ICICI Securities Ltd

NSE:ISEC

Earnings Call Transcript 2023-Q2

[Operator]

Good evening, ladies and gentlemen, and welcome to the Earnings Conference Call of ICICI Securities Limited for the Quarter Ended September 30, 2022. We have with us 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 ; Mr. Ketan Karkhanis, Head, Digital Client Acquisition and Co-Head New Solutions Group; Mr. Nilotpal Gupta, Head Data Science Unit. [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 now hand the conference over to Mr. Vijay Chandok, MD and CEO, ICICI Securities. Thank you, and over to you, sir.

[Vijay Chandok, executive]

Thank you very much. A very good evening to all of you, and a warm welcome to the ICICI Securities Quarter 2 Earnings Call for Fiscal 2023. First of all, let me take this opportunity and wish you in advance, a very happy Diwali and season's greetings for -- to all of you and your families. So I'm sure, and I do hope that by now you have already perused through our investor presentation, which has been uploaded on our website.

So what I'm going to do right now is I'm going to start with a very brief highlights of the industry performance and what transpired there during this quarter. And thereafter, I will take you through some of the key aspects and the final points of our performance during this same period.

So talking about the industry first. As compared to the previous quarter in which the industry witnessed moderation across most parameters, I think there were some encouraging signs visible this quarter. So I'll first highlight these encouraging signs.

First and foremost, the F&O trading activity continued to grow with the ADTOs or the average daily turnover growing sequentially by 25% compared to 11% sequential growth that happened in the previous quarter. The second positive point to take away was that the cash volumes in this quarter was actually flat compared to the previous quarter, halting a sequential decline after 5 quarters. So I think it's a notable development in the industry.

The third point is -- what was observed is that the flows into SIPs for mutual funds, Systematic Investment Plans for mutual funds, continued to show an increasing trend, and it actually grew 4% sequentially. So while these were some of the positive takeaways for the industry during the quarter, on the [ flip ] side, I'll highlight a few points as well.

So on the [ flip ] side, the newcomers, the new demand accounts that opened during this quarter continued to witness moderation. In fact, on a sequential basis, it declined by about 11%. The NSE active clients for the industry declined actually by 2%, minus 2% sequentially, and this is the first quarterly decline after more than 3 years. So NSE active at the end of this quarter came in at a lower level for the industry compared to the end of previous quarter.

The gross flows in equity and debt mutual funds also declined by 11% and 1% on a sequential basis. So clearly, these are some signs of slowing in the market. When it comes to ECM activities, equity capital market activity, the fundraise showed a growth sequentially. And obviously, the reason for that was that the primary market activity remains quite weak amidst all the uncertainties in the marketplace.

Against this kind of a backdrop, as you would have observed, our revenue for the quarter for ICICI Securities Limited grew 9% on a sequential basis and 1% on a Y-o-Y basis and came in at INR 865.6 crores. The profit after tax increased by 10% on a sequential basis and came in at about INR 300.4 crores. However, when you look at it on a Y-o-Y basis, it declined by about 14%. When you look at this Y-o-Y decline, you could attribute this predominantly due to our continued emphasis on franchise-enhancing spends, which we are doing to harness the medium-term growth prospects of our industry.

The other notable point that I would like to talk about our financial performance is that the Board of Directors today have approved an interim dividend of INR 9.75 per share. So in the context of these somewhat uncertain market conditions, our company redoubled our efforts and continued to work on 4 key focus areas, and I'll take you on the nuances of the 4 key focus areas that this company focused on.

The first important focus for us was improving market share across various areas of business. The second was diversifying the mix of our revenue and intensifying the focus on the wealth franchise of the company. This was with a view to reduce revenue cyclicality in our business model. The third focus was on cost efficiencies without compromising on growth opportunities. And lastly, the focus was on building a product proposition pipeline to be future-ready as the opportunity keeps unlocking for the various product propositions that we offer to the customers.

I'll now take you through each of these 4 areas and how things have played out. So coming first to the market share. We continue to witness some green shoots in the retail derivative market share. And during this period, it increased by 20 basis points and came in at about 3.7%. And I'm also encouraged to share that there was growth in all the underlying parameters of number of customers, orders and so on and so forth.

Our retail equity market share increased by about 90 (sic) [ 60 ] basis points on a sequential basis and came in at about 10.6%. We continued to maintain our leadership position with regards to the MTF business. And in this area, our market share improved further by about 60 basis points and now it stands at approximately 23%. The commodity trading segment for us seems to be performing again in an encouraging way, and we continue to gain market share there. For the end of quarter 1, the market share was at about 4.4%, and I'm happy to again report that this has increased to 5.5% in quarter 2 FY 2023.

With regards to incremental Demat market share for this quarter, we increased our share from 6.5% to 7.6% sequentially. So while we have gained market share on most of our parameters, our NSE market share actually marginally declined by about 20 basis points during this quarter and stood at about 8.2%. In this context, we continue to guide you not to look at this NSE active market share parameter on a stand-alone basis, and our performance in this quarter is a testimony to this, as we saw growth in revenues and gain in market share in the context of what NSE active market share came in us. We continue in this -- on the subject to focus on acquiring better quality clients as we move forward as well.

Coming to our second area of focus, which is diversification of revenues. Reducing cyclicality has been an important part of our strategy, and we've been stressing on that time and again. Quarter, despite the cash ADTOs falling by 21% and the capital markets being muted in the current quarter as compared to the corresponding quarter last year, our revenue actually grew by 1% on a Y-o-Y basis. I think this outcome is a clear testimony to our continued focus to diversify and texturize our revenue base.

You would recollect that we have been focusing on scaling up MTF, Prime, increasing distribution revenue from multiple products that we've been systematically adding over time and strengthening, of course, our derivative proposition which tends to have a less cyclical behavior as compared to cash and sharpening our focus on wealth franchise, which also tends to display a much more sticky behavior.

So going forward as well, we will continue on this journey of diversification of our revenue and focusing on generating multiple sources of revenue which meaningfully contribute to reduce the proportion of cyclical component. So the cyclical component in our revenue, which is now only cash broking and the capital markets business.

Since I specifically mentioned to you about our wealth franchise, I would like to highlight the scale and strength of this franchise. Just for your reference, any customer having an AUM of more than INR 1 crore with us is classified as a wealth customer. While this segment existed for a long time, it was actually 3 years back in 2019 we made this segment a key focus area and pivoted from a product-centric customer organogram to a customer-centric coverage organogram and we accordingly align the KRAs of the leadership team.

We increased our offerings in this segment to capture the entire financial ecosystem relevant for these wealth customers and also added our proprietary portfolio management schemes. You would also recollect over time, we've added products like, Masters of the Street, Premium Portfolios, retirement solutions, ESOP finance, margin trading facilities and more recently, even loans to our partners to the existing bouquet of our products which we offer to these wealth customers.

Our efforts have started yielding results, and I would -- again be encouraged to highlight to you that we have today become a significant wealth franchise in the country. The qualifying AUM of a wealth customer for us now has crossed INR 3 trillion during this quarter. As we have grown this segment to a customer-centric strategy, we have witnessed some very interesting customer behavior, which I want to share with you.

The first point that we have observed is that the AUM and the revenue persistency of this wealth segment is much higher as compared to the other segments, and it is demonstrated by the fact that the average customer retention rate at the end of 1 year is 98%. And when it comes to average AUM and revenue persistency, it is actually 120% and 111% (sic) [ 110% ] at the end of 1 year. This is calculated by taking the average of 1-year retention across 7 periods starting from financial year of 2015. So clearly, a high persistency business when it comes to customers, when it comes to AUM and when it comes to revenue.

Secondly, we have also observed that the AUM, revenue and ARPU of these customers in the wealth segment actually increases with vintage. So as the customer continues to stay with us, more and more ARPU starts coming from these customers. And that's a trend that we have also observed in this segment.

The third nuance that I want to highlight about our wealth business is that there is a reasonable secular trend of customers who have an AUM of just under INR 1 crore. And many of them are breaking into the INR 1 crore AUM club and becoming part of our wealth franchise. This, along with our new customer acquisition that the Wealth Management team does, has today given us the ability to add anywhere between 1,500 to 3,000 customers to the franchise of our wealth business on a quarterly run rate basis.

Having spoken about the second point, which is diversification of revenue mix and our wealth franchise, which is adding greater stickiness to our total business model, I'll now shift to the third area of focus, which is with regards to our cost. So cost for this quarter has actually increased by 8% sequentially and by 20% on a Y-o-Y basis. And in line with our broad guidance, our cost-to-income ratio has been flat. The increase in cost is mainly on account of the finance cost, which is linked with the MTF business, which has actually increased, employee costs related to the areas where we are adding heft in our manpower strength and also some technology costs.

As we move forward, we just wanted to assure you we'll continue to look at cost in a judicious manner so that we don't miss out on any of the growth opportunities and franchise enhancing opportunities and at the same time, run it efficiently, to keep -- keeping in mind the impact on our P&L.

Finally, the fourth point that we focused on during this period is about the product launches and the initiatives that we have done to continuously modernize and make our platform, make our app future ready. And in this context, there were some very, very interesting developments during the quarter, which I will highlight. The first one is that we launched the product for our traders, the derivative segment, a product called Flash Trade. There is no such equivalent product in the industry today, and it has been very well received on our platform, and we are shortly looking to launch the same version of it on our app.

The second interesting product was the launch of an integrated Watchlist, which enables customers to look at all kinds of asset classes under 1 screen and provides a single screen trading experience on our website. Again, this is a fairly unique proposition for ICICIdirect to offer to its customers. We also launched something called the Smart Order tool. This Smart Order tool enables customers to place orders based on rules and these rules, which are -- which can be set by the customer and executed at the swipe of a smartphone screen.

Also happy to share with you that during this quarter, we soft launched our Super App. This Super App integrates all products offering that we do: equities, F&O, currency, commodities, mutual fund, insurance products, global investments and very shortly, loans, all of them in one place to our customers.

During this quarter, we also entered into an exclusive partnership with IDFC First Bank to offer 3-month broking services, a service which is very similar to what we do with ICICI Bank. So we've added one more bank as a partner during this quarter, and this service has now been launched in the marketplace. As far as our Issuer and Advisory business is concerned, we have a strong IPO pipeline of about INR 54,000 crores spread across 28 deals. In addition to this, we also are running 16 approved mandates where the amounts of the IPO is yet to be decided. We are optimistic that as and when the market sentiments improve, many of these deals will be executed as quite a lot of them are in a ready to launch kind of a stage.

Having said that, I would say that as we move forward, the very short-term, near-term outlook remains uncertain considering the rising inflation, the interest rates, the geopolitical tensions, all of us are aware of all these factors. However, despite these short-term uncertainties, we continue to believe strongly that the medium- to long-term growth story of the industry remains actually very strong. And our key focus areas as we continue to pursue these opportunities will be, number one, to gain market share across products like derivatives, equities, mutual funds, insurance and loans. Number two, to diversify our revenue stream by reducing proportion of revenue from cyclical components and grow our wealth franchise, which offers stickiness and heft to the business model.

In line with our approach to enriching our disclosures, we have added some more information this quarter, which pertains to derivative and cash [ booking ] revenue split. This is available in our presentation. Some of you might have already noticed it. We also have given data with respect to the number of customers who do MTF with us. And we've also enhanced the disclosures that we do with respect to our wealth franchise, all available in our investor presentation.

I'm going to now end this commentary and open the call for any questions that you may have. Thank you so much. Over to you.

[Operator]

[Operator Instructions] The first question is from the line of Sahej Mittal from HDFC Securities.

[Sahej Mittal, analyst]

So a couple of questions from my side. Sir, firstly, I mean, what is your outlook on the option volume given the pace of growth in the industry? How sustainable do you think are these volumes? That would be my first question, and maybe then I'll follow up.

[Vijay Chandok, executive]

Yes. Thank you, Sahej. Well, if you look at past as an indicator of what's happened to volumes, I think it's been a secular growth trend not just quarter-on-quarter, but for several years now. Having said that, we do not want to double guess the movement of how options will happen from here onwards. We are very clear. It is one of the important line items. It's an area of importance and focus cannot ignored. We have been a late starter in this space. We will -- we have started investing through tools, apps, experiences and products, plans, and we'll continue to press the lever very, very hard to gain market share there.

We are very clear. We are not a one-horse pony or one-trick pony, as you call it. So we will focus on multiple products across the spectrum of financial services that we've been highlighting which is across savings investments as segment 1, obviously, wealth being part of that. The protection insurance space is #2, and the loan distribution space is #3. So we will press our pedal in all these 3 baskets of opportunity.

[Sahej Mittal, analyst]

I mean, so now deep diving on the option side and if you could give us some color around the retail customer. So what is the medium size of the order and options in terms of the number of lots in a single order? And how does it trend maybe in a bull market or when the markets fall down? So because the auction volumes have continued to improve, so -- but is there a trend in terms of the number of lots or the order size how the retail investors actually trade in the market? For example, like most customers saying more than 3 lots in order or something of that sort, the median size.

[Vishal Gulecha, executive]

Yes. So, Sahej, we have not disclosed the number of lots, et cetera, in every order. See, our focus largely is on increasing the customer base for each and every product. And so as for the derivatives also. I can say that this quarter, I mean we did reasonably well and that's ever highest number of customers in derivatives and the other 2 metrics just like number of orders as well as the total volume were on a higher side. So these are the important parameters.

And then, of course, market plays a very important role I mean the entry and exit given. The volatility also plays an important role because that decides the premium, right, the number of lots is again a derivative of the premium, which is in every lot. In a volatile time, the premium goes up, and that is where customers will be able to buy less and in the stable period, the premium [indiscernible] so more number of lots can be bought. So I mean, the focus really is on increasing the customer base using all kind of enablers like Flash Trades, the integrated Watchlist, Revision Margin product, which we have introduced, and we'll continue to focus on it.

[Vijay Chandok, executive]

So we'll keep increasing our disclosures from time to time as we've enriched our disclosure pack this time as well. But let me just address one point. I don't know if you're -- what you're trying to drive at, our derivative business is fairly granular. It's not concentrated, if that's what you're trying to understand.

[Sahej Mittal, analyst]

Right. Got it. Got it. But sir, I mean, some sense on the order size, if you could give because given the kind of increase of the derivatives in the overall broking rate, it is very important of being a broking company if you track a broking company to understand the size of these orders, right? Even from the customer behavior point of view, that if these customers are coming from the Tier 2, Tier 3 cities?

[Vijay Chandok, executive]

Yes. Sahej, I'd just like to clarify, I don't view as a broker fees. We are not a broker. We are -- we also do equity business. We have far more broad-based equity business, if I'm not -- this quarter would be about broking would be just 40% and a large -- a reasonably large proportion of that is derivative. So it's increasingly becoming a small part of our business. We are actually broad-basing to become a financial services player. So just request you to consider us in the context, but coming specifically to your question.

[Ajay Saraf, executive]

Yes. So, Sahej, I think Vishal clarified, which I also referred to the fact that we have a slightly granular kind of a franchise. Having said that, I mean, of course, whether you look at lots or whether you look at ADTOs or number of orders, our sense is that there is a lesser linkage to market cycles on derivative, if you look at the correlation compared to cash equity. And that's why I think over a long period of time, we have seen growth.

So I think whatever parameter you look at it, whether lots or orders or this thing, I think the trend is similar. I don't think we find any different trends. Also incrementally, as you've rightly said, a lot of customers are coming from Tier 2, 3 towns. They are joining this -- our aim is to kind of how to simplify their experience. We've launched a couple of products in this light -- in this quarter, which we have mentioned, and that helps us in kind of simplifying the experience and making it relevant even for the young, new to market, new joinee. So that's our approach.

[Sahej Mittal, analyst]

Got it. Got it. And just to get some sense on the employee expenses, so on which side of the business, are we hiring the manpower?

[Vijay Chandok, executive]

Yes. So the manpower side is being largely -- technology is a big zone. Second is data sciences. Third is digital marketing. Fourth is certain roles which require supporting digital. So where digital journeys drop off, we pay that up through calling activity and then put it back on track. So broadly, I would say, these 4 areas.

[Operator]

Mr. Mittal, may we request that you return to the question queue for follow-up questions?

[Sahej Mittal, analyst]

Just one last quick question, maybe. Sir, I mean, on the penalty charges under the peak margin regulation. So have you provided for it? Or have you paid, I mean, there was some regulation from the NSE?

[Harvinder Jaspal, executive]

No so -- Sahej, actually in our kind of a model, what we do is we collect any kind of upfront penalty prior whatever penalties -- whatever margin is required to be collected before placing order is collected, only then an order can be placed. So we have very strong processes in place. So therefore, that may not be relevant for us in terms of getting a penalty on upfront margin. Yes, I understand that in the industry, there's a lot of discussion happening but at least from whatever the applicable circulars are, we have been compliant with them, and therefore, no such provision.

[Sahej Mittal, analyst]

So we haven't collected any penalty charges from the customer? Is that the right end, sir.

[Harvinder Jaspal, executive]

As I explained, in our case, if you're talking about a circular, which says that no upfront penalty can be passed on. In our kind of a model, we collect the margin before the client places an order. We do not have a scenario where a client has placed order without giving the margin prior to placing orders. So we do not have that scenario.

[Operator]

[Operator Instructions] The next question is from the line of Nidhesh Jain from Investec.

[Nidhesh Jain, analyst]

Sir, the question is on wealth. So when the customer crosses INR 1 crore AUM with us, how the Life for the customer and how our approach to the customer changes? That is first question. And second is how many of the customers that we have added on the wealth franchise of 1500 have come at the existing to ISEC customers? And how much of the new customers to ISEC?

[Anupam Guha, executive]

This is Anupam here. I head the wealth sectors. So the moment a customer crosses INR 1 crore, obviously, we have, as you're aware, that Private Wealth we're close to 500 odd team members, and we have a very seasoned relationship team as well. Our entire model of engagement is an omnichannel model, where while we have the ICICIdirect platform being available, but we have a relationship manager who hand-hold the customer. And the way we look at our entire practice is that we focus on getting more clients into our ecosystem and really engage on an asset allocation model. The way we approach is that and the metrics that we would want to look at is, are we growing the overall AUM.

And once we have the AUM, it is nothing but a share of wallet and the trust of the customer, that bases the market scenario, we are able to advise, recommend the customer across the asset classes. One of the other things that, in fact, Vijay, in his opening commentary also spoke about is really the opposition that we have enhanced for our [ HNI ] customers.

So if you were to look at the proposition on equities, we have direct equities, we have managed equities through mutual funds, PMS, AIF, both Category III Long Short, private equity. On the fixed income, right from government securities at one end to mutual funds on the other, global investments offshore. So we've got almost the entire work. And we are really able to engage with the customer right from wealth creation, preservation and all the way to a wealth transfer.

So that's really our model like classical Private Banking, the way we do. The only thing is that, as a franchise, we have almost 70,000 customers, 70,000 plus, who are the [ INR 1 crore ] plus, and that really is a differentiator, which really makes us unique.

The other thing -- the other question that you spoke -- asked was really about -- New to ISEC, So what's happened is that, obviously, the franchise is 20-year-old, ICICI security, 20 years plus. And we have a lot of clients whom we've not been able to deeper mind.

With data analytics, now what's happened is that, obviously, we are able to get -- we're able to get many surrogate data points which actually allows us to know the network of the customer, and hence, our approach and our engagement is far more sharper and which is why you are able to see the kind of trend and growth in terms of the count of customers that we're being able to add. So it's a combination of both upgrades, improving our engagement, sharpshooting and new client acquisition as well.

[Operator]

[Operator Instructions] The next question is from the line of Dipanjan Ghosh from Citi.

[Dipanjan Ghosh, analyst]

Just a few questions from my side. First is, if I look at your SIP flows and look at it more from a QoQ perspective, it seems to have dropped, whereas for the industry side, I understand it has increased significantly. If you can shed some light. My second question...

[Vijay Chandok, executive]

Dipanjan, your voice is very muffled. Can you just repeat your question? It's not clear, sorry.

[Dipanjan Ghosh, analyst]

Is this better?

[Vijay Chandok, executive]

Maybe you are very close to the receiver or something. Just can you recede a little back and speak.

[Dipanjan Ghosh, analyst]

Sure. Just give me 1 second.

[Vijay Chandok, executive]

Now it's better. Yes. Now I can hear you, yes.

[Dipanjan Ghosh, analyst]

Yes. So the first question I was asking, if I look at your SIP flows, that seems to have dipped Q-o-Q. So if you can give some color on that because for the industry from what I understand, it increased.

Second, on your other distribution revenues. That has also seen some amount of moderation during the quarter. And lastly, if I look at your insurance yields, that seems to have gone down. So is it like your -- the overall increase in volumes is led by more of non-life or [ sachet ] sort of products out there. So these are the 3 questions.

[Harvinder Jaspal, executive]

Yes. So let me take one by one. So on the SIP, it has been -- our flows have been stable at about INR 400 crores to INR 420 crores. So that has been the run rate that we have been operating at. Today, we have about 1 million SIPs operating on a monthly basis, which are live, which keep getting triggered. In the industry, if you look at it, I mean, we will be probably the fourth or fifth largest players in terms of flows.

Yes, on a quarter-on-quarter basis, there could be some variation, but I think with respect to both the competitive position, the absolute number of SIPs getting triggered and the flows, it has been relatively stable. So nothing really much to highlight over there.

Your second question was with respect to the other distribution revenue. The other distribution revenue on a sequential basis, there were 2 reasons some primarily. One was on -- in terms of the distribution of some of our PMS, AIF and HNI-centric products. There was a relatively lower distribution fee in this quarter because last quarter, we had a reasonably high fee over there. So that was one reason.

The second reason was that some of the IPO distribution fee was there last quarter, which was relatively lower, slightly lower this quarter. So these are the 2 predominant parameters. Actually, the 2 things that have actually gone up on a sequential basis is; one, is the loans business, where if you look at it, our loan disbursal for the quarter has now started touching almost INR 900 crores. So from about INR 600 crores run rate this quarter of about INR 900 crores, so this product actually did well in this quarter sequentially. The second product, which did well was the fixed income basket. There also, we have seen sequential growth and some money which has started coming into the fixed income basket.

Your third question was with respect to yields on insurance business. So there also on a sequential basis as well as on a Y-o-Y basis, we have registered growth in insurance income. The yield, one, is a parameter of mix, both 2 types of mix. One, the mix between new business and distribution -- and renewal. And second, within new business, there is a mix between unit-linked versus the non-unit linked. So these are some [ derivatives ] in that range. So new business yields are in the range of about 20-odd percent and the renewal is, as we know, is relatively lower. So it's more of a mix impact, but this business registered a growth both on sequential as well as on a Y-o-Y basis.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Just extending the previous question. On the SIP, we had a run rate of [ 13.2 billion ] in 4Q and we are down to [ 11.9 billion ] now in this quarter. So there seems to be a sharp fall against it, and this is completely against the industry trend wherein we are possibly much higher from what we were there in Q4 for the industry. I think that -- could you explain that as to what really is different happening with ICICI as compared to the rest of the industry.

Secondly, on the prime income fee, we've possibly seen for the first time a sequential dip. Any thoughts there as to what's the trajectory? And why is the dip? And lastly, any thoughts that you can share on the cost-to-income ratio of this INR 1 crore plus kind of clients that you are talking about on the wealth side, what kind of profitability is here on these clients? And yes, those are my 3 questions.

[Harvinder Jaspal, executive]

Yes. Prayesh, so I'll again take one by one. So the first one is on the SIP. As I said, I mean, yes, about 1,200 crores is the number for this particular quarter. It was slightly lower than last quarter. First, I would like to context as I said earlier also by saying that in terms of both number of SIPs and in terms of flows, it continues to be above [ INR 400 crores] plus 1 million SIPs. However, there was some impact on account of transition of the new regulatory direction, whereby the payment has to be directly made instead of through the pool account.

So we have kind of had some transition issues, which impacted SIPs for a limited period of time. But as I responded earlier, in terms of run rate, I mean, that resulted in some pauses as the payment instruction did not get executed, which has got revived, we have kind of specifically engaged and revived those. So there was a transient impact, which impacted the flows. But there is nothing specific to highlight structurally on the SIP. We continue to be, I think, the fourth or the fifth largest player in the country in terms of incremental flows into SIP. That was with respect to SIP. I missed your second question, Prayesh, I'll come back to that, Sorry.

[Vishal Gulecha, executive]

Yes. So, I guess, second question was that why there is a dip in Prime fee in this quarter. So as you know that we have made Prime plans, Lifetime plans. So there are less renewals because all the plans above [ INR 999 ] now carry the lifetime value. But the focus clearly is on getting more number of customers using this kind of proposition. So we have increased our sourcing in [ 999 ] and above plan. And as you know that when we get a Prime customer, Prime free is only one small component of the overall ARPU, which we generate. So our large focus is on to get the complete wallet share which includes the brokerage part, the MTF and many other incomes through other products. So that is a single reason. But in terms of number of plans, I think we have done reasonably well. And more number of plans in Q2 compared to Q1 as far as high value is concerned.

[Harvinder Jaspal, executive]

Prayesh, if I may come to the third question that you asked with respect to the cost to income for the wealth business. So if you refer to our presentation on Slide 33 and 34, you will see that those details are disclosed. And I'll just kind of read out the numbers. So on a full year basis, if I look at fiscal '22, our cost to income for the wealth franchise business was 45%. And for the current quarter, which is Q2, it was 54%. It is broadly in line or -- and it is broadly in line with, I mean, the trajectory that we have seen at the company level for the reasons that we have articulated.

To kind of highlight over here is that this cost to income, the way we disclose is -- on a gross basis, which means that if I have an NPF income, the interest income is also gross in the revenue and the interest expense is also included in the cost. If, for example, if you were to remove this impact and say that [ NIM ] as revenue, then the cost-to-income ratio would be slightly lower at maybe about 48% for Q2.

[Operator]

[Operator Instructions] The next question is from the line of Aejas Lakhani from Unifi Capital.

[Aejas Lakhani, analyst]

Congratulations on the results. Your efforts are helping gain market share and thank you for the additional disclosure. My first question is that in the journey of migrating the customer through Prime where he's paying a lower brokerage and thereby still being retained. And that has impacted, of course, the absolute cash brokerage revenues. Where are we in that journey? So has that migration that you wanted from prime already taken place or still there is scope? And the reason I ask this is because your absolute cash revenues are down, say, from INR 180 crores second quarter last year to about INR 108 crores this year. So where are we in that journey of migration?

[Vishal Gulecha, executive]

Yes. So see, as far as Prime is concerned, all the plans are open for the entire set of customers. So there is no selective selling which is happening. We do market Prime plans across all sets of customers. And the objective is not to look at 1 quarter in particular. I mean the entire purpose of the Prime is to get customers for lifetime.

And if this can help us managing the attrition better, getting the revenue better, making him take many other products we sell. And also, if it can help us in acquiring more customers from market, activate our non-traders and stock traders, I think overall, things are working well for us. And this is reflected in our MTF book, it is reflected in equity market share and many other parameters. So we don't look at it at quarter, rather this is a very long-term game midterm to long term, and dividends are definitely visible now.

[Aejas Lakhani, analyst]

Okay. I'll just try to rephrase that, that will this cash segment income that we are sort of receiving, given that ADTO remains the same, is there any more migration left because of which we may see a decline in this? Or is this the base on which you expect cash segment level income to keep going up?

[Vishal Gulecha, executive]

Yes. So, I would say, the large migration has already happened. I mean as I said that the Prime plan is open for a fairly long time now. And even the lifetime proposition is open for customers, it has been second quarter. So large part of the migration is already over. Of course, customers from time to time, they enter in a lower value plan to start with. And then as they experience their own potential, they experience the market opportunity, they keep upgrading. So that generally will continue. But as far as inventory is concerned, I would say that the large migration has already taken place.

[Aejas Lakhani, analyst]

That answers my first question. Second, sir, how do you think I should look at client additions for the rest of the year?

[Vijay Chandok, executive]

Yes. So if you look at new client additions, we are broadly in the ballpark of around 4, 50,000 -- 4, 60,000 customers per quarter. While obviously, it will depend. You can see that the market has been showing a declining trend sequentially now from quarter 4 versus quarter 1 versus now quarter 2. Each quarter has been lower than the previous one. That's why I said short-term headwinds remain.

Our endeavor would be to broadly keep our market share in the story intact, new customer addition. So to some extent, it would be fair to say that we will -- numbers will depend on what's the number of newcomers coming into the market. Broadly trying to maintain this kind of a run rate -- market share that we have, which is broadly in the 7 -- which varies between 7% to 7.5%. So our endeavor would be to keep it somewhere there.

Yes. I mean, we are not chasing new customers for the sake of numbers. We are chasing for the sake of quality. So certain channels and the quality [indiscernible] indicator is channels. There are certain channels where it is very nice and certain channels where we get numbers which are not so nice. So I think numbers is one part of the story, but the channel mix is important for us. And last few quarters, we've been putting massive emphasis on getting our channel mix better. And I think there is some green shoots visible in that effort, get your channel mix right. Numbers on a stand-alone basis, if you chase them, you'll find some growth in one story and then nothing really will transpire in revenue sense.

[Aejas Lakhani, analyst]

Got it. And sir, are the investment and trading income and other revenues this quarter has seen quite a big flip. So could you just comment on how we should look at it from a trajectory perspective for the next 2 quarters? Is there a one-off? And how should we look at cost-to-income?

[Harvinder Jaspal, executive]

Yes. So Aejas, 2 things. Treasury, yes, we had a good quarter this time. I mean the kind of positions that were available -- opportunities that were available in the market, we were able to leverage that. So it was one of the better quarters that we had in treasury. They primarily came out of the mark-to-market and the investments that we have done in debt instruments. That I would not say would be a kind of -- you cannot use Q2 as a sustainable run rate. We could see some moderation in Q3, Q4 in the treasury income, the trading segment income.

On the second part, other income, yes, there was of INR 5.7 crores worth of interest that we got on prior income tax refund. So we got decisions in our favor, which is what we have -- if you look at a performance note, we've mentioned that reason. So about INR 5.7 crores out of the other income that you've seen is a one-off for the particular -- for this quarter.

[Operator]

[Operator Instructions] The next question is from the line of Pujan Shah from Congruence Advisers.

[Pujan Shah, analyst]

Sir, one question. What value we have paid to multiply for acquiring the whole team and...

[Vijay Chandok, executive]

Sorry, your voice is fading out. Can you just repeat your question?

[Pujan Shah, analyst]

Yes. Now am I audible?

[Vijay Chandok, executive]

Yes, yes, got it. Got it. Yes, yes, yes.

[Pujan Shah, analyst]

Yes. So what value we have paid to multiply for the acquisition?

[Harvinder Jaspal, executive]

We have not put that out over here. It's a principal to principal transaction that we did, a bilateral transaction, but it's nothing very material is guidance I can give.

[Operator]

[Operator Instructions] We have the next question from the line of Sanketh Godha from Spark Capital.

[Sanketh Godha, analyst]

Sir, I just have one question with respect to how the [ NIM ] with respect to MTF and ESOP book is playing out. We see that in the current quarter, despite MTF book increasing, rather -- I just wanted to understand because if I calculate investment yield interest yield on the MTF book, it comes to closer to 9%. But the MTF income has come off a bit maybe because of the decline in the book, but I just wanted to understand the trajectory how the NIMs are moving over last 2 quarters.

[Harvinder Jaspal, executive]

Yes. So 2 things. So yes, again, one, on a quarter-on-quarter basis, the average book is actually slightly lower from Q1 to Q2. The exit is higher, but the average is slightly lower. However, on NIM basis, we -- depending on what the yields are, we get about 3% to 4% as NIM currently. I mean so as you rightly said, it's about at 9%, 9.2% would be the gross, and our cost of borrowing would be in the range of, let's say, about 5.5% to 6%. So 3% to 4%, it kind of varies in that range.

[Sanketh Godha, analyst]

But that range you get compressed, Harvinder, because I just wanted to understand, given we have gained so much of market share from -- in last 2 years, by 3 -- 350 basis points. So whether the market share gain came at the expense of a little margin compression.

[Harvinder Jaspal, executive]

Yes. Sanketh, marginally because, obviously, there is always a lag where you make pricing adjustments. We have increased recently our pricing where we've gone from, let's say, the best plan that we had used to offer a pricing of 7.9%. Now the best plan offers a pricing of about [ 8.7% ]. So those are some changes that we have done recently, which I think for a full quarter, the impact would not be visible, but the yields would go up going forward. But yes, for the quarter, on an average, there was a minor compression.

[Sanketh Godha, analyst]

Got it. And the last one from my side is that given you have disclosed for the first time the broking income broken down into cash and derivatives for the retail segment. Sir, just if I do a calculation, I see that the cash yields have come down from [ 9.4 bps ] to 7.8 bps on a year-on-year basis and it has remained flat on a sequential basis. So this compression because we are still on [indiscernible] basis still is it largely because of the Prime and Prepaid? And the 7.8 bps is the kind of a bottom, we need to see going ahead, assuming that intraday and delivery broadly remains similar.

[Harvinder Jaspal, executive]

If you make that assumption, yes, so Vishal tried to explain that in response to an earlier question as well, Sanketh, that today, we have substantial migration to Prime plan, which has happened. We launched -- towards the end of Q4, we launched these Lifetime variants. That was in March. So Q1, we have seen a round of people who opted for Lifetime variants, which also has kind of stabilized. So if the mix is constant, there may be some -- I mean, I will not say that it's absolute 0. There may be incremental migration. But I don't expect that to be substantial going forward. In terms of our revenue contribution also, you would have seen that for the last 4 quarters, the Prime revenue contribution has stabilized at about 70% to [ 75% ] of our overall portfolio. So we expect stability over there. Again, the assumption I'm making and as you started with that, the mix of intraday and delivery remaining similar.

[Sanketh Godha, analyst]

Got it. Got it. Perfect. And finally, we have seen a bit of a better traction in the Derivatives segment. It's happening sign that we have seen market share inching up a bit. So now still sits at 3.7%. Any number you have in your mind by end of the year, what you want to get or are there aspiration to have it maybe in next 4 to 6 quarters with respect to Derivatives market share?

[Vijay Chandok, executive]

No number in mind for -- as a guidance, we have a number in mind or say, internal guidance for sure.

[Sanketh Godha, analyst]

Okay. But can we expect this 3.7% to incrementally improve further? Maybe it can go beyond to those numbers in 1Q FY '22, it was around 4.2%. So can we expect that number to come?

[Vijay Chandok, executive]

So if I would be in your place, I would expect an improvement.

[Operator]

We have the next question from the line of [indiscernible] An Individual Investor.

[Unknown Attendee]

Sir, I have a more broad based question. Like if we see the comments of recently from Zerodha's founder he had said that due to the regulation requirements of settlement periods, they say that they have made feel upward pressure on the brokerage. I understand that ICICI doesn't have this pressure because for us the fund of the client in ICICI client of course [indiscernible]. So if there is upward pressure on the brokerages, so it will indirectly benefit us because we are already a very established in this sector, right, sir.

[Vijay Chandok, executive]

Yes. So what is your question?

[Unknown Attendee]

Sir, my question is that if there is upward pressure brokerages, so it will indirectly benefit us and we should be able to gain more much higher market when there is pressure on the brokerage business.

[Vijay Chandok, executive]

No. Certainly, if there is an -- as per what you just said, yes, I also went for the deal, if there is an upward pressure and there is indeed an actual translation of that upward pressure in terms of discount brokers increasing brokerage, it certainly makes us more competitive in the marketplace. So that should be a plus for us. So we have nothing to do with an increasing and everything to gain in an increasing brokerage scenario from the discount brokers side.

[Unknown Attendee]

But we don't feel the cost pressure right now, sir, right, because of the [indiscernible].

[Vijay Chandok, executive]

No. So you answered the question because we do not actually keep the float. I mean, predominantly, as you correctly pointed out, we have a block model and not really a model of float. The float model is there only for a few plans, which is a very miniscule part of our overall story. And we also found that the money that came back within a short period of 3, 4 days, virtually the entire money. In fact, that money has crossed the money that went out in those specific accounts.

But having said that, to your question, the only observation I will give is that right now, I think, SEBI is having circulated a discussion paper, the discussion paper on the ASBA model kind for secondary market. Now if something like that comes, I think that will have a meaningful impact on the float opportunity for discount brokers and that could be a very material -- I would be -- I would say that would be a more significant pressure point on discount brokers than the current regulation.

[Unknown Attendee]

Okay, sir. Just one more thing. Thank you for conducting this con call at evening times instead of in the morning because most of the players do that. And as retail investors, we may not be able to join the call. May I request you to keep following this model. I don't know if all you expect and this is also a kind of feedback.

[Vijay Chandok, executive]

Thank you. I appreciate and all the best to you. God bless you.

[Operator]

As there are no further questions from the participants, I would now like to hand the conference over to Mr. Vijay Chandok for closing comments.

[Vijay Chandok, executive]

So thank you very much for hearing our narrative patiently and also the questions that you've asked. In case there are any follow-up questions or unanswered questions in your mind, please do not hesitate to get in touch with us. We'll be happy to address any questions that pop up in your mind. You know whom to contact. All of us are available, the IR team, myself. So look forward to hearing from you, keeping in touch, and I wish you all a very, very happy Diwali. Take care, and stay safe. Thank you very much, and good night.

[Operator]

Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.