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ICICI Securities Ltd
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Good evening, ladies and gentlemen, and welcome to the Earnings Conference Call of ICICI Securities Limited for the quarter ended September 30, 2020. We have with us today on the call Mr. Vijay Chandok, Managing Director and Chief Executive Officer; Mr. Ajay Saraf, Executive Director; Mr. Harvinder Jaspal, Chief Financial Officer; Mr. Vishal Gulecha, Head Retail Equities; Mr. Anupam Guha, Head Private Wealth Management; Mr. Subhash Kelkar, Chief Technology and Digital Officer; and Mr. Ketan Karkhanis, Head Retail Distribution Business. [Operator Instructions] Please note that this conference is being recorded. The business presentation can be found on the company's corporate website, icicisecurities.com under Investor Relations. I would now like to call Mr. Chandok to take over the proceedings. Thank you, and over to you, sir.
Thank you very much. Good evening to all of you, and welcome to ICICI Securities second quarter earnings call for fiscal 2021. So I trust that all of you, your families, your near and dear ones are safe and healthy, and I do hope it remains that way. I'm sure by now you would have already perused through our quarter 2 financials. And in this context, we are very happy to report to you that our company's quarter 2 FY '21 revenue, which came out just now, stood at about INR 680.5 crores, a growth of 63%, and profit after tax stood at INR 278.2 crores, a growth of 106%. During this quarter we continued our journey of furthering the digitization push and also taking lots of efforts to strengthen our franchise. Our overall franchise grew strongly with total assets of our clients with us growing at about 20% on a Y-o-Y basis and moved to INR 2.9 trillion. A lot of this growth was actually led by the equity business. So we continue to focus on enhancing operating leverage of the company which has resulted in our manpower and branch count coming down by 10% and 17% Y-o-Y, respectively, and we consequently brought down our cost-to-income ratio of the company to 45% and increased our return on equity to 76%. We are also happy to report that following these results, our Board of Directors have approved an interim dividend of INR 8 per share as compared to INR 4.25 per share last year, interim dividend. Anchoring our performance for the quarter has been the equities business, which continued its strong run from the previous quarter. However, we did see in the industry of cash segment in the month of September, some moderation. This moderation was around 13%, 1-3% as compared to the previous 2 months of the quarter. These are industry numbers. Now this moderation to our view was due to a combination of factors playing out, I would say, on the economic and regulatory environment. Our efforts of focusing on the 5 strategic pillars of our company that we have been talking about with you in the past, have indeed stood us in good state and helped us capitalize on the market opportunity. As a result of this, our market share in the equities and derivatives business increased by 240 basis points and 150 basis points, respectively, Y-o-Y. We added around 113,000 new customers in the quarter, aided by our open architecture and also digital account opening process. Here, I would like to mention that in the current year, we have been able to transition from, what one could call, 100% physical or a phygital model of sourcing requiring a face-to-face interface with customer, either using a tablet or a paper-based process that we had till last year to a situation where about 80% plus of our sourcing now comes through our application, the app or the website. All channels that we have within the company for sourcing new customers are increasingly using our new website and app for acquiring customers. And this transition, we expect, which are still in its very early days, will help all our channels to scale up faster and more efficiently going forward. During this quarter, we expanded our business partner network now to have about 13,600 partners, and these partners sourced about 16,000 customers. A growth of about 2.5x on a Y-o-Y basis. We have a dedicated mobile app for our business partners to help them serve the customers efficiently on the go. The app features a powerful dashboard and also allows partners to keep their clients updated on market trends, upcoming investment opportunities and so on. Additionally, through the digital sourcing channel, our company acquired around 28,000 customers during this quarter. Considering that we have just embarked on this journey of digital sourcing, coupled with the market opportunity and our own experience of generating leads on our website and the app, we strongly believe that we have significant headroom for growth through this more in times to come. And at present, we have in the process of -- we are in the process of implementing a number of initiatives, which will help us move forward in this direction. Some of these initiatives include building and enhancing our data analytics capabilities so that we are able to target in a sharper manner through digital media, augmenting our call center capabilities to fulfill such needs and improving and easing customer journeys besides some other initiatives to help us drive this growth. The growth in both these channels, that is the business partner network and the digital channel, has also helped us to diversify our client sourcing mix. Our largest sourcing channel, which is ICICI Bank, now contributes to about 55% of our total clients as compared to 80% in FY '20. In addition, non-ICICI banks linked accounts contributed to 35% of the new accounts that we opened in this quarter. So it's important to note that we are adding not only higher number of clients, but we are doing it with an increasingly diversified channel and bank mix. Growth in-sourcing, coupled with healthy adoption of our Prime proposition, taking the total Prime subscription now to 4.25 lakh customers has helped us grow our NSE active base by about 32% Y-o-Y. And it stood at about 1.2 million as at September 30, 2020. So against this backdrop, we recorded our highest ever quarterly retail equities revenue in quarter 2 2021, and 50% of this revenue was actually contributed by our Prime customers. Our efforts to granularize and diversified also played out with aligned revenue of equity now contributing 14% to the total retail and equities and allied revenue. Overall, our Equities and Allied revenue as a total basket actually grew by 88% on a Y-o-Y basis. Coming to our distribution business, as you are aware, the flows in the mutual fund industry remains subdued, and the industry actually saw a decline of 29% Y-o-Y in the gross equity flows, along with net outflows in the equity segment action. In such a context, our efforts of focusing on input parameters helped us increase our market share on the gross flows into our company from 8 basis points to 27 basis points. With respect to systematic investment plan flows, we increased our market share from 3.23% to 3.44%. On the back of these, as well as the improving mix and yield on the mutual fund AUM, our mutual fund revenue actually for the quarter grew by 3% Y-o-Y, an increase that we saw after 7 quarters. As the markets emerge from the lockdown mode in quarter 2, our nonmutual fund revenue sequentially grew by 32%. However, this was lower on a Y-o-Y basis by about 13%. Significantly, during this quarter, we saw encouraging traction in our fixed income business and distribution of loan products. The loan -- total loans that got disbursed through the business that we sourced during the quarter increased to INR 300 crores. This was INR 240 crores on a Y-o-Y basis. Coming to our wealth management business. It registered a revenue growth of 86% on the back of good equity performance. The total assets of our clients in this wealth segment increased to INR 1.15 trillion, a growth of about 15% on a Y-o-Y basis. We also scaled up our proprietary PMS product where the AUM actually stood at INR 160 crores as compared to INR 50 crores during the same time last quarter. During this quarter, we also augmented our equity franchise by launching a very interesting proposition called the global investment platform for our customers. This was done in alliance with Interactive Brokers, Inc., USA. The offering is unique as it's a completely digital solution, including the outward remittance component which is being done in partnership with ICICI Bank. The global investment platform fundamentally facilitate investments in U.S. Equities, fixed income, mutual fund products and ETF products, all in the U.S. markets for our customers, with no minimum ticket price and fractional ownership of shares also being permitted, even small investors, retail investors can build a portfolio in the U.S. equity markets, mutual fund market, ETF markets effectively. During this quarter, we further expanded our suite of products by introducing the commodities product. Here, our rates are extremely competitive, best-in-class when it comes to -- compared with the industry. Now as a result of all these recent launches, we expect growth to start coming in the course of the next few quarters. All these efforts, we certainly believe will help us push our journey forward to diversify and granularize our revenue mix as well as our business model. As a result of all these initiatives, the total active client base as at September 30, 2020, for us, stood at 1.56 million, a growth of about 17% on a Y-o-Y basis. Coming now to the institutional and issuer services business, the equity capital markets really witnessed a resurgence in activity, where deals that were put on hold in the first quarter of this fiscal year, owing to market conditions, saw a revival in Q2 FY '21, and there were 42 ECM transactions with a total deal size of about INR 1,085 billion. Our issuer services and advisory business revenue for the quarter increased by 93% on a Y-o-Y basis. We executed 24 investment-banking deals in the quarter and have, as we speak, SEBI approved IPO/FPO/InvIT/REIT pipeline of 7 deals, amounting to over INR 8,500 crores. In H1 of FY '20, we were ranked #1 player in the country in IPO, FPO, InvIT and REIT issuances with a market share of 98%. And we are ranked second amongst domestic financial advisers by number of deals in the M&A league table. Our strategy in business continues to remain to broad base and diversify revenue by increasing the contribution of the non-IPO deal.We, at ICICI Securities, firmly believe that a sustainable business is one which is sensitive to the needs of all stakeholders, our employees are one of our most important assets and in times of the COVID-19 pandemic, we have rolled out a number of initiatives, including tie-ups with leading hospitals, quarantine facilities across different cities for our employees and their family. This is to ensure that there is prompt medical attention in case the need arises. In times of current economic uncertainties, we have also rolled out increments to all our frontline employees and extended the ESOP program to all deserving employees beyond the senior management, so that we are able to attract and retain the right kind of talent for our company. Going forward, we recognize that the future is fraught with uncertainties. There are new regulations coming, new upfront margin collection regulations, for instance, for intraday products, this will be implemented in a phased manner from December 2020, as you would all know. These regulations would require standardized margin to be collected for all products from customers upfront before you enter into a trade. And as we know, intraday in terms of volumes is an important and a dominant part of the industry, these regulations are, therefore, likely to have an impact on market volume and revenue in the short term. And this will, of course, have an impact on all players, including us. However, we believe that these changes augur well for the orderly growth of the industry in the medium to long term. We, at ICICI Securities, are strengthening our franchise to take advantage of these trends and are working on various strategies to mitigate the impact of these changes. Some of these strategies includes launching new exciting competitive propositions to help us increase our client base and volume from not just new customers but also existing inactive customers, and we have a base of about 5 million customers with us already, continuing to scale up our various channels of client sourcing. Now we have 3 very strong channels of client sourcing, ICICI Bank, digital channel, which is scaling up well; and also the partner network channel, which has been digitized. Increasing traction in our non-impacted part of the revenue, which are cash, delivery, MPS, et cetera, which contributes significantly to our equities revenue pool, continuing to scale up our non-equity business through product categories that I spoke about and some of them which we've added in the last few quarters, and of course, continued emphasis on cost efficiencies and the impact of that translating into operating leverage. We would like to reiterate that the -- in the context of the recent market disruption, our strategy of providing a comprehensive live stage-based financial services, solutions to retail Indians in an open architecture format delivered digitally becomes more relevant than ever before. As already mentioned, our detailed performance has been circulated through our presentation and uploaded on our website, and I would like to end our commentary and open the call for any questions that you may have. Thank you very much for a patient hearing.
[Operator Instructions] The first question is from the line of SivaKumar K from Unifi Capital.
Congrats for a good set of numbers. Sir, a couple of questions from my side. Among the incremental clients that we added in Q2, how many are from the non-ICICI Bank customers?
Siva, that number would be approximately 1/3, about 35%.
Okay. 1/3. Great. Great. Sir, and my second question is on the Prime customers. Now you said you have already reached 44% of your active client base, right? So incrementally, do you think you are hitting a ceiling in terms of onboarding or converting the existing customers to Prime customers? Do you think the growth rate might not be as high as what we have seen over the last couple of quarters?
Yes. I'm just handing this over to Vishal, who is heading the Equity business, Vishal.
Thanks for the question. And as you rightly said that this has been manual over a year since the launch time. And in a time like this, when you reach to almost 44%, 45% customer penetration, this is -- I mean, good to relook at the proposition and see where are those pockets where you can increase your overall customer base, where you can reactivate more and more customers. And we have done precisely that. And about 5 days back, we have completely reintroduced our Prime offering. This is just -- today is the fourth day. We have reintroduced our Prime offering. And in a short period of time to say that whether the response is good now, but we have got a very, very encouraging feedback from our existing set of customers. So I mean, just look at the other side, that out of almost 11.5 lakh active customers, we have only 4.25 lakh customers in Prime. So we have headroom for another 6.5 lakh customers. And at the same time, as we just said that we are sitting on a huge inventory of customers who have participated in the past, and for some reason, they are not active right now. And also, it will augur well -- I mean it augurs well with our acquisition engine. So put together, I mean, we are putting everything to make sure that we continue to see a very, very robust, I mean, inflow as far as time is concerned.
Yes. So one of the interesting features of the Prime, we call it the Chota Prime, it's a INR 299 product. We are very positive that with a smaller eATM limit, we were clearly seeing that there is an opportunity to penetrate into a slightly smaller segment, which is what we are looking to address. So there has been an interesting new addition to this Prime as Vishal said, for 4, 5 days old, and the channels are extremely excited about this opportunity because they speak to the customers on a regular basis. This came in as an insight and input from there.
Right. Great, sir. Sir, and any progress on the mutual fund-based app that we have been working on? Any timelines you can share?
Yes. Beta testing is on, going on. We want to improve certain elements of it before we launch. We are hopeful that it could be a matter of a few weeks at best. We will -- once we are satisfied with the build quality, the experience, et cetera -- right now, it is under testing with a largish internal group. We expect it to come out in a matter of a few weeks more.
Great, sir. Sir, and one last question, if I can ask. Sir, we see that the volume market share has increased from 10.7% to 11.1% over the quarter. I'm talking about the equity ADTO. This is a very positive sign that we got to see. But in the light of increasing competition from the players in the discount broking segment, are you confident that you should -- you will be able to hold on to this market share and even grow it further?
See, in terms of outlook, I would say we have an approach, we have our strategy, which we've been articulating. We will keep doing that, right? We are going to be focused on ensuring that we keep our customers happy. We keep refining our approach to acquiring customers. We keep refining our approach to the proposition. That is what we -- on the other hand, we see that the trends of digitization, equitization, financialization, more and more inclusion is there to stay. There could be ups and downs in one quarter [Foreign Language], I don't know. But I think this commitment is there for us. If we execute it well I think there will be fruits of this commitment. That is how I would sort of put it. That's what we've been doing for the last so many quarters. We'll continue to do that.
[Operator Instructions] The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.
I just have a couple of questions. So firstly, when you said that you acquired 28,000 customers from the digital sourcing platform, you're referring to the open architecture platform that started in April, May?
Yes. Thanks for your comment. Your question is that 28,000 customers, is it open architecture? Yes, it is open architecture. But technically speaking, even our channel partners are open architecture.
Correct. Okay. So -- but then if I look at your traditional platform then, excluding this 28,000, our customer acquisition has been a bit muted. And when I compare with yours it would seem like very strong customer acquisition in the last 6 months, as has been largely range bound under 90,000 to 1 lakh customers a quarter. So how do you really see this going forward? And what exactly are we missing that our other competitors, the discount brokers, and even your listed peers are able to do?
Yes. So if you look at -- at least if you look at -- if you're referring to our listed peers, I think we are ahead of all of them, listed or I would say, if you're referring to the peers as in a bank broker set, then we are probably ahead of them. Having said that, I would say that we've adopted a model of open architecture and digital really 5 months back. When you compare this with what some of the discount brokers have been doing, they've been doing it for at least 4 years, if not, some of them probably even longer, right? So there is an advantage of the learning curve that they have had in front of us. We can see improvement on an ongoing daily basis, weekly basis within our own world. As we have been picking up insights into this, we have also come across some very interesting points which I thought I will highlight. And I'll leave it to you as more food for thought. I would say that point number one, if you were -- if you are referring to acquisition as in the NSE active, take it, it's an important number, take it with some pinch of salt because it's important to understand what quality you're getting. That level of detail is never available, unfortunately. We have learned that not all of them is as meaningful as it may seemingly appear. Secondly, it's very easy to run-up a very high operating cost for acquiring customers. Some of them have acquired multiple times our number in terms of cost of acquisition. That can be very depleting. So we want to be very cautious that we don't go overboard on increasing cost as we are scaling up. And number two, we continue to attract the customers who are right for this segment. We don't want to just go -- for sake of numbers, go and acquire customers. So just to tell you, the extent of leads that we generate is at least 8 to 10 times the number of accounts that we are sourcing, right, on a period width. We are ensuring that we increase our analytics capability, journeys, processes, et cetera, so that we are -- our conversion rates improve. So the challenges that we are addressing, the point that you said, what are you missing here, I think improving our customer experience, customer journey, we still feel that there is a huge way to go. We still are getting our act together there. And we'll get better and better with every passing week, fortnight, as we move forward. And we will continue to show an uptick in improvement there. We want to ensure that we give you a sustainable story of growth and a sustainable quality of growth, both.
Okay. Fair enough. And so then what would -- how should we think about your internal targets over the next couple of quarters. From this digital sourcing platform, you're acquiring 10,000 customers a month, can that potentially go up to maybe 25,000, 30,000 customers a month?
No, no, if you ask me -- when you say digital -- today, we think that we acquire -- and virtually 80% of...
I mean, non-IBANK. I meant non-IBANK. Sorry.
Yes. So you've seen what is happening in the market, right? People are acquiring much higher numbers than what even you mentioned. They have the benefit of 2 things: proposition, the extent of spends that some of them are doing as well as the experience of having been there, done that for a longer period of time. We will certainly crunch that last part, which is learning faster. We will do that. We are fairly confident about it. Having said that, I would say that we don't have a limited ambition there. We feel that we can do far higher than whatever you have articulated. But we want to do it in a manner that we don't go overboard on cost, and we target the right customers. So we will be on this. We are totally committed to this. We feel that we should not let go this opportunity.
Okay. That's good to know. And sir, you mentioned that you introduced another Prime offering for a subscription fee of INR 300. So what are the yields there? And do the other Prime offerings also remain status quo? Or have you tinker around the offerings in both also.
Yes. So we've actually revised the entire proposition for Prime. If you're interested in the plans, I'll very quickly take you through that. The new Chota Prime, we call it, is INR 299.27, INR 2.5 lakh eATM limit. Then we have a INR 999 version, which is a INR 10 lakh eATM limit, which is at INR 0.22.
Sir, if you could also mention the bps alongside the eATM limit that would be helpful.
Yes, I told you INR 0.22. The first one is 0.27. The second one is INR 0.22. The old INR 900 at INR 0.25 continues for people who are already availed it. Then we have a INR 1,999 plan, which is at INR 0.18 with a limit of INR 25 lakh -- eATM limit of INR 25 lakh. And then we have a INR 2,999 plan, which is at the limit of INR 1 crore and INR 0.15.
[Operator Instructions] The next question is from the line of Madhukar Ladha from HDFC Securities.
Congratulations for a great set of numbers. First question, the cash margin requirements were increased from September. And that seemed to have impacted volumes. So can you tell us a little bit about what your experience has been? And whether clients are now able to do BTST and all the different types of trades, maybe you can share some experience and some color out there? And second question would be that from 1st December, we have a peak margin requirement in the F&O segment. So maybe you can share what percentage of trades are intraday trades in futures and options segments separately? Yes.
Vishal this side. Thanks for the question. So I will go with your first question as far as cash margin is concerned. So Madhukar, I mean, you know that the organized market or the top 25 brokers or top 30 brokers who have the lion's share in terms of volume, they all were already complied. I mean we all were collecting margins well in advance. Rather cash trade we used to -- and like -- I mean, many other brokers, 100% margins to be collected before the order is placed, et cetera, et cetera. So I think more or less, I mean, there were no challenges per se. Regulator was also kind of very, very thoughtful. And also, we considered the feedback which came from market participants on couple of issues, like if you sell today, can you buy against that and what will happen to the BTST. So they accommodated the request in one or the other way. So I think more or less, the market is completely settled on that. There was initial phase and there were apprehensions. And as and when the regulation is introduced, there will be apprehensions around that. But if there are merits and if it is in a long-term benefit of customers and intermediaries, I think those regulations will definitely, I mean, work well -- augur well with all the participants. So I mean, whether the volume drop was because of that regulation, it's very difficult to pinpoint because too many activities are happening together. So the volatility has tapered down. There was a new regulation. There are -- I mean, the election in U.S., so there's some amount of uncertainty in people's minds. So there are many factors. I mean, so very difficult to say that what I mean what factor would have impacted the volume. Our feedback and as we speak to other participants, I think that has certainly done pretty well in the market. Second thing was -- I mean you asked about the peak margin. Yes, peak margin in coming, December 3 is the start date, and it will be, as Vijay said that it will be introduced in a phased manner. As and when there is a change in regulation, whether this was the advanced margin collection for cash trade or whether this was a pledge which was introduced from October 1 -- for September, and whether this is a peak margin, I mean, there are 2 factors, one which -- one has to look at. One is, what will be the clients reaction to the changed situation? I mean, we have many, many instances in the past when the expected behavior of customers was something, but what turned out to be was completely different. I mean take the Q1 and Q2 in terms of market volume. We all thought that pandemic will cause -- the dampening sentiments as far as volumes are concerned, but it has not happened. We saw on the other side that all investors, new investors, I mean, they all came into the market. And they took complete advantage. So we'll have to see that how investors will be changing their behavior. And the second part is that as an intermediary, we all recalibrate. We see that how to get aligned with the new strategy in a manner, which is less painful for customers and as well as for intermediaries. I mean, these are the 2 things which, in a situation like this, anyone will think. And that's what we have done in case of pledge also, in case of advance collection on margin also. And the same thing we are going to see in case of the peak margin also. Definitely, it will have impact in terms of volume on the overall market. How much? I mean customers will respond in a different way. We all will watch it very, very carefully. And at the same time, as Vijay said, that we are working on various different kind of initiatives to be again relevant with the right propositions as and when such regulations kicks in.
Sir, but what is the current intraday projection? In our ADTV, how much is the current intraday share in futures and options, if you can give that number?
Madhukar, I mean, see, one is, it is not a disclosed number. Second, there are, I mean, 2 kinds of intraday. The products which are intraday and second is within futures and options for equity there are intraday rates. I mean, so you -- still, today, also, you pay full 15% margin and you will find that 40%, 50% of the customers decide to exit during the day. They will not even wait for the day end or next day market movement. So it's very difficult to say that which is intraday and which is not. And we have also seen that people shift their priorities. I mean, when the contract size was increased in F&O, we all thought that volumes will crash and people will find nowhere to do the volume.And on the other hand, we saw that people have shifted to equities. I mean they thought that there the ticket size is not a constraint. So let me do INR 2.5 lakh trade in equities. So that is where, I mean, very difficult to call that what is intraday and what is not.Finally, we have to see that customer interest continues to remain in the market. It has -- I mean, as we all hear from the market, it has its own, I mean, share in volume. But however, this volume is not like a cash volume, which is a very, very high yielding volume, right? So it will have its own color. It will have its own fabric. And we'll have to wait for another 6 months before we can tell that what all changes it caused in terms of customer behavior and what all we could do in terms of response to the changed scenario.
And last year, I think we had changed our incentive structure for ICICI Bank RMs to sort of sell or get more clients for ICICIdirect. How has that done because it seems that with 1/3 of -- or almost 35% coming from outside channels, is there enough growth happening out there?
No. Indeed, if you look at a lot of our market share gains, you need to appreciate that it's all coming from our Prime customers, which is coming from ICICI Bank, right? So...
Yes, but that is just the conversion into Prime. What about the new adds?
These are not conversions. These are new clients, which we are acquiring with prime. A good 75% of what ICICI Bank is giving are our Prime customers.
Madhukar also, just to kind of add to what Vijay said, in terms of quality, we are definitely seeing an uptick. We measure quality by way of activation ratio. If you are able to get, as Vijay also alluded and Vishal also spoke about, that right kind of customer, customers interested in doing investment. That is what we are looking at. And there, we have seen sequentially for the last 4, 5 quarters, there has been a secular trend of improving conversion ratios in our bank channel at a company level. So a larger portion of the customers that we are acquiring are the right fitment of customers. Obviously, that is a definite advantage that we have got through on that kind of an arrangement that we started last year.
[Operator Instructions] The next question is from the line of Ritika Dua from Elara Capital.
And congratulations to the team for a fantastic set of results. Sir in your opening remarks, you had mentioned that you are making some strategic moves to ensure on the growth front and also to maybe arrest maybe some bit of concerns on how business would move after the margins -- peak margins get implemented from December. So if you could maybe elaborate on that. And sir, the second question is on the branch front. So can we say that largely that rationalization is done with? Or there could be some more? And this rationalization, while you have been sharing it for some time, it pretty much happened in a quarter. So just want to understand if there is more room? And where have we really cut this down? So those are my 2 questions.
Yes. Harvinder here. So I'll just take on the question on branch rationalization and then the margin. So branch rationalization, it has been a journey. It's not only one quarter. Obviously, it's a process. We started by identifying branches and then there is a logistical process and so on and so forth. So it starts coming into numbers with some lag. But consistently over the last 4, 5 quarters, we have seen reductions happening. We started with about 202 branches, today we are at about 158 branches. A good low-hanging set of fruits we attack first, we are looking at things like what are the work-from-home concept opportunities, are there any synergies possible over there to work across teams, et cetera. So if they are able to do something there with increasing digitization, maybe there could be some additional room there to say. Second is that with this reduction as it has happened on a quarter-on-quarter basis, the full-annualized impact will keep coming in over the next 3, 4 quarters as well. So I think these are the 2 things on rationalization of infrastructure on our journey. On the margin impact, I think as we discussed earlier as well, this is a regulation which will have an impact on certain segments, certain product segments for the industry, intraday is a significant segment, as we discussed when Madhukar also raised this question. And here to deal with that impact, and you'll have to see primarily the determinants are what is the kind of customer quality that you have, what is the kind of other revenue mixes that you have. So there is a portion of product segment which has got impacted or which will get impacted, which is, let's say, the intraday segment, but there are segments like investing segments, MTF segments or delivery segment, those are unimpacted. We have a strong franchise over there. We have a strong nonequity franchise. Some of those things are what we are going to leverage to come out of that. And the second aspect is, as we have been anyway focusing on growing the total active customers, right, there from the pool of our current inactive dormant customers by using better product proposition. So Vishal referred to that. There, we want to increase that. One case in point is we launched Option 20 last year in October. We spoke about this in calls. Over the period of last 3, 4 quarters, we have seen that the number of customers active on Options, they actually doubled. That has been our experience with actually a lower pricing and our revenues went up. So the volumes we're able to make up. And there are a lot of examples. When we launched Prime, it was almost a 60% decline in volume in yield, so one would have expected a do-nothing revenue impact would have been a negative. However, we saw a substantial increase, 32% is the latest number in terms of NSE active where the customers have grown. So revenue, volumes and customer, I mean, we saw an increase. So we keep working on these propositions currently, as Vijay mentioned, and Vishal also alluded to, intraday is a segment, which has got impacted. We are working on our competitive proposition to deal with that. Our endeavor is, how do we get more customers activated from existing customers, how do we help attract a new set of customers apart by these propositions. So some of those things we believe will help us tide over the immediate term impact. Over the long term, I don't think there is any debate that any such initiatives that have been taken by the regulator now, in the past, et cetera, that has enhanced confidence of the retail investor, it has enhanced the retail franchise of -- and made franchise more granular for the industry. And we being, let's say, one of the significant participants of the industry, hope to benefit from our brand and technology trends. Slightly longish answer, but hope, that is the way we are thinking.
Sure. So if I could just maybe just one follow-up.
Yes. Yes. Sure. Sure, Ritika.
So sir, on the OpEx side again, so because your strategy on sourcing from outside ICICI Bank has been working well, can you share something on operating -- on the cost front, how is that also shaping by having now being -- also getting more acquisition from the non-ICICI front? So that's one question. And the second on the -- see, we also -- I mean, have been of the opinion that while your customer addition has been lower than what the peers have been, you have been gaining market share still on the volume front. Any color if you can give to maybe put some clarity on the fact that the kind of customers you are onboarding is actually of a much better quality. So maybe if you could share what is their incremental contribution, et cetera. So it gives us the confidence that definitely while your customer addition is slower, but your quality onboarding is much better. So that's what we should focus on. So these are my 2 more questions.
Sure. Ritika, I will endeavor to answer both of them. The first one you said is what are the levers on operating efficiencies, especially in the wake of the digital manner of sourcing and the nonbank sourcing that we have embarked on. So a couple of factors that I can think of. One is this whole transition from a phygital model, where we either needed to sit across a customer or needed to open a tab and then take customer details, but I had to visit a customer. From that model, almost 100%, I mean it's not even 99.9%, 100% of our sourcing when we exited last year was in this model. You needed to meet or see the customer, right? From that model, even in our digital sourcing, we had a letter of power of attorney, et cetera, where you needed to have some physical interface, through a courier or whatever. Now from that model, we have moved to a model where customers can open, and there is a contactless opening of accounts. That releases bandwidth. It enhances distribution capacity. That is one impact that has happened. It also makes our entire process front-end and back-end more efficient. I'll give you a couple of examples. So if you don't have a power of attorney pick up, you don't have pricing-related issues, you don't have courier-related issues. The capacity of opening an account on a daily basis for our RMs et cetera, that enhances because it is digital. And customer is helping us open his account. All that activity was being done by us. So some of those things have started bearing fruits. I mean you can rethink of a lot of your back-end resources processes, and that is what we are doing. That is one aspect. Second is, it enhances capacity only -- not only on digital channels, but since in a lockdown scenario, all the physical channels, like our own branches, ICICI Bank branches, some partner branches, all of them are resorting to this process. The process, which is a website or an app-based process. Their capacity has also gone up or their capability to get more customers has gone up. So those are some of the benefits that we are looking at. Once situation normalizes, when things open up, once we can start visiting customers, we feel that, that could add probably to the distribution creation. So that is on part number one. On part number two, when you mentioned that how will -- how the quality of these kind of customers shaping up. So I'll just give you a few indicative references. It's too early, as I said. Vijay also mentioned it. It's a start of a journey. But we keep monitoring the quality by way of volumes, by way of either assets or ARPU, et cetera. The customers that we are onboarding through these channels, the newer channels, are not very different or substantially different from our erstwhile customer franchise. So we have been able to attract decent quality customers through our DIY model as well. You have rightly mentioned that even though the rate of growth could be lower, but in terms of volume share, in terms of revenue growth, et cetera, the quality is kind of coming to core.
The next question is from the line of Utsav Gogirwar from Investec.
Congratulations on a great set of numbers. I just have a couple of questions. Firstly, can you just help me in how many months the customer acquisition cost is breakeven for us, is there some color you can give? Maybe ICICI Bank channel and non-ICICI Bank channel?
Utsav, it will be slightly early to say that, but it's -- and it will be definitely -- it is slightly early right now. See, I'll tell you 2 things. One is on the mix of the channel. You have to let the mix of the channel settle, whatever mix of digital versus in-house, et cetera. But suffice it to say that our payback would not be more than, let's say, about 5, 6 months, maybe, but I would be conjecturing right now. Maybe I can come back to you with a final number, but it will not be very high. It will not run into years.
Okay. So actually, the question is related to the customer, which we -- so we are choosing customers selectively. As mentioned in the call, we are just focusing on the profitability. I just want to understand what different -- the discount broking player are doing, where -- so what will be the breakeven difference for that kind of customer? And the customer we want to acquire?
So let me comment. The numbers of discount brokers are not available to us. So difficult to say. They are not listed. They don't share it. There is one player who has just got listed. So we got those numbers. Those numbers are far higher than what we would spend in several years in one quarter, if you put it like that.
Okay. Sure. And sir, second question on the employee cost. So I think we have done a commendable job in this quarter where sequential growth is just 4%. But this -- if you look at the quarter 1 employee cost, there was a sharp jump. So I just want to understand how I should look at employee cost for the H2? Do we expect a similar kind of numbers? Or what could be the driver for that?
The reason why you're seeing an employee cost go up in an absolute sense is due with the fact that the variable component of performance pay has been factored in considering the performance. We, therefore, do not expect increases to continue on that front in the subsequent period.
The next question is from the line of Saurabh Dhole from Trivantage Capital Management, India Private Limited.
I have 2 questions on the institutional broking side. So right now, as a percentage of total revenues, this business is kind of pretty small. So what plans do you have to scale up this business? And what opportunities do you get to cross-sell to this particular line of customer? That's question number one. And the second question is on the advisory side. Is there some structural changes that you've brought in because of which the revenues are probably looking much better than what they were a couple of quarters ago?
So your first...
Ajay is stepping in, yes.
Yes. On your first question on the institutional broking side being small, if you see last 4 years, we have been growing at probably 30% every year. And we have been increasing our market share consistently year after year in last 4 years. And what we see also as an opportunity is to tie up with local brokers across the globe. So what we have done is, recently, last quarter, we tied up with a U.S.-based broker to kind of have a deferred penetration among the FDI clients, who we are not servicing right now. Similarly, we are looking at a tie-up in Korea and Japan. And that should happen very shortly in this quarter and followed up with the conversation we're having in Europe. So that's the strategy, is to kind of go and partner with the local broker. Our market share from the domestic clients is very high, is in double-digit kind of a number. So idea is to grow on partnership model on the FDI side. On the advisory side, so obviously, the market volume plays a role, we have seen H1. On the Capital Market, at least that's been a very very high issuances. It's actually, the current year would have been one of the highest in terms of the history of Capital Market, how much money has been raised. So some of the fees are -- is a factor of that. But more importantly, our high market share, we just mentioned, it's over 90% is our market share on IPO inventories and stuff like that.Also, we are focusing on M&A private equity transaction and that's something also giving us rewards on higher fees. So we have been ranked second among the domestic bank for the advisory in the merger market for H1. And we topped the retailers for the IPO ETM among all banks in the country.
Right. Right. And sir, just a follow-up. What opportunities of cross-selling do you get on the institutional brokering site? Is there any fee?
Broking and cross-selling would be few -- it helps the investing banking side for doing large 20 jobs and stuff like that. So that's a pretty large cross-selling opportunity. Otherwise, some of these insights, which we get from the broking side, they can be used which we pay to ideate and make an advisory transaction on the revenue side.
The next question is from the line of Shreya Shivani from CLSA India Private Limited.
This is Saikiran from CLSA. Just 4 questions from my side. Post COVID, I think you guys are seeing significant change in terms of customer acquisition process, thanks to digital. But how have been the experience in terms of customer service during this period that too with the digital kind of a scenario? We foresee some more cost benefits kicking in because of this? Or what has been the experience? That's question number one. And question number two is in terms of non-ICICI Bank customers, how can one judge in terms of the revenue potential, considering we might not have understood the potential of this customer nor what is the kind of wealth or revenue potential, what these guys will have without having much of the bank-related data? And the third question is overall yields for previous wealth customers during this quarter, if I look it on a year-on-year basis, it is a significant sharp uplift. Can you just explain us what is driving this. It seems like both transactional and non-transactional, both yields are moving up significantly? What is driving that? And lastly, ESOP and MTF book have seen a very sharp rise. How do you see this going forward?
Yes. You're actually a little too close for the phone. So I didn't full get what you spoke, but I think Harvinder got what you spoke.
So Saikiran, I'll just maybe paraphrase your question so that we have got the question right. So first you said, what has been the experience on the profile of customers we are acquiring through a digital mode and therefore what are the implications on even cost efficiency, that's point number one. Point number two, you said that how do we judge the revenue potential of these customers because they are -- we don't have the advantage of the same level of information that ICICI Bank customers we have. So how do we do judge by revenue potential? Third, you said, that...
Private wealth customers, the very sharp...
The customer yield has seen a sharp increase what is driving that yield increase in the wealth customer, both transactional and non-transactional revenues seems to have gone up. The fourth question was that MTF book has seen a sharp rise, what is driving that? These were the 4 subparts, right?
Yes. So only the only difference is like the first question, what I meant was that the customer acquisition process was mostly new...
Can you just go back a little bit from the phone.
Your voice is a little muffled.
Yes, slightly muffled.
Okay. It's better off because I'm not using any speaker, but I'm just speaking through normal line.
You speak. Yes, you continue to speak, please.
Yes. So I'm just asking that the first post COVID, the customer acquisition process, as time we moved to the digital, I think there was certain kind of benefits which have already flowed through and the process has stabilized. But if you have to extrapolate the customers service through digital because, I guess, during this COVID period, the customer service would also have happened through the digital way, right? What has been the experience? And do you foresee any kind of cost benefits kicking in?
So Saikiran on the customer sourcing, definitely, the process has been completely digital, non-contactless and our franchise is mostly DIY. So roughly 97% of the transactions actually customer punches his orders himself on the website. So he doesn't -- I mean, we don't have a lot of physical engagement on branches or call centers, et cetera, to place an order. Therefore, that has been one of the key benefits for us historically. It has obviously helped us in this current scenario, where once the customer has got through the process of opening an account, he has been comfortable in doing the transaction. You said, whether the process has stabilized? As Vijay mentioned, that it's a new arena for us. It's about 5 months old for us. We are -- we have a lot of projects that we have identified that can help us improve this process further.There are customer journeys. There are, for example, things like call center capacity to help if somebody has got stuck somewhere. There are sharper digital marketing techniques, which are available and capabilities which are available. We have a lot of projects identified in that arena to develop that. So it is well begun and some way to go still. So it's not -- we expect those things also to kind of improve going forward. That is on the process part. And therefore, service is not that big a component because most of the franchises DIY, on the first question.
Got it.
Yes. On the second question, you said that how do you assess the revenue potential of a client, which is non-ICICI Bank base. See, our -- it is an open architecture, which means a customer is looking at the proposition we are offering. The propositions are available digitally. It's uniform. And the proposition in short for example, Prime. Vishal gave an example that our customer is choosing a INR 299 or a INR 999 plan. He is interested in starting a trade and he is interested in the capability of eATM. So that kind of a customer, if he's coming on the platform, he could be from SBI or HDFC, it is a proposition which is attracting the customers across. So I think there, it is pretty similar. Again, it is early journey. We are looking at it and we are learning every day on that as well.
So I think the question is that how do you assess potential. So the way it happens is that potential starts and keeps building over a period of time. To begin with the fact that he enters you, it means he's interested in equities, right? That's the behavior he has demonstrated. He's taking the effort of coming to you, opening an account, putting up whatever is required to be done. Sometimes even paying a fee to become your customer. So that's an expression of interest.Thereafter, it is transaction behavior, the type of plans that he chooses. And then combination of as time progresses and his behavior plays out, gives us insight as to whether this person needs further sort of uptake, further support and so on and so forth. So that's how it really plays out.It actually grows through the kind of behavior he displays. And to analyze that, there are all analytical tools to do that. It's not done from a human assessment. It is done through tools that are there, analytical tools that are there. And then based on a certain behavior, then we classify this guy as someone who needs an advisory support or he doesn't need an advisory support at the back end. And then the advisory support is sort of anchored, not anchored, depending on how it goes. So that's how the whole journey builds up.
Sure.
Second, moving on to your next question on wealth yield improvement both on transactional and recurring, so 2 factors that have helped us on the transactional front, we have seen that the equity franchise, specifically delivery in the market for us, in general, has shown good growth in terms of volume and therefore revenue.Wealth customers typically have a higher delivery orientation. They have an investment kind of an outlook rather than a trading kind of an outlook. So they have benefited as has overall our franchise. That has helped the transactional revenue on the asset base and used to go up as higher amount of transactions happening, and therefore, higher booking income. That has driven the transactional yields. The recurring asset yield has been driven primarily by higher interest in ESOP and MTF. Those are recurring assets. The book has gone up. Wealth also has a fair share of MTF and ESOP book that has improved, which has led to overall improvement in yield, both the portfolios are going strong. The third -- the last question that you had was what is driving the MTF and ESOP increase. This has been a focus area for us. If you look at our numbers, if you trace them back for the last 5 quarters, you will see that consistently, when we started the journey last year, we were at about INR 4.6 billion. That was the book. It has consistently kept going up. And I'll just quote numbers from memory, maybe I'll get something wrong. But they were, yes -- so we had about INR 5.3 billion by the end of Q1, moving up to INR 7 billion, moving up to INR 11 billion. It moved up to actually INR 15 billion in the March quarter. But due to COVID in the last week or fortnight, we actually proactively brought it down. We discussed that in the first investor call of this year. And therefore, it was INR 6 billion, but it had reached INR 15 billion, and now we are looking at about INR 18 billion.So it has been a consistent focus area for us. Our product proposition has been pretty strong. Our network and our balance sheet gives us the ability to borrow at a relatively decent rate. We are AAA rated or short-term rating even rated from CRISIL. Financials are strong. So some of those things we leverage to attract better quality customers. Our wealth focus has helped get customers in the ESOP franchise. So both of these things have helped us grow this book.
So if I can just add on that wealth bit on the transactional income. We also had a strong growth on the fixed income side, apart from the equity that Harvinder just spoke about. And maybe start -- when we started disclosing on the wealth side, we always had assets, and we said that our yields were relatively lower, and we wanted to work closely on our customers and do a better coverage. So lot of analytics has gone in, sharper segmentation has happened. And resultant to that, we've been able to activate a whole lot of customers, both on the equity, fixed income side and ESOP and MTF, that Harvinder spoke about.
The next question is from the line of Roshan Chutkey from ICICI Prudential Life -- Prudential Mutual Fund.
I have 2 questions. Sir, firstly, in the appendix, you have given this receivables trend, I am just looking at the receivables trend, how do you explain that movement? That is one. Two, if you can just comment on the part of private wealth management business as well on some data that you have given? Third question is in the business performance, like the first slide on the business performance section, ARPU missing there because in the footnotes you have mentioned ARPU, but it's not there in there, if you can just mention the ARPU number as well.
So Roshan, again, last question, I have not fully captured. The first and second are captured. So maybe I'll start with the first and second, and then we'll come to the third one.The first one, you mentioned is the trend on receivables. See these receivables on any balance sheet base primarily will comprise of last 3 plus 2 days transaction, we'll have either a receivable from exchange for a trade. So for example, if there is a sell trade, we'd have some receivable. And it may vary from balance sheet day to -- balance sheet day, depending on whether the last day was a working day, trading day or non-trading day and what was the quantum of value. So therefore, it is difficult to attribute it to any of the prime drivers is that is what we're trying to do. So it kind of fluctuates with the last 2 days. So it is very episodic in that sense. That was the first element. The second element that you mentioned was...
Wealth management business.
The PAT of the wealth management business. So for wealth management business, we have disclosed. The revenue contribution does not put out a specific PAT number. And I just maybe give you a sense of why we look at it this way. That is a customer-facing classification. Eventually, the way -- we are a digital company, the way we look at it, there will be product lines, where the resources or the cost could be spent. And then there'll be customer-facing line, which will be using these resources. So every customer could have an online equity revenue, could have a wealth revenue, et cetera. So it is very difficult to kind of segregate, so we do not put that out specifically. But all our segments, let me assure you, have decent operating margins. Obviously, there'll be a pecking order. Our retail online business would be the highest operating leverage business. And also our distribution business, et cetera, would have a bit of physical infrastructure. So then there is pecking order, but we've not specifically put out a PAT number. If you could repeat your third question, I could not get your third question.
Yes. Before we go to the third question just a comment here. On the second question, the reason I'm asking you for a PAT here is, I can think of a value for the business for the wealth management business per se in the entire business. So that is the reason why I am asking you for wealth management. Last question, that of the third question is the ARPU number is missing in the business performance slide, the first slide, in the footnote you mentioned ARPU, but last quarter, for example, you mentioned a 36% increase in ARPU growth, right, whereas now, I don't see that, that's the reason I'm asking you if ARPU was missing by accident or whatever, in Slide #20?
Yes. So Roshan. ARPU is very simple for us. If you look at our NSE active numbers, our NSE active is the total equity active customers for the last 12 trailing months. And that -- if you look at an equity ARPU. We also disclosed the retail booking income separately. So if you take for the 4 quarters. The only thing you'll have to do is you have to take for 4 quarters and then divide it by the NSE active clients. If you do that...
More than 20% in your sense, my calculation of this is around 20%.
Sorry.
ARPU growth is about 20%, according to my calculation or thereabout?
Just one minute. Okay. Yes. So Roshan, let me come back to you, but yes, it would be a growth. Let me come back to you with the exact number.
As a last final question. From December onwards, should we expect financing to be provided by a separate arm to ensure that broking volumes are mitigating faster to the regulation. Can we expect some financing to be provided, like you have MTF for the cash delivery business, for the intraday business, can we expect some sort of a financing availability?
So Roshan, by regulation, we are not allowed to extend any kind of a financing as a broker, we as a company. We are not allowed to extend any kind of financing other than MTF and ESOP. These are the only 2 products where as a broker, we can extend financing. If there is an NBFC, that angle could be different. But for us, as a broker, MTF and ESOP are the only 2 products. So it would not be possible for us to extend a loan to our customers to give margins back to us as a mitigant. Also that technically, even if you look at an NBFC-based organization, technically, also that will be a challenge. I mean, it's a technical challenge where it will be difficult. So for us, it will not be possible.
[Operator Instructions] The next question is from the line of Deepak Khatwani from Girik Capital.
Congrats on a good set of numbers. I have a couple of questions. First, if you could comment on the client concentration. So how -- is it that a small percentage of clients can contribute to a significant chunk of your revenue? And if that is, then how much percent contributes how much?And obviously, if you can also comment on the maturity cycle of the client. So if you onboard a new client today, how does the client mature? When is the time that the client starts contributing significant chunk to your revenue?And I have another question on the wealth management. You said that there's INR 100 crores of revenue this quarter from wealth management. So under which head that revenue is? And if you can also kind of comment on the margin profile of this business. Those will be my questions.
Hi Deepak, this is Harvinder here. So first is a question on the maturity profile of the client. So 2 indicators I'll give you. One is that our clients, once we acquire, within 90 days, currently, 63% of our clients start giving revenue. So that is the first part, and that is what we typically measure as an output of quality.So he starts trading within a period of 90 days. The remaining people, we keep on engaging and they come on board later. So that is one part. What we have seen further is that once a customer, let's say, gives a revenue of X to start with, it will be a one. With a high retention that we have -- I mean, we have discussed in the earlier calls also that almost 55% of our revenue in any financial year comes from customers, which are more than 5 years vintage.Almost 37% of our customers, which were acquired 14, 15 years back are still trading with us. So all this leads us to believe that it's a very high retention profile.With that, what we've seen is that let me start with a revenue of X, we'll continue to see improvement over the life cycle of a customer as 5 years, 10 years and 15 years. Sequentially, we keep seeing that their revenue with us keeps growing, as their personal economic profile keeps growing. So that's the way our client profile or client cohort matures. The second question that you asked was -- sorry, could you just repeat your second question? On the wealth franchise, you mentioned that where is the revenue attributed, right, where can you see the revenue?
Under which head that revenue is there?
Is that the right question? That is what you were asking, right?
Yes. In which side is it? And obviously, I also wanted a comment on the margin profile of this business?
Yes. So first, let me take the first one. As I said, the wealth management business is a customer-facing angle. So if a wealth customer is doing an equity broking revenue, in our financial statement, it will come under equity broking line. If it is doing a mutual fund, ESOP, et cetera.So it will come under respective product lines in the financial statement. However, the sum total of that is that we have got about, let's say, INR 100 crores of revenue in the wealth franchise -- from wealth customers this quarter vis-à-vis the total revenue of the company. So that has been the split of all the products. I mean it is wealth customers doing all the different products and they'll be within this specific line item. On margin profile, as I'd answered a question of a gentleman earlier as well, we have not put out a specific PAT number, but all our business segments have decent operating margins, the operating leverage can vary, but all our businesses are profit-making and have decent PAT margins. We have not put out a PAT number for wealth business specifically.
Sir, will it not be a good idea to put the wealth management business revenue and maybe the cost separately as well because if there's a broken customer contributing specifically from broking that will not be a wealth customer, right? So will it not be a good idea to have a separate wealth head in the presentation or also in the income statement?
Yes. So you would appreciate that we started year marking our wealth segment in a sharp manner only in the January quarter. That was the first time when we started it. We are increasing -- periodically, we keep increasing our disclosures. We'll continue to do that.It's only the third quarter or so where we started disclosing the wealth as a segment. We will keep seeing what all we need to do to increase disclosure, greater depth and so on and so forth in times to come. It's still in early, I would say, phase of disclosure for us as far as wealth is concerned. I think there was also a question around concentration, if I remember. There was something around concentration you wanted to ask.
Yes, yes. So that was one question as to is it that a small portion of your clients contribute a bit chunk of the revenue?
Actually, if you see wealth is a segment where the tendency of revenue seems -- is higher. So there are about 35,000 customers that we declared that did a revenue of about INR 100 crores. That's a reflection of the fact that there is concentration or absence of concentration.Our revenues tend to be very granular [Foreign Language]. We don't have any significant value on concentration. Millions of customers are sort of trading. So the rest of it is all distributed around that 1 million-plus customers. If you take out 33,000, everything else gives us the balance. So it's fairly granular is what I would say. The value of concentration is a lesser of an issue here.
And Deepak, it will not be very different from the financial service industry of India, and there will be a concentration of wealth in terms of customers or clients, the number of families, whatever. So it will be -- I mean, that is reflective of our franchises. And there are different segments which have different strength. You'll have like a lower ARPU customers with huge number of scale, which is completely granular and then you'll have wealth profile customers which -- where the ARPUs could be high and the numbers could be low. So all of those is what we get in.
The next question is from the line of Vijay Karpe from Bryanston Investments.
I have just one question. Have we seen any pressure on the yields, NIMs of the MTF book? And have our borrowing costs come down? Can you give any numbers year-on-year and quarter-on-quarter?
Yes. So on the borrowing cost, definitely, we have seen a bit of softening of the borrowing costs. As I mentioned earlier, with our kind of franchise we are able to do at repo or thereabouts, that kind of a rate. Okay. So very quickly, very quickly. So we have seen our borrowing cost coming down for us around repo rate. Second is on yield or NIM, so we enjoyed healthy NIMs over there. Typically, 4% to 5% are our NIMs in these books, which we enjoy.
The next question is from the line of Sanjaya Satapathy from Ampersand Capital.
Yes, my question is a bit simple, but how do assume that how much you're investing on your IT capability?
Yes. So a part of our strategy is to build our digital capabilities. We expect our CapEx this year, we want the layout actually to be actually 2 or 3x of what we have been spending typically, and you can look at it up from our financial disclosures, about INR 8 crores to INR 10 crores is the CapEx spend, which has been the longer-term average, somewhere between INR 7 crores to INR 10 crores has been the longer-term average of CapEx.We are looking at increasing substantially. We have identified 2 areas as well, capacity enhancement to get to do substantially higher growth because we've moved up in terms of the utilization in the recent period. Digital analytical capabilities, digital experiences, user interfaces, customer relationship management, these are some of the identified areas in which we are investing.
So let me just comment here. As far as technology is concerned, there is no -- there is absolutely no constraint on the team to do what it takes. We have actually more than 4x our budget this year compared to the numbers that Harvinder said because we don't want that to come in to place. We have enough internal resources to take care of that. So in that sense, I can assure you that our technology spend is not an area which will be put to any kind of a pressure point from us, right.
Is it only in CapEx or there's an element of OpEx there? And if you can just put it in context of, let's say, some of the big brokers globally or in India, how much they would be spending? I'm just trying to see a -- get of sense that how much more -- I mean, basically INR 8 crores seems too low to just look at it from a top-down basis.
Yes. So your question is how much would the other brokers be spending? Is that your question?
Yes. Digital release, financial services platform, which you are talking about, how much is that absolute amount, let's say...
I think if you're asking about the industry in India, they would be spending far lower than what we would be spending, far lower traction.
And the global benchmark would be?
Global benchmarks, i.e....
We have broad range, it will be very difficult because...
Because there's no comparable kind of a player, really, I mean, Charles Schwab, et cetera. They are at a very different, I would say, maturity stage customer story, customer maturity position there.
And Sanjaya, just to add to this, one critical difference for us is, see, we have a large portion of development that happens on, let's say, the equity tech platform, et cetera, is also in-house, we have a team which develops rather than completely for 100% outsourced. So that also has a bit of a dynamic, but it will be a wide range. I mean, it will be very difficult to put just one number to it.
So your employee cost also has that cost of IT engineers?
Yes. Yes.
Of course.
So we have an in-house team. So this -- the entire platform has been actually developed by our in-house team and it has been maintained, upgraded all the products that have come in. We have -- one of our levers of our strategy is agility, where we have started partnering with other vendors, even buying out, et cetera. So that is a phenomena that we have started, but our historical route has been an in-house, in-growth channel. So it will be within employee cost and whenever they're spending their time on capital goods or new applications, that is accounted as CapEx in our books, and that is the number that I quoted.
And sir, can I ask like what proportion of your employee cost would be on IT engineers?
As I said, Sanjaya, if you could go to our CapEx schedule, year-on-year, you'll find that is the amount of -- that is a quantified amount which we spend. So as I said, the longer-term average would be about INR 7 crores to INR 10 crores.
No, that is the CapEx. I'm talking about how much of your employee expense is on your software engineers?
So see, it is not a very significant number. We have a team of about 200, 250-odd people, which is a combination of our in-house team as well as our partner team. So that is what we kind of have for the development.
So it would be fair to say about 5% of our total employee cost would be attributable to that segment that we are seeing, 5%, maybe 6%. Whatever you see as the employee cost, [Foreign Language], you could probably assess.
Understood. Understood. And lastly, if I can ask, because you are having more than INR 3,000 crores of cash, I believe, and you're paying pretty well in terms of dividend. So -- but with that level of cash and on what all we are seeing in terms of doing globally in digital spend for enhancing this experience. What we're trying to understand is that, like, how can you allow of that competition?
So let me just clarify, Sanjaya, over here, our cash bank balance that number of INR 30 billion actually includes our fixed deposits that we place with exchanges. They will form roughly about INR 24 billion to INR 26 billion, out of the INR 30 billion is actually FDs which are placed with exchanges. They are placed for the purpose of margin and that helps us get the volume. So that is not cash as in net worth.Our net worth is about INR 14 billion. Our ROE is about a 76% of this period. We have always believed in being a high dividend paying company. We, in fact, have a dividend policy, which prescribes minimum 50% our dividend payout ratio. This quarter, it has been about 55%.
[Operator Instructions]
Just one clarification, Roshan, to the question that you asked on ARPU, so it will be slightly higher than 20%.
Are there any more questions or...
No, sir, we don't have anyone in the queue. Would you like to add any closing remarks?
No. Nothing from our side. We have spoken. Thank you, everyone, for coming on to our call, listening to our commentary as well as asking us all the questions. If there are any follow-up questions, feel free to get in touch with our IR team. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.