarter sort of a run rate. I understand that there is a fair bit of revenue stream from that in terms of shares as well. So can you probably help us understand how much of it comes from that piece and how much is a pure increase in our base transaction revenue?

[Nehal Naleen Vora, CEO & MD and Director]

So I'll ask the CFO, Girish, to answer that.

[Girish Amesara, Senior VP, CFO & HR]

Aditya, can you repeat your question, please?

[Aditya Bagul, Assistant Vice President of Midcaps]

Yes. I just wanted to understand that there will be some component of revenues, which are coming on account of pledge and unpledge share and a few new regulations that have come into place within the transaction revenue segment. Just wanted to understand, of the INR 30 crore revenue that we made, INR 31 crores revenue that we made in this quarter, how much of that would be attributable to those segments of new revenue [ high-end items ]? And how much would be for transaction business?

[Girish Amesara, Senior VP, CFO & HR]

So if you recall, last quarter, we reported, while in this call that around -- from the transaction charge of last quarter, we had around roughly INR 1.75 crore or around that we had earned from pledge, repledge, margin pledge, et cetera. In this year, we have total -- in this quarter, we have recorded a transaction charge income of INR 30.94 crore, out of which, roughly, you can consider that there is income on account of pledge margin, margin pledge, pledge et cetera, of around INR 2 crore, INR 2.5 crore.

[Aditya Bagul, Assistant Vice President of Midcaps]

That is [ the business ]? And there is only INR 2 crores of...

[Girish Amesara, Senior VP, CFO & HR]

Yes, yes.

[Aditya Bagul, Assistant Vice President of Midcaps]

So annualized number would be INR 8 crores to INR 10 crores on a steady-state basis?

[Girish Amesara, Senior VP, CFO & HR]

Yes. Yes.

[Nehal Naleen Vora, CEO & MD and Director]

It will be difficult to predict, Aditya, because as the number of accounts grow, the transactions also grow, and the margin pledge abilities also grow. So if you say that it won't be a simple kind of, basically, an extrapolation of one quarter into another quarter because the number of accounts also are growing every quarter.

[Aditya Bagul, Assistant Vice President of Midcaps]

Understood, sir. Understood, sir. Very, very helpful. Just a second point, again, Nehal, sir, you highlighted that we've seen a reasonable increase in accounts from Tier 2, Tier 3 locations. Can you probably help us understand a little more as to whether this is -- in your opinion, whether this is a sustained trajectory or where are -- is there a geographical concentration or a customer concentration of these accounts which are coming from the Tier 3, Tier 2?

[Nehal Naleen Vora, CEO & MD and Director]

So I think it will be difficult to predict whether it will be sustainable or not, but it is expected to be sustainable. The reason is that it has not fallen off on every quarter-on-quarter. It has been growing. So the reasonable expectation is that today, around 7% to 8% of the Indian population is only kind of accessing the securities market. There's a huge potential. And we have a huge young population coming into the workforce. And with the government guarantee schemes becoming a thing of the past, the only access for wealth creation for your planning product, old age and retirement is the securities market. And the first point of call for any exposure in the securities market will be opening a demat account. So I see there is a huge pent-up potential, which can be tapped in. Whether that will translate in the next quarter or next year or next 3 years, the next 5 years is something which we'll have to wait and watch. But I think the important thing is that the entire paradigm of doing things is doing it yourself, give as much information to each of the investors. And that brings in trust and security into the system.

[Operator]

The next question is from the line of Kunal Thanvi from Banyan Tree Advisors.

[Kunal Thanvi, Equity Research Analyst]

Congratulations on a good set of results and stellar performance in last 1 year. So I have a few set of questions like I just wanted to understand. This year has been aberrational year for us and securities market as such. We have seen a flush of new demat accounts coming in. So as you look at it, like the number of demat accounts that have come this year are larger than -- it's 3, 4 years growth that has come in 1 year. How should one look at it in terms of next 3 years in terms of the settlement values, settlement market for the entire capital market in India? And that is question number one. Second is if you look at our profitability, we are, in a way, peaking in terms of our historical levels. As a management, how do you look at it? Because one understands the fact that these are a high employee cost business where the operating levels could be higher than what we have seen in the history. So how do you, as a management, look at that particular aspect of profitability? And thirdly, my last question is on the bank revenue. As a company, we have been very vibrant in last 1 year in terms of capitalizing the opportunities that come our way in all the businesses that we are present in. So apart from already disclosed things like this new KYC KRA [ avenues ] that is coming, any other new avenues that we feel are interesting and we are looking to invest in the same? I remember you mentioning about preempting them at -- last quarter. Any interesting thing that we should know?

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So I think growth of demat accounts this year has been kind of a very high-growth year. Whether it sustains at the same levels or it is at a lower level is something which we'll have to wait and watch. I think our core focus as a management team and my focus as the MD is to create a sustainable solution, which is safe, secure, convenient and creating that trust in the ecosystem, that people want to come back to us really again and again. And for me, the biggest success would be that my own clients and customers become my own people who will kind of spread the word around that CDSL is a good platform to go to. So I think that is our focus. We are -- whilst it is important to increase the demat accounts, but our focus is to create a safe, secure and convenient solution platform. And whether that translates into numbers or not is really a byproduct. It's not the main focus of the management team. Your second question -- I'm sorry, can you repeat your second question?

[Kunal Thanvi, Equity Research Analyst]

Sustainability of the profitability and the operating leverage in the business.

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So I think we are in -- for us, the 2 main raw material and work in progress and finished goods are our people and the technologies. So obviously, technology also needs to be constantly updated, upgraded. Information security is going to be another important component of our business, which needs to be constantly updated and upgraded. And the people is something which we need to -- because these are highly specialized people required in this line of business. Our endeavor is going to be to keep the costs under overall control, however, not compromising on the quality of the people, the technology, et cetera, which is getting used. And hence, we will have to kind of go forward wherever are important aspects of employee, which needs to be increased or enhanced in terms of both quality and quantity. As well as our technology interface and prowess, both in hardware, software as well as information security, is going to be a prime focus going forward because this is like building, as I've said in my previous call. We are in the financial infrastructure space. So we are like -- it's like building a road. The road needs to be constantly kind of upgraded in terms of its quality of surface, at the same time, the security, and third is obviously the people who are really doing the operational stuff. And that is going to be our focus. The -- so that would kind of lead to some amount of an operational leverage as we go forward because these are kind of fixed costs, which you kind of invest in. And hopefully, that translates into higher revenue, which may not translate into commensurate increase in the costs as the revenue increases year-on-year. So there is an element of operational leverage, but how that cycle pans out, whether it is every 3 years, 5 years or every year because it's a combination of various costs which are across the board, both in technology as well as the employees. And I'm sorry, I've missed the third question. Could you repeat the third question?

[Kunal Thanvi, Equity Research Analyst]

So third question was on new avenues, apart from what was already disclosed. And any update on the NAD?

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So NAD is something which we are continuously working. In the Indian scenario, the government has decided to take it over and give it free of charge to that. But this is something we continue to focus on as the Phase 2. There are a lot of other countries who are kind of interested in this kind of similar kind of ecosystem. So we'll see how it goes forward in terms of being able to roll out. And secondly, is that universities, to comply with what the government has done, we are kind of really helping them also to kind of comply with, basically, the interface, which is required for that. So these are some of the other initiatives. And I think as the financialization of markets is happening, more and more commodities are entering the financial markets. I think the safekeeping custody is going to become the most important driving force of this financialization of the market. And pledge repledge, for example, it gives an interesting feature to the entire suite of products, which can add a financing piece also to the securities market. So these are some of the important building blocks where CDSL is kind of basically in it, and it will continue to grow.

[Kunal Thanvi, Equity Research Analyst]

Sure. And last, if I can squeeze some bookkeeping questions on -- Girish, if you can help us with quarterly breakup for last year same quarter for the revenue. And Nehal, if you can talk first to our dividend policy. And any thoughts on with the improvement in the profitability and the scale, any thoughts on improvement in the dividend payout?

[Girish Amesara, Senior VP, CFO & HR]

Yes. Sure, so...

[Nehal Naleen Vora, CEO & MD and Director]

Yes. Go ahead, Girish.

[Girish Amesara, Senior VP, CFO & HR]

So I will first provide the details of the income breakup. I'll start with the annual issuer income that we achieved during this quarter is INR 21.9 crore compared to INR 19.48 crores INR during last quarter. Transaction charge income, we have achieved this INR 30.95 crores compared to [ even INR 0.17 crore ] last quarter. Another major source of revenue is online data charges, which we have achieved this roughly INR 13.10 crores, compared to INR 9.39 crores during last quarter. Another major source of revenue is IPO corporate action charges of INR 6.95 crores compared to INR 5 crores last year. Cash statement, we have contributed around INR 4.45 crores during this quarter compared to INR 2.51 crores during last quarter. And this constitutes the major portion of our operating income. And the remaining portions are contributing roughly in a range of 2% to 1%, so...

[Kunal Thanvi, Equity Research Analyst]

What about the e-Voting? e-Voting...

[Girish Amesara, Senior VP, CFO & HR]

e-Voting. e-Voting this quarter is around INR 1.6 crores compared to 44 lakhs during last -- same quarter last year. The e-Voting major income was already recorded in the second quarter, which we had discussed during last year's call. I hope I answered.

[Operator]

[Operator Instructions] The next question is from the line of Gokul Maheshwari from Awriga Capital.

[Gokul Maheshwari, Founding Partner]

Yes. Just 2 questions. One is on the payout policy, if you're looking at any change, which was asked in the previous policy. And secondly, on every few years, you get a hike on the annual issuer charges, and I think there has been only 5 years of lapse. Is there any update or engagement with the regulators on that, if you can update?

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So on a dividend policy, we are kind of -- it's a long-term sustainable policy. We've been fairly liberal in terms of our current dividend policy. We are also building a balance sheet in terms of its financial strength. Also, there are going to be newer projects coming up both on technology, which I mentioned earlier, and also the newer, basically the IFSC centers, which will need some amount of money going forward. So we will see. We'll wait and watch how this pans out. But as of now, I think it's a fairly liberal dividend policy, and we -- there are no plans of any changes as of now. The second question was...

[Gokul Maheshwari, Founding Partner]

On the annual issuer charges.

[Nehal Naleen Vora, CEO & MD and Director]

Yes. The annual issuer charges, SEBI has -- we have not really engaged because this is both NSDL, CDSL doing it jointly together because the national pandemic, there has been an overall request to bring down the charges. So we have not yet -- we have not really approached it. We'll see how this bodes out within this year.

[Operator]

The next question is from the line of Aadesh Mehta from Motilal Oswal AMC.

[Aadesh Mehta]

I just wanted to understand the unit economics of your annual issuer business. What is the variable cost and the fixed cost that goes behind it?

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So it is the amount of securities which are dematerialized, it's kind of -- becomes an annuity charge, which is the annual charges which we charge, which is kind of an annuity, which is there. And if there is any capital infusion or capital creation, there is the charge for the action -- the corporate actions, et cetera, which gets created like a bonus or a rise, et cetera, then there are separate charges for that. For any voting which is done, e-Voting, again, there is a separate charge which is for that. So it's basically a host of -- depending on the circumstances of capital infusion, that kind of becomes a variable cost. But then that kind of adds into basically the annuity, which is charged in terms of the total number of shares which are under the -- which are under us.

[Aadesh Mehta]

Right. So just to paraphrase the question more accurately. If, say, a corporate like, say, Reliance or Infosys, it comes for the annual issuer business to you, what kind of variable cost will you incur in converting those folios into your database?

[Nehal Naleen Vora, CEO & MD and Director]

No. So there is no variable in terms of it is kind of a function of the number of folios. Say if the shareholders increase in a particular company, then the folios increase. So the charges on the annuity have a ceiling also. So beyond a certain level, it is a fixed charge which is there on a yearly basis.

[Aadesh Mehta]

Okay. So there is no variable cost...

[Nehal Naleen Vora, CEO & MD and Director]

They have a ceiling. Most of the large companies will have a ceiling.

[Aadesh Mehta]

Because my question was more from the cost side, that I just wanted to understand the cost side better. Okay, sir, we...

[Nehal Naleen Vora, CEO & MD and Director]

The kind of the technology costs which are there and the operational costs out there. But as finally -- the active share capital, if there is no further corporate actions or no additions in terms of capital infusion, it remains in the system, but that is paid to ensure the security of that particularly [ this transaction ].

[Operator]

The next question is from the line of [ Amil Shah ] from [indiscernible] Portfolio Managers.

[Unknown Analyst]

Yes. Sir, my question was more on understanding how we can increase the total market size of the opportunity. So right now, we are into depository for shares. But how about other alternates like getting the insurance policies also in the demat form or maybe work towards getting the bank deposits also into the demat form? So if we can have some subsidiaries which are maybe reporting to IRDA or RBI, that could help really increase our opportunity size tremendously or increase our market size altogether because we have great credibility on the share demat form. And we are, as a country, we are going digital, and we are completely on creating secure and convenient mode of working. So the other opportunities on interims or bank deposits, if you could give me some understanding as to that is possible or it can be evaluated, it can be thought upon, just going something off in terms of what we are doing right now.

[Nehal Naleen Vora, CEO & MD and Director]

There is a process of deliberation which is happening for the single demat account where all financial assets come under one demat account. That is under active deliberation at the ministry level. But it will require creating a framework where all the regulators need to come on the same page. We'll see how that goes because each of these products, like insurance policies and bank deposits, will be driven by differentiating rules, by the sectoral regulator. And that has to find a common minimum program to ensure that it becomes like a single demat account. So whilst the idea is being thought through, the operation modalities, et cetera, will have to be brought up. We'll see how it goes.

[Unknown Analyst]

Yes. So just to understand. So we think that it will progress in this direction in the next coming 2 years or it will take some further time than more -- more than 2 years for this to do -- to take?

[Nehal Naleen Vora, CEO & MD and Director]

It's hard to predict the time line because until the proof of the pudding is in the eating, so until it is actually rolled out and operationalized. However, in the insurance sector, there is a voluntary demat which is continuing to exist, and CDSL does have a subsidiary which does that. But I think your question has more to do with a single demat account where everything comes under one fold. So that is something we'll have to see how it works out. Difficult to predict the time line, how much time it will take.

[Operator]

The next question is from the line of Amit Chandra from HDFC Securities.

[Amit Chandra, IT Analyst]

Yes. So my question is related to the annual issuer charges. So if you can provide what is the revenue contribution from the unlisted companies in this quarter. And also, if you can provide the split of folio-based billing versus flat-based billing in the annual issuer charges. And is it fair to assume that with the increasing market share, the share of the folio-based billings would also increase? But the same is not reflected in the annual issuer charges as of now. So have we witnessed a similar increase in the folio-based billing or it actually follows after some time? So it's my first question. And second question is on the debtors provision. So we have seen a sharp decline in the debtors provision in this quarter. So how do we actually see this moving? And do we need to provide more provisions for the full year?

[Girish Amesara, Senior VP, CFO & HR]

So answering your first question on unlisted revenue. We have -- in this December quarter, we have a revenue of INR 1.12 crores from the unlisted companies revenue. And for the 9 months, we have an income of around INR 2.82 crores for unlisted revenue. As far as the debtors provision is concerned, our collection efforts for the 9 months ended December 31 were proposed that they're well beyond expectation compared to what it was during September 30 -- September quarter this year. During -- if you recall, lots of -- a lot many companies were not operating during the first half of this financial year. And due to that, the payment that were forthcoming were not received on a timely basis. Due to this increase in collection ratio more efficiently during the last quarter, this December quarter, the overall provision that we had made during September has reduced drastically in the quarter ended 30 December 2020. If we are able to maintain this collection ratio during the full financial year, this would be the picture that you will have. And debtors as of now is fully provided as per the recovery effort and as per the expected credit loss method forwarded in the Ind AS.

[Amit Chandra, IT Analyst]

Okay. So generally, because we've seen a rise in the debtor provision in the fourth quarter.

[Girish Amesara, Senior VP, CFO & HR]

Yes.

[Amit Chandra, IT Analyst]

So the...

[Girish Amesara, Senior VP, CFO & HR]

So on an average, our collection efforts were very good during this December quarter, and that has resulted into lower provision for debtors [ also ]. Let's see for the March, we'll see -- we'll be able to -- we'll try to maintain the same collection effort, and we'll see what happens in March.

[Amit Chandra, IT Analyst]

And sir, also, on the folio-based billing versus flat-based billing of annual issuer charges, so if you can provide a breakup. And also, I was actually mentioning about the increasing market share that we have witnessed in all the accounts in the existing demat accounts. So will it translate into higher annual issuer charges maybe sometime later as the share of the...

[Girish Amesara, Senior VP, CFO & HR]

This increase in -- I think this increase in folio prediction would be very difficult at CDSL end because that is depending upon the corporate action that comes -- that is decided by the company. And with respect to the breakup that you intend to have for income based on folio basis and income based on flat basis, can I come back on this? Because I need to check up on this detail.

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So normally, I think, Amit, we don't provide that level of detailing because it's finally a culmination, it's a combination of both folio-based as well as flat-based. I think the important thing is the overall revenue growth, which is happening in that.

[Operator]

[Operator Instructions] The next question is from the line of Aalok Shah from MNCL Group.

[Aalok Shah, Research Analyst]

Yes. Sir, congrats on the great set of numbers. Just 2 quick questions from my side. One is on the margin front, sir, how do we look at overall EBITDA margin? With every passing quarter, we've seen improvement there led by cost efficiency. So not maybe specific to a quarter, but on an aggregate basis, how do we look at margins as a whole? And two, on the last question which got discussed in terms of collection efficiency between [ September ] - December, you had talked about some element of provisions being created. Did that got reversed now? And what is the stock of provisions now on the balance sheet?

[Nehal Naleen Vora, CEO & MD and Director]

On the first question on the EBITDA margin, I think it would be more or less at these levels given. But I can see, again, it's a function of the overall buoyancy and volumes in the market, which will also drive a part of the revenue. Our cost, as I had earlier explained, is kind of fixed cost. So there is a level of operational efficiency which is built in. But depending on our revenue is kind of -- some part of it is limited to what -- some part of our revenue is limited to how the markets as a volume performed, and some part is kind of an annual [ indicator ]. So it is kind of a function of both these factors. And it will be -- at least our endeavor will be to keep in this broad band or broad range of the EBITDA margin. But each quarter-on-quarter will be a function of many such factors which we have to take into consideration. As regard to your second question, I ask the CFO, Girish, to answer that.

[Girish Amesara, Senior VP, CFO & HR]

Yes. On the provision for the bad and doubtful debts for the 9 months ended, we have made a provision of around INR 7.34 crores compared to last year's provision of around INR 5.81 crores. I hope I've answered your question on provision.

[Aalok Shah, Research Analyst]

So this provision number in Q -- in H1 FY '21, if you could help me with that number, please?

[Girish Amesara, Senior VP, CFO & HR]

Half year -- just a moment, I will give you that. Half year was around 6.20, 6 crore, 20 lakhs.

[Aalok Shah, Research Analyst]

This half, sir?

[Girish Amesara, Senior VP, CFO & HR]

Yes. Yes.

[Operator]

Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Aditya Bagul for closing comments.

[Aditya Bagul, Assistant Vice President of Midcaps]

So just wanted to say thank you to the entire management team for taking all the time and sharing your thoughts and commenting on the results. Nehal, sir, I'll hand the floor back to you for any closing remarks that you may have.

[Nehal Naleen Vora, CEO & MD and Director]

Yes. So I think closing remarks is that we'll continue to remain kind of keeping our costs under control. But what is required to be done, we will -- have to be done, as I mentioned, the technology costs as well as the employee costs. Our intent is to make this investor self-sufficient. And we hope that this will continue to ensure a higher trust and growth in the CDSL system in terms of business. Thank you. Stay safe, and stay secure, everyone.

[Girish Amesara, Senior VP, CFO & HR]

Thank you.

[Operator]

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