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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 December 31, 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. Kedar Deshpande, Head, Retail Distribution, Product and Services Group; Mr. Anupam Guha, Head, Private Wealth Management; Mr. Subhash Kelkar, Chief Technology and Digital Officer; Mr. Ketan Karkhanis, Head, Retail Distribution Business; and Mr. Prasannan Keshavan, Head, Operations. [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, and welcome to the ICICI Securities third quarter earnings call for fiscal 2021. So I trust that all of you, your near and dear ones, are safe and healthy, and I hope it remains that way.So as I had mentioned during our earlier interaction, all digitally centered businesses have done well ever since the pandemic broke out, led, of course, by certain shifts in consumer behaviors, with increasing number of people adopting digital methods of transacting. ICICI Securities has been a natural beneficiary of this trend since 99% of our equity transactions and 95% of our mutual fund transactions are performed online. Our company continued progressing on its strategy to leverage and harness this opportunity. And we are happy to report that for the current quarter, as you would have probably already noted from our published results, our company's quarter 3 FY '21 revenue stood at INR 620 crores, a growth of 47% on a Y-o-Y basis. Profit after tax stood at INR 267 crores, a growth of 95% on a Y-o-Y basis. Our continued focus on enhancing our operating leverage is also yielding result with our branch count and employee count coming down by 15% and 2% on a Y-o-Y basis. Consequently, bringing down our cost-to-income ratio to 42% and increasing our return on equity on an annualized basis to 71%. Also, the asset of our client, the AUM with us, grew by 38% to cross INR 3 trillion. In fact, it stood at INR 3.4 trillion as at December 31, 2020, driven by an all-round growth across businesses that we operate.Let us now have a brief look at the market environment for the quarter ended December 31, 2020. So equity market continued their strong momentum from the last quarter. And during this period, 3.2 million new Demat accounts were opened. Equity and derivatives ADTO increased by 53% and 76% on a Y-o-Y basis. Equity capital markets also saw 27 deals in the current quarter as compared to 12 in Q3 of FY '20. While all this was very positive, on the other hand, mutual funds witnessed subdued flows with gross flows for the industry going down by about 44% on a Y-o-Y basis. While the net flows in the industry increased by 2% on a Y-o-Y basis, driven by debt mutual funds, equity mutual funds witnessed net outflow for the sixth straight month in the month of December. Also, in the mutual fund, SIPs or systematically investment plan flows, for the industry fell to INR 7,300 crores in November, the lowest since April 2018 before recovering to INR 8,400 crores in December. On the regulatory front, the new uniform margin norm by SEBI was implemented across the industry, resulting in a reduction in volume for the intraday equity product. However, there was an upsurge in cash delivery volume. Also, the growth in derivative product moderated on a month-on-month basis after the introduction of these new regulatory norms.In such an environment, your company has been steadfastly focused on executing our strategy that was articulated last year, and one would like to take you through some of the important updates on the same. So first, the critical lever of our strategy was with respect to ramping up scale with quality. During this quarter, we further invested and increased our digitization and used this method to strengthen our overall franchise. Our client base crossed 5 million, and we added 1.4 lakh customers, the highest ever for us in a quarter. This was aided by our open architecture digital sourcing. And through this channel, we acquired 38,000 customers in this quarter, up from 28,000 in quarter 2 and 20,000 in quarter 1. We continue to invest resources and efforts in further scaling up digital sourcing in the coming quarters. This initiative has helped us diversify our sourcing mix with all our non-ICICI Bank sourcing channels, which includes digital sourcing, along with business partners channel and our own RM network, all these now contributing 41% of the total account source. Approximately 30% of the total accounts opened in the quarter were linked to banks other than ICICI. Our focus on quality, as we have scaled up, has ensured that the activation ratio continued its up trend and stood at 67% for the quarter ended December 31, 2020. Additionally, a healthy adoption of our product propositions, along with growth in sourcing, has helped and grow the NSE-active client base by 34% on a Y-o-Y basis, and this number stood at 1.29 million as at December 31, 2020. Our NSE-active customers increased by over 50,000 in the month of December, our highest in the 9 months, and our incremental market share of NSE-active customers increased to 7% in December, up from 1.5% in April, when the pandemic actually broke out.The second lever of our strategy was to monetize client value. We have been adding new product lines, and we are happy to report that home loans disbursed during this quarter increased to INR 360 crores as compared to INR 240 crores during the sequential last quarter. This is the highest ever quantum of disbursement for any quarter until date. Our average MTF and ESOP book for the quarter almost doubled on a Y-o-Y basis, which is helping us diversify our equity revenue. Nonbrokerage revenues income streams like ESOP finance, MTF interest income, depository charges, new subscription fees, Prime fees in our equity business are now contributing 17%, 1-7 percent, of our retail equities and allied revenue. We have also scaled up our proprietary portfolio management scheme, where our AUM stood at INR 1.7 billion, up from INR 1.1 billion last year.Our next lever of our strategy is improving customer experience. With an objective of increasing engagement, we made available products like One Click Investment, trading strategy formulation tools for derivatives, besides other ongoing simplification. We also increased cross-selling, and our customers with 2 or more products actually now increased to about 1 million, up 9% on a Y-o-y basis. This has helped us increase our cross-sell ratio, which now stands at 1.7 product per customer. As we continue to increase our cross-sell ratio, I would like to reiterate that it is of utmost importance to keep in mind, customers' risk appetite and preferences to ensure sustainable lifetime relationship. And towards this, we have heightened our focus on Net Promoter Score. All these initiatives have helped us increasing our total active client base to 1.63 million, a growth of 17% on a Y-o-Y basis. For building up our digital agility, our API architecture helps us quickly integrate with a diverse set of fintech players. We have so far evaluated 140 fintechs and have onboarded already 9 of them, which are in various stages of implementation. Further, in order to declutter and simplify investing in mutual funds, particularly for first-time investors, we launched ICICIdirect Money, an app -- a very easy to use app, for which the initial response has been quite encouraging. Finally, for cost efficiency, the last lever of our focus, we continue to rationalize our branch network, which has resulted in higher operating efficiency.I would now like to discuss operating details of our various business segments in detail. In our equities business, during the quarter, the new margin regulations came into force from December 2020. As a result of these norms, we did see some decline in turnover of derivatives and intraday cash for us in month of December. Our market share in derivatives in the quarter fell by 240 basis points on a Y-o-Y basis, primarily attributed to the decline in market share in the month of December alone. However, we would like to reiterate that this volume loss did not translate into equivalent revenue loss as the decrease in volumes was majorly driven by our intraday low yielding products. In fact, this decline in derivative revenue in December compared to November represents only 7.6% of our total retail brokerage revenue. Further, it is a fact to be noted that our total retail equities revenue actually landed up increasing by 9% in December as compared to November despite this development -- regulatory development. And on a run rate basis, it have adequately been offset on account of better yielding products in the month of December. Going forward, the recently launched NEO plan, targeted at the price-sensitive trading segment, is expected to help us grow the derivative trading business even further. In this context, we have already started seeing active growth in derivative customers in the month of December itself as compared to November. This is despite the margin norms that were implemented. Given our past positive experience in Options 20 plan, which was launched last year, we remain quite optimistic about the positive outcome arising out of our NEO plan.With respect to equities business, our market share increased by 160 basis points on a Y-o-Y basis from 8.9% to 10.5%. However, on a sequential basis, it declined by 60 basis, primarily due to decline in market share in December to about 9.9% owing to the new margin norms, which impacted our intraday equity volume. However, this did not impact our equity revenue because of higher delivery volume and also higher number of customer base compared to November. We expect that the scale up that is taking place on account of our NEO plans would result in increase in intraday volume of our company. Consequently, for the entire quarter, our revenue in the equity brokerage business actually increased by 65% on a Y-o-Y basis, driven, as already mentioned, by enhanced base of active customers, higher proportion of cash delivery volume and the growth that we have seen on the ADTOs. On a sequential basis, the retail brokerage revenue declined by 8%, primarily on account of lesser number of trading days in quarter 3 compared to quarter 2.Coming to our institutional equities business, the revenue grew by 34% on a Y-o-Y basis, aided by established traction that we have been getting in the domestic financial institution space and growing traction in the FII space. We have started adopting a partnership framework to enhance our presence globally. And in the quarter ended December 2020, we actually partnered with a U.S. firm to enhance our access to service global clients in the U.S. market.Moving to distribution business. Our sustained efforts of focusing on input parameters in mutual funds has helped us gain market share on an overall gross flow basis from 15 basis points to 28 basis points and on systematic investment plan flows from 3.22% to 3.66%. Aided by improvement in market share, improving yield and also the appreciation in the AUMs of our portfolio, our mutual fund revenue grew by 9% on a Y-o-Y basis. On the nonmutual fund distribution revenue -- grew by 5% on a Y-o-Y basis. This was aided by growth in distribution of wealth and bond products. Nonmutual fund products continued its strong sequential run by growing 13%, supported by life insurance revenue, which was up by 20%. As a result of growth in our mutual fund and nonmutual fund business, our overall distribution income actually registered a growth after 3 quarters. Also in order to cater to the borrowing needs of our customers, we have recently launched loan against mutual fund on our platform. Our wealth management business had an extremely positive period of performance, registering a revenue growth of 86% on the back of a strong equity performance. The total assets of our clients in this segment increased to INR 1.47 trillion, a growth of 45% on a Y-o-Y basis. On our issuer and advisory services business, revenue increased by 33% on a Y-o-Y basis.So to sum it up all, it would be fair to say that we are moving purposefully towards the articulated strategy. Our new client acquisition scale is gathering momentum. Our sourcing run rates are improving. Mix is getting diversified. And on an incremental basis, we started gaining market share on NSE-active clients. We continue to deal with significant business model shifts, including the latest regulatory changes, in an agile manner by launching relevant product propositions and focusing on maximizing the opportunities that are emerging. Our distribution business has registered a growth on Y-o-Y basis and a strong traction on a sequential basis, where our focus on input parameters and activities are showing encouraging early results. It is our endeavor to continue to pursue our long-term strategy, and we will specifically focus on all the areas that have been articulated in the past. At current times, while we do that, we continue to focus on digitizing, decongesting process, to enhance customer experiences; secondly, focus -- continue to focus on increasing cost efficiencies by variabilizing our expenses; thirdly, invest in next-generation technology for upgrading our infrastructure and capabilities; and lastly, look at these opportunities to fortify and get the best talent and fortify our talent pool to position ourself for the future.I would like to end our commentary and throw the call open for any questions that you may have. Thank you so much for your patience here.
[Operator Instructions] The first question is from the line of SivaKumar from Unifi Capital.
Congrats for a good set of numbers. Sir, a couple of questions from my side. To start with the cost structure, we see that the employee expenses are down sharply on a sequential basis. You have explained that this is because of lower provisions for variable pay. So is this -- how sustainable is this number? And how should we rate this for the coming quarters?
So see what happens is we have 2 components of this employee cost. One is fixed. The other is variable. The variable cost is linked with performance of the company. The past period actually reflected the cost that was attributable on account of variable costs, on account of the revenue growth that took place. However, we are also guided by our Board policy on an -- which takes us that in these variable expenses, even if there is a continued improvement in revenue, cannot exceed. It is capped. It cannot exceed a certain number. So to line with that -- in line with that, the moderation that you've seen in our employee cost is reflecting that framework and direction of the Board. We have this one more quarter, and it would be fair to expect that the trajectory that you've seen in quarter 3 would be similarly reflected in quarter 4.
Okay. Just to clarify, you're saying even if the ADTO and the improvement in the active client base, the traction continues in both those categories, the employee expenses wouldn't flare up, right?
Indeed, indeed.
Right. Right. Sir, my next question is with regards to the market share in the derivatives side. It's a bit unnerving to see the market share come down so sharply from 8% to 3.4% in December. Can you throw more light as to why we lost market share because the regulatory change is uniform across players, right? So why would the client move from one player to another player now?
No. So there is a decline in market share on leveraged products. Given the fact that we have a very agile risk management, real-time platform to handle market position, we took advantage of that agile platform and we offered customers a fair amount of leverage to trade, right? So as a consequence of leverage becoming more normalized, the same customer who was trading with us had to bring down the volume of trade that he was doing with us, given that there's a reduction in the leverage. So we -- the reduction in volume is a reflection of that reduction on a business done by an individual customer compared to the past trends. However, it is interesting to note that the total number of customers who did business with us actually went up. So we have not lost -- the reduction in market share is not on account of a specific customer migrating out. It is actually a reduction in volume of a specific customer with us, given the fact that the leverage that was being offered on the product has come down.
Got it. Sir, but that brings to question the fact that this should be a phenomenon which should be observed, even at the other brokerages, right?
It would be reflected in this kind of a thing, wherever the brokers, which offered a higher level of leverage. People who did not -- the brokers who did not have -- offer a higher level of leverage would have a relatively lesser impact.
Okay. Sir, can one say that this has stabilized at the current levels? You haven't seen any more decrease in the market share, subsequently?
Actually, we expect with the launch of NEO to offset this from a -- there are 2 points -- 2 aspects to consider and ponder about in a development like this. One is the salience that this volume has got to revenue. And the second is the extent of growth that we can give -- bring about for the company. That is the relevance of market share really. It should be sustainable, and it should bring about revenue growth. The way to do it is actually 2: a, add new customers; and b, get more -- that existing customer to do more business with us, right? With the launch of our NEO plan, I think -- which is one of the most competitive plans in the market for traders, it's probably even more competitive than discount brokers. Not probably, it is more competitive than even the discount brokers because we have a 0 futures and INR 20 on option. It throws open our ability to attract customers, particularly traders, in large measure. So in a period of time, our endeavor is to offset the decline that we have seen in our derivative volume by growth in number of customers. And given the fact that we have changed the model of charging the customer on volume basis to activity based because it is per trade and not irrespective of the amount of volume. The nature of the plan is to give him that ability, given that there is -- to trade more. So we expect this revenue salience to return on account of more customers getting added, which we have already started seeing. Within 20 days of the launch itself, we've seen growth in customers. And number two, in a period of time, get an existing customer to trade more, which will add to the revenue pool. So we should think about market share decline in this manner, that, a, it has had a relatively muted impact on revenue. And in fact, the revenue for that entire pack of business has been more than offset in the same month itself. And b, in the more medium term, to think about regaining market share by increasing number of customers and deepening value from existing customers because we have a very competitive plan. So that's the way we have to think about, and that's the way we are thinking about.
Understood, sir. Sir, but in the interim, should we expect a hit on the retail brokerage revenue due to the rollout of that plan?
So like I told you, we have already had this impact in December, right?
Right.
And we actually broad -- the market share came down, and the numbers are disclosed what the market share came down. In the month of December, what was the market share, what was it in the average of November and December, that also we've shared with you. So between these 2 months, despite the market share reduction, we have already seen that our revenue has actually increased. December revenue, despite the lower market share, has gone up higher than November market share. So this has happened because: a, the areas in which we have lost market share is relatively low salience on revenue; and b, we have seen healthy growth in number of customers as well as cash business. So if we feel -- if indeed, in the quarters to come, the market continues to remain favorable to benign, the way it is just now, I think we have a fair sort of a footing to continue the kind of trend that we've seen in the month of December.
[Operator Instructions] The next question is from the line of Aditya from Citigroup.
Really good to see the traction in new client acquisition. Just want to touch upon one point which you mentioned, which is the key part is the salience of the various components in revenue. Could you maybe help us understand the share of the intraday trading related products on equity and derivative side in revenue? So that would just change. How important is that shift to the overall revenue pool?
So Aditya, volume share is the predominant part. So in volume, for example, in equity, intraday contributes to roughly about, I mean, estimate 75, 80. For us also, it is similar. It's a dominant part. Revenue, not so much. So from a revenue perspective, it is the delivery of overnight components, which are contributing more. We have not specifically put out an exact number between these 2, but from revenue perfective it is cash or overnight, which is higher.
It has relatively -- I think the way you should think about it is that it has got a relatively more modest contribution on the total revenue pool, the intraday product.
Got it. Okay. And behaviorally, what has been your observation on customers when the intraday margin increased? I don't know if this sort of analysis is possible to do, but did you see customers migrate to derivatives or migrate to cash? Or did you just see the volume go down from those products? I don't have such -- and as is possible, but if it's there, then that would be helpful.
So it is just about a month since this event has broken out. So I'm going to request Vishal, the Head of our Equities, to come. He has done some analysis. But again, you must hear this analysis because it's only a month old, so it's more initial fee of what we are seeing.
Yes. So different customers in different segments have taken a different approach. So there are customers who are option sellers. They also have adopted to options buying now with a limited set of money. So in a way, as far as per order activity is concerned, I mean, they're trying to leverage the buying options. There are customers who are intraday futures customers. Many of them have pulled more money and used their existing asset to support their margin requirement. As well, there are customers who have started taking exposure in intraday equity where the ticket size is not a limitation. So you can take exposure of INR 2 lakh, INR 3 lakh, INR 1 lakh, whereas in futures, you have a minimum trade size limitation. As far as core future and options are concerned, there also a lot of intraday happens. Those products have remained completely unaffected. They used to bring the complete margin. And today, also they bring complete margin. So it is only those -- I mean, the impact is limited to the products where they were making use of the leverage, which system was making them available, and many of the customers have mend their ways and adapted the new practices.
While this is happening, I'll just add one more point to what Vishal said. The total number of customers has actually increased, even while leverage as a proposition has been reduced.
Got it. Understood. Sorry. And just last thing, I would just quickly squeeze in. You mentioned a 7.6% number in the beginning. I couldn't understand what that was. If you could just explain it.
So it is referring to actually our -- and in a way it is alluding to the first question that you asked. If you look at our derivative revenue, right, retail -- the derivative revenue, retail derivative revenue and because of the reduction in market share, the reduction that we've seen in our retail derivative revenue, that reduction as a percentage of total equity revenue is only 7.6%. So that fall in market share that you've seen from November to December is only leading to a 7.6% reduction in our overall equity revenue. So that, in a way, signifies to you the importance of intraday in the overall equity.
The next question is from the line of Madhukar Ladha from HDFC Securities.
Congratulations on a good set of numbers. So just to understand -- to get my understanding right on this. Right now, the weak margin requirement is only 25% and our market share is actually down in December. And going forward in March, this is going to increase 250 and then so on and so forth. So what additional sort of impact do you see? Are we now checking for 100% margin requirement? Or, right now, the norms are just going to get implemented in a gradual manner, and therefore, the impact -- there will be future impact on this? So that will be my first question. Second, can you help us with a split on what cash and derivative revenues are broadly for the third quarter and, let's say, for 9 months in total? And third, on NEO, what do you think -- what has been the adoption so far? And how do you see that progressing? NEO will also have the impact of -- at 100% adoption level, your futures revenue practically go to 0. Your intraday revenue also gets impacted dramatically. So wanted to understand how do you think about this.
Thanks, Madhukar, for your comments. And I think some great questions. Let me go one by one. The first point that you asked was in terms of the implementation of the margin norms from SEBI. In mid-March, there's going to be the next round and then subsequently future increase, right, up to 100%. So if you look at what happened in the month of December, that impacted people like us more than the others because we offered relatively more leverage because we were able to offer that kind of leverage, given our very robust platform and the high salience that the platform enabled us to handle risks when we offered this kind of leverage. Now with the implementation of this norm, we are even steepest with respect to market. The extent of leverage that we provide now stands at shoulder to shoulder with any other broker in the market. Any further increase, therefore, will not negatively impact us relative to the others. We will have an equal impact relative to everyone else. So actually, going forward, market shift to our mind is unlikely to have an impact because it would impact any other player as much as it would impact us because we are even steepest with respect to other players with respect to the leverage. So that is the way we are anticipating things to play out. So fair to say, from a headline market share perspective, perhaps the worst is already absorbed. Going forward, we should be actually agnostic to it. And because of the introduction of our plan, we should start seeing an improvement in our penetration and share. Coming to the second point, Madhukar, the split between derivatives and equities that you asked. As yet, we are yet to disclose that specific split. I think in the course of our future, we have -- you'd appreciate that with every passing quarter, our disclosures are only increasing. We will probably take this input and see as and when we can share those numbers with the entire investment endless community. We'll certainly share it. As yet, we are not doing, but I think as we have been giving you directionally, equity is a more material part of the total split between derivatives and equity. And clearly, cash is the largest part of our revenue contribution, which has not been impacted yet. There was a third component in terms of the adoption of NEO. Adoption of NEO has been very encouraging. We have already crossed about 20,000 new customers as at today. And we have a healthy run rate of adoption. Interestingly, it is largely coming from new customers as well as some of our past customers who don't trade with us anymore. They are getting reactivated at a very rapid pace. On an overall basis, we believe that we should grow the business rather than think of any adverse impact of NEO. We have -- the reason why I'm saying this is because when we actually came out with Options 20, which was about 1 year back, we landed up actually growing our derivative revenue, which you would have seen rather than any other outcome. And the reason for this is basically 2. One is a plan of this nature helps us increase our customers. So we have more customers to derive revenue from. Number two, it also rides on the fact that an existing customer, who migrates, trades more because he is -- this is far more attractive for him to do more trading. And number three, there is a natural growth in the market itself that takes place. So actually 3 reasons that invariably, it is reasonable to expect will continue to play out. And on an overall basis, our expectation is that a plan like NEO should help us grow. The other point you are -- subject to this, I think it will be relevant to know that a product like futures is actually taken by some of the highest quality customers. So they land up actually providing large margins for us on which we make good float revenue. In fact, the float revenue that we have started getting is pretty encouraging. And that is why when you stack up our entire nonbrokerage, but allied brokerage revenue stack, that is now inching up on a quarter-to-quarter basis, and we expect that to start to continue to inch up. What we like about that is that it is not dependent on trading completely. It has got some dependence on trading activity, but it tends to have its own stability, given the fact that it tends to stay with you, irrespective of trading actives. So that's the way we are thinking about the last part. As far as NEO is concerned, overall, we believe that it should help us grow our revenue too and not -- we would not want to have any other different outcome than what I just mentioned.
The next question is from the line of Piran Engineer from Motilal Oswal.
Congrats on the quarter. Most of my questions are answered. I just have a couple of them. Sir, firstly, if you could just give us an indicator sense of what is your average ticket price in intraday trading on the cash side, not F&O?
Piran, that is something that we have not disclosed, but I'll just tell you that, let's say, at an overall level, if you look at our equity ARPU that ranges around, let's say, 9,000, 10,000 over a longer term, on intraday products, the ticket sizes are substantially higher.
I didn't get that. The ticket sizes are substantial…
Are higher, higher, higher. So this is a company average across all businesses. If you just take our total brokerage divided by total asset plan, you will get the overall number. It ranges from, let's say, 9,000 to 10,000, 11,000, in that range over a longer period of time…
No, no, sorry. Harvinder, I meant, average ticket size of the trade, not average revenue from an intraday trading.
So that number would be over a lakh, Piran, over a lakh in terms of [ revenue ].
Okay. Over a lakh. Fair enough. That's a good sense I guess. Sir, my second question is, I just want to get a sense preferably, quantitatively, on the ARPU from customers sourced in the last 9 months versus say customers who are on our books about a year back. Just want to get a sense of whether it is similar or is it much lower? And also similarly, the ARPU of clients coming from our open architecture business that we started in May versus, say, the ones we used to get from ICICI Bank?
So both the questions. First is that, right now, given the way the business mix, et cetera, is we have seen that the ARPUs are higher now. Currently, 900 versus, let's say, last year, of the order of, let's say, about 20%. Secondly, we have put out the number of digital acquired client ARPU because it is -- you'd appreciate it's only 4, 5 months. And these clients take -- I mean, every new client will take period for the ARPU to settle down, but the trends are encouraging. So we have not seen any significant difference between the ICICI Bank sourced or erstwhile-sourced clients and the new channel sourced clients. The trends are, in fact, encouraging on ARPU on the digital clients. Not put out a specific number, Piran.
So whatever we get from ICICI Bank, we get that much, but slightly higher than that, actually from a digital customer. But like Harvinder said, early days because it's only 9 months since we started sourcing. And typically, you need to give at least 2, 3 months of seasoning before you start getting a sense. So on an average, it will be 4, 5 months old data.
But this is quite counterintuitive, right? Because the new customers are largely from Tier 2, 3 towns and cities. And the erstwhile customers would have been -- would have had a higher share of them coming from Tier 1 cities. So I would have expected actually incremental ARPU to be much lower than on book ARPU, if I can just broadly use those words.
See there is -- prima facie, what you're seeing is probably what one would expect. But having seen this closely, what really is happening here is when we acquire a customer from an ICICI Bank, there is always a meeting, a conversation, an interest expressed and then a sale. So there is an element of starting inertia. Customer who's digitally acquired is actually looking to do business. He doesn't -- you don't go and tell him. He comes to you. His interest -- his intent and interest is to do business. So if one has to explain the intuitive, apparent different outcome, I think one can attribute to the fact that the person who's coming digitally has a do-it-yourself kind of a mindset and have an immediate need to do stuff, and that's why probably the ARPUs are what it is.
The next question is from the line of Kashyap Jhaveri from Emkay Investment Managers.
Sir, congratulations for amazing numbers for the quarter. I have just one question. If I -- you mentioned in your opening remarks about retail brokerage and lower number of trading days during the quarter. While I understand that in terms of ADTO, it's clearly reflecting that additional 4, 5 trading days, which were available in Q2 versus Q1. But in terms of brokerage, the decline has been slightly higher. So has it got anything to do with any yield changes that we would have done during the quarter?
It's a great question, if I can comment. 65% of the decline is actually attributable to different trading days. 33% of the decline, sequential decline, is attributable to greater penetration that we are having of Prime prepaid customers in relation to the non-Prime prepaid customers. So that has an impact on yield, but the lifetime value of the Prime prepaid customers are better.
And the Prime revenue that you report in the presentation, so that is the amortized value of the prepaid amount or -- so what revenue is that?
Yes. That's the amortized value of the subscription fee, Kashyap.
But that has actually grown quarter-on-quarter.
Yes. So that -- so amortized value of subscription fee versus the brokerage what we are getting as total.
Okay. Okay. Okay. We would have sold more cards, but because those cards have lower brokerage this thing, it would have reflected in the brokerage part of the revenue?
That's right. So brokerage income would carry that part. The Prime subscription fee is what it is.
Okay. Okay. Okay. If I can just squeeze in one more question. In terms of our distribution revenue now, the base has set in. And on quarter-on-quarter basis, now we have started growing there. And this is equally for mutual fund as well as non-MF distribution, both. And if I look at our active client growth, revenue has actually grown faster than the active client growth versus quarter 1 where we sort of form the base effect. So what's driving that number? It seems like there is more revenue per client that we have started mining now. So what's driving that number?
So a couple of things over there, Kashyap. We have -- both on mutual funding and nonmutual fund business, we have carried out a lot of initiatives -- taken a lot of initiatives over the last 2 quarters to get in more number of clients and that -- with the help of that, we have seen higher activity. So I'll give you a couple of examples, but that is the approach. Our approach is to kind of work on the input parameters so that we maximize the number of clients and therefore the products that they are taking. On the mutual fund side, we have seen growth in our SIP market share, that's a more sustainable market share. We have launched -- we launched, if you remember, about 2 quarters back or 3 quarters back, we launched One Click portfolio of mutual funds, which made investments very easy, simple to understand. Very recently, we have launched Idirect money app, which is targeted at a investor who just wants to buy a mutual fund in a very simplistic journey. So a lot of these initiatives have started showing results, and we are getting more traction over there. We are also looking at improving our cross-sell ratio. So on one side, there are equity product propositions. On the other side, there are product propositions on nonequity side. I'll give you a couple of other examples on the non-MF side. For example, we are now building up our loan distribution network, where now in this quarter, we have disbursed or helped disburse INR 3.6 billion worth of loans. We believe there is headroom here, and we are taking a lot of initiatives to grow this pie as well. And a lot of such of these initiatives is targeted towards increasing our overall client value. We have a specific lever called monetized client value. Our objective over there is to try and grow that way. We are building on a fixed income portfolio. So we were able to distribute a significant chunk of sovereign gold bonds in the fixed income portfolio. So some of those things are also helping.
Just one last question. I don't have presentation right now in front of me, but what would be the number of Prime customers within this 1.29 million active customers?
About 5.4 lakh. 5.3.
So about half of them now?
Yes.
And what was this number in quarter 2?
Quarter 2 would be 4.25. 4.25 in quarter 2 and up to 5.3 now. And if you include Prime and prepaid, it's about 6.3 lakh customers.
Sorry, 6.3 is what number?
Prime plus prepaid. So these are the 2 recent plans. It is 6.3, including that.
The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.
Sir, I have couple of questions. One is, basically, for our intraday market share in the cash segment didn't get impacted despite the new margin who's coming in, whereas derivatives got impacted. Why is that so?Second is there was a chatter about clients adopting pledging as a mechanism to get over the margin requirement. Did we see any uptick in -- from the month of December? Thirdly, we have launched a product MF direct to you. Could you just talk about it? And how does it impact -- affect all your revenues in the longer term? And lastly, on net flows on the distribution side, especially in the MF. I think you have mentioned about the industry, if you could mention it about ISEC also, that would be really helpful? So these are the 4 questions.
Yes. So Prateek, I'll endeavor to answer all of them one by one. Your first question was intraday market share. We did see some impact of intraday market share. We have put out that number as well. For the month of December, we did see because of the similar reasons that Vijay mentioned for derivatives…
No. I mean, for example, your -- I mean, just -- if 8 became 3 for derivatives. So equities was 11.1 to 10.5. So it's not a material shift. So I'm just trying to understand why it didn't happen -- it happened in the derivatives, but not in the equity.
Yes. So wherever, the leverage is more, it goes -- impacts there more, right? So in equity, the leverage is relatively lower.
Okay. So -- okay, got it. So like in derivatives, you were offering higher leverage products. In equity, intraday, we were not offering. Got it. Okay.
Relatively lower, yes. Correct.
Yes. In equity, if you see, out of the entire product basket, one product was impacted more than others. And at the same time, in the quarter, the cash volumes, MTF volumes and all this helped us in offsetting the impact. Whereas that was, I mean the -- as MD said, that in derivatives the leverage was more, and there was -- the only way to compensate this is to get more customers, to give more enablers to customer and to activate the customers who have left us for some reason.
Got it. On the pledging side, sir?
Sorry, Prateek your second question was that have you seen a shift of customers adopting hedging strategies? But that's not…
No, no, Pledging. No, no, no, pledging, sir. Pledging, pledging. Basically, the chatter was that clients will pledge their existing equity holdings to get extra margin, which they can compensate for the peak margin requirements, right? So if you add 25% peak margin requirement, and if a client has a very high asset book or equity book like which our clients have, they could have pledged that and use the margins from there to get into derivative segments so as to not get work -- so as to -- for the volumes to not get impacted.
Yes. So there are customers who are making use of their Demat asset and pulling off more money for trading. However, it all depends on what we would require to bring as the margin and what you can do by pledging your existing holdings. So we have seen few customers taking more often than earlier. However, all these customers may not have the effect in proportion to the kind of volume which they do. So they have then adopted a different strategy, like as I said earlier, that buying options or making use of cash intraday products where the size implementation or size compulsion is not there. So there's a mixed trend, few have changed their ways and few have leveraged their existing assets.
Yes. So the point Vishal is making is that there has been extent of cushioning on account of the demand assets available with the customers with respect to withdrawal or reduction of leverage products. Some cushioning has happened.
Like had all clients adopted this? Or whoever wanted to adopt has adopted and the guys who have not adopted will not adopt? I'm just trying to understand the penetration of this product amongst clients because it was new.
So we've shared the margin -- the pledging was the process part which was introduced. Otherwise, this concept of giving your stocks for margin is not new in the market. I mean [indiscernible] a process where customers bring a Demat asset to give as a margin. So it has only changed -- the process changed that instead of giving it to broker or creating a lean in favor of a broker, now there is a more systematic and uniform method across markets and people are creating the pledge. However, there is no massive -- I mean, difference between customers coming or not taking or taking. Everyone is making use of this. This process is fairly familiar now with the people in the market.
Sure. And question one, MF Direct to You, the new product that you have launched and net flows for the MF book here?
Correct. So Prateek, first of all, a clarification. The MF app that we have launched is not a direct MF app. It is a mutual fund regular plan MF app, but it is a simpler journey. Our insight was that people who are joining that equity business, sometimes there'll be customers who can get to -- inundated with the whole equity [indiscernible] we may just want a very simple product. With that interest in mind, it is a regular MF app that we have launched. That is one clarification.
My question was not on the app. My question was, you have this HNI -- for the HNI and family offices you have launched, right, MF Direct to You platform fee structure which is flat. Yes, yes [indiscernible]
Yes. So this is Anupam here, I'll take this. So one, obviously, because direct as a category in the mutual fund has -- is only gaining prominence, we now have a slew of product offerings really to kind of capture that segment of customers. And one of them -- so we always had the mutual fund advisory business.
Correct. Yes, yes.
But that is largely focused on the ultra-HNI customers, given how the advisory regulations are. For clients who are typically between, say, for example, INR 2 crore to INR 10 crore, what we've thought is that we would launch a subscription-based direct plan, which is called as the Direct to You subscription plan. It has been just launched as a pilot, as an introductory offer to certain -- select few customers. And these are early days. We've had some 50, 60 clients who kind of subscribed to it. And largely, the offering is that you get the ICICIdirect platform, you get an active private banking relationship manager to have an oversight and support, besides the other features of ICICIdirect. So we are early days, but we feel that I think this will grow as we -- and we strengthen the proposition.
And you are seeing increased acceptance from clients on this product?
Yes, that is right. That's right. Because there are clients who are comfortable with the regular mutual fund. And for that, we have a strategy like the One Click and the mutual fund app that Harvinder just spoke about. And for the ultra-HNI clients, we have the mutual fund advisory product or a subscription-based plan.
Great, great.
And lastly Prateek, on your question on net flows, yes, we have witnessed net flows. However, on gross flows, which is the input parameter that we are focusing on, there, our market share has gone up. But yes, we have also seen net outflows.
Okay. And sir, if I can squeeze one last question. Could you also talk about how many of your customers have -- are using the mobile platform for trading? And are you offering NBFC service and margins, if at all, like the NBFC sponsoring margins for intraday, like some other brokers who are doing?
Yes. So in terms of volume, Prateek, about 45% of our volume are now coming from the mobile app.
Okay, okay. That's very encouraging. And on the NBFC side, are you offering? Or would you look to offer NBFC? Like I know certain brokerages who are tied up with NBFC are giving intraday margin as a loan.
So actually, we are offering loans against pledge of mutual fund, right? But that is between the lender and the -- yes. We have that -- we have just introduced that facility recently.
No, no, no. So my question was on intraday…
Yes. No active discussion right now, Prateek.
The next question is from the line of Ritika Dua from Elara Capital.
So firstly, some smaller questions, and then I'll again come back to the upfront margin because I'm still a little -- I want some more clarity there. So firstly, on the other OpEx, so while -- employee, obviously, you provided in the first half, like you had guided it to come off in the second half, again, you've shared. On the other OpEx, we are not seeing too much of movement. So that was one question. I wanted to understand how to really read that number. Secondly -- second insight I want from you is that how are the trends for MTF? Thirdly is that which is actually clubbed with the new subscriptions or rather than Prime, which is today, how much is coming that from conversions? And how much is from new? So that is the third question. And the last one is, sir, I would still, again, want some more clarity on the upfront margins. And I guess one of my -- one of the callers had asked a similar question. Firstly, the impact which had happened in December, is because obviously, the person did not want to put in that much of leverage. And that's how -- or rather did not have that much to maybe provide for upfront and earlier was okay to do it because the leverage was provided and they're not trading anymore. How are the trends in January with -- like we caller also asked that it's 25% in December, 50% will come by March. So how are the trends that you're seeing in January? How are similar clients maybe behaving now with the norms getting more stringent? And again, if you could also explain that how do you look to maybe bridge this gap by new acquisitions because the new customer who would be coming, I'm assuming that they are testing waters. They might not be very seasoned investors or traders. So how do you look to maybe bridge that gap with somebody who has been existing, taking leverage and doing the business and now with somebody who is very new to maybe investing? So broadly, these 4 questions.
Any more questions, Ritika?
No, sir.
Yes. So we'll go one by one. Your first question was with respect to -- I think the OpEx.
OpEx.
Yes. So OpEx, as we had guided, we have followed that guidance. We are also guiding that the future quarter, I think there was a question, would be very sort of -- the employee cost, et cetera should be following the similar trend as the last -- as the quarter that has just gone by. So that will give you a sense for this fiscal. With respect to our commitment to giving you operating leverage, we are steadfast on that. Like I said, that we run a business, and as and when we see opportunity for growth, we will invest in resourcing for growth. Where we feel that it is requiring a squeeze of OpEx, we will do that. So we do not want to become committed to, what should I say, OpEx item in isolation. You should see OpEx as a percentage of revenue, leverage. So we will continue to do that. We still see that there are areas of squeeze that can be done. We also see that there are areas for investments that we need to do. And it is fair that to harness all the opportunities, that investment also we should do to ensure that we are all the time able to give maximization of the revenue opportunity. So that's how we are looking at OpEx, the guidance I've indicated and the way which we are looking at OpEx also, I've requested you to look at it in that manner.
Sir, just -- sorry, but then on this point, where is the incremental expenditure being put in, like how is that number…
So the incremental -- it's actually more on technology areas. That's where we are investing in. As I said that our volumes have gone up, we are investing in the platform. There would be certain costs as a consequence of that. We are also creating redundancies, backups, bringing -- digital marketing is another area as we are scaling up. So those are some of the zones in which we are putting our resourcing behind, right? So where we need to invest, we will invest. Where we need to squeeze, we will squeeze. Idea is to demonstrate operating leverage. We had guided a 50% operating leverage in '22. We have delivered 1 year ahead of it. And we will remain committed to our direction. So that is how I would request you to look at OpEx trends. With -- your question -- there was a question, I think, then around MTF trends, right? What's happening to the MTF. MTF business has actually gone up quite a bit, particularly after the margin implementation. It is appearing that a lot of customers who were intraday equity guys have probably shifted to MTF overnight, probably. So we are seeing an increase in the MTF trend by reasonably clear sort of a number, both in terms of number of customers as well as in terms of book. With respect to Prime, the new Prime that we are adding, we've added about approximately -- in the month of December alone, we added about 60,000 new customers, which is a record for us.
And so about half, 50%, 52% of our incremental customers are subscribing for Prime.
So it is more than half, which is coming on Prime. So actually, most of our growth is not by converting existing customers to Prime, but actually it is coming from NCA, new customer acquisition.
So Ritika, when we started Prime, at that point in time, the split was roughly about 40% are coming from existing.
See Prime launch is now almost 2 years old. So whoever had to take Prime has taken Prime.
Yes. So the stock may -- whatever fellows are -- customers are on Prime are on Prime, or whatever doesn't want to move to Prime, they are not on Prime. So I think 2 years is a long enough time. We're almost -- in April, it will be 2 years. We're in January end. So virtually 2 years, you can say. So most of our new -- business growth in Prime is coming from new customers.
Sure, sir. And then on Prime, can we say, is it more towards the INR 299 plan or even people are even going for the higher plan?
So it's -- I mean, I would say that the contribution of higher value plans has increased once we changed our offering. So from earlier levels, we see a better proportion coming from INR 999, INR 1,999 and INR 2,999 plan. Of course, INR 299 is a flavor because it addresses a larger set of customer, even a smaller size of the customer in terms of numbers that continues to dominate the entire Prime sourcing. However, in terms of higher value percentage contribution, that has gone up after the relaunch of…
So when we relaunched the new stack of plan, while in the old stack of plan, we found that this was heavily skewed in a favor of that INR 999 -- INR 900 plan, right. That SKU has become a lot more balanced. Though the INR 299 plan has got a very high adoption but it is -- we also see INR 199 and INR 299 and INR 999 plans being adopted. And the total of this is far higher than the earlier stack.
Sure, sir.
Right? I hope I've been able to express what I'm trying to say.
Certainly, sir.
Yes. Then you had a question on upfront margin. And can you just…
Yes, sir, how has the behavior been in January after maybe whatever we've seen in December? And the fact that somebody who's been a seasoned investor and doesn't want to maybe take up leverage and do maybe more volume, somebody who is a new entrant, which we think as a strategy to, to some extent, make up for the lower leverage for existing customers, how do we see that -- bridging that gap, actually?
So actually, when you say -- again, I'll go back to the point that I made. The -- when you say bridging the gap, I presume you're talking of bridging the gap in volumes, right? Bridging the gap in revenue has happened. We have already done it in December itself. Volume bridging the gap will happen only as we grow revenue from existing -- from addition of new customers. New customer, we find that we have a very compelling and a competitive proposition, probably the best proposition in the market to attract new customers. So that is getting reflected in growth. So the growth -- so the offsetting of margins will happen as we acquire more customers, convert past customers who have become inactive over time. And both these pools are showing good traction. On a daily basis, I said, we are seeing more than 500 customers coming on this plan alone. So that is how we will offset it. The trends in -- the customer trading in January to December is not very different because there is no difference in the margin regime between December and January, the assets per customer level. But because customers are growing, the volumes will grow, the revenue will grow. So that is how you should think about it. But at per customer level, the trends are very similar to the previous month.
The next question is from the line of Sanketh Godha from Spark Capital Advisors.
Just again, harping on the point of market share loss, sir, just wanted to understand that probably we provided higher leverage compared to intraday cash and so we have seen a market share fall to 3.4% in December. But this is just a 25% compliance right now. So if the compliance steadily increases, then how you are looking at this market share to play out in derivative markets? So anything we have in our mind, the 34 -- 3.4% is the kind of market share we are okay with to live with because anyhow, that doesn't contribute significantly to our revenue line? That's the way? Or you think that incrementally you launched new and it's more targeted to derivative market rather than cash intraday -- cash derivative market so -- but that's compensate for the growth? And between that, just wanted to understand probably, like you give the data for Prime, around 0.53 million customers are Prime platform. Just if you can give a broader indication how many are on new? And whether Neo is still offered only to the existing clients or even the newer guys can take Neo the way we can take Prime in that sense. So these are broadly 2 questions. I have one more. Maybe after you answer this, I'll come back to on that then.
Yes. So clearly, our aspiration is to grow market share, even though it has had -- the fall in market share has had relatively muted impact on revenue. But certainly, we want to grow market share and grow our revenue as a consequence of that increase in business. To do that, we've launched the Neo plan but growing revenue will be -- not only we are taking the steps of launching a Neo plan, but I think it is fair to say that a series of new initiatives are planned to grow market share and revenue in the derivative side. These include certain features that are shortly going to be introduced in the app, some integrations that we are working on with algo traders on the app, some new tools that are coming out on our app and website. So market share for enabling trader growth is a combination of very attractive proposition because these tend to be very price-sensitive customers, and at the same time they need tools, and they need very easy access and simple interfaces. All these areas are WIP. And on a weekly basis, fortnightly basis, we will keep adding these propositions and launch. Typically, Friday -- every Friday, there is a new launch that we plan. So that will continue. And we believe that over a period of time, that should start giving us traction. And we don't need to wait for too long to start seeing traction also. So that is how we are thinking about Prime and the growth in Prime. I already mentioned -- sorry, Neo and growth in Neo. I already mentioned that we have a 500-odd run rate per day. This Neo plan is open to all customers. Whoever wants to take it, it is available. Most of our growth has come from new customers and some of our old customers who have come and started embracing that. Who did not trade with us in a long time, they've come back and they've started trading with us. And as I mentioned that as of yesterday, I think we had crossed some 18,000 Prime -- Neo subscribers, sorry. So that's it. It's hardly 25 days or less than a month actually since the launch. So that's the story so far. Did I answer all your questions?
Yes, yes. Yes, sir. And largely -- second 2 questions I had. One is that MTF book on sequential basis, if I see, it has not significantly increased. I mean, from INR 18.1 billion to maybe INR 18.4 billion. It's not a significant growth, what we have seen in the past. So sir, just want to understand color there. And second thing, just other thing was that, this loan disbursement opportunity, how big it could be for us? Because we have done around INR 360 crores there. So sir, just wanted to understand, anything which you have in your mind that this is the size which you can probably use it 2 or 3 years down the line, or 5 years down the line, and this could be a significant contributor to the total top line induction?
Yes. So on a sequential quarter basis, as you have pointed out, the book -- the outstanding book has had a relatively more muted increase. You used the word MTF book. I just want to correct the understanding. It is not MTF, it is MTF plus ESOP.
Yes, sir. Yes, sir.
Yes. So we have not individually shared the difference between -- the split between the 2. This quarter 2, we actually saw continued growth on the MTF book on a sequential basis. But on the other hand, ESOP book came off, understandably because a lot of clients who had taken ESOP saw very historic high for their shares, and they decided to actually encash the ESOP and pay off the loans. So there's been actually a big decline in the ESOP book during the quarter, and that led to this relatively more muted growth. So what you should actually -- see if you take separately between ESOP and MTF, MTF has actually grown quite a bit during that quarter. Now the ESOP book has actually sort of stabilized and MTF continues to show a growing trend. Yes, we do believe that MTF opportunity will continue to grow in line with market. But we need to understand that MTF as a product is largely a product, which gets used by customers when they are optimistic about the future of the market.
Right, sir.
When markets are giving them a confidence that it is worthwhile taking the position by taking margin and then buying a specific security, and then waiting for an improvement in the price and then cash out, then only he comes and takes that product. So his believe is that the interest payout for that MTF is lower than the appreciation that he will see in the times to come and that is why he comes. So as long as that belief is there, I think the market will keep increasing. We already have a steady sizable market share. The market share is, in our estimate, in the ballpark of about 20%. So 20% of total India's MTF business is sourced to us. It's a decent market share we've achieved in a short period of time and we will continue to put our attention behind MTF because I completely agree with you, not only it's a good source of NII for us, but also it eventually leads to good cash brokerage.
Right. Right.
So yes, it is a focus area. There was focus team under our equities advisory business -- equity business, actually, which is focused on this.
Okay, sir. Got it. And then on that loan disbursement opportunity from fee income point of view?
Loan disbursement opportunity from a fee income point of view. Yes, the home loan you're referring to?
Yes, yes, yes. Because just wanted to understand, do you have any number in the mind, like INR 360 crores what we have done in the current disbursement. So you have any figure in your mind, maybe 4 or 5 years down the line? Or this piece will be a structure -- structural growth driver from making us less cyclical, relying completely on broking income to report top line, this source of income could be a steady shift to growing business line in that sense?
No, no, you are very right. Actually, the reason why we chose to invest in this area is exactly because of the reason that you mentioned that it tends to be dealing from markets and tends to have a steady source of revenue for the company. And it is with that thinking that we have started investing in both insurance distribution in a more serious way and loan distribution in a more serious way. So we are not really thinking about 1, 2, 3 quarters here, but we are thinking more medium term. And as you rightly pointed out, the more -- 3-, 4- to 5-year horizon is what we should be sort of focused on. We are investing quite a bit in this area. The investments are taking place around getting the right skills first. We are also wanting to commit through a digital model. So the digital acquisition and pipes to our lending partners are getting all laid out and trying to transit more to a digital method of approval and disbursement. We are still physical in this nature at this point in time. I think in the next -- following year, in the ensuing calendar year, we should start seeing lot more elements of digitization creep into this business because it is not only us digitizing. Even our lending partner has to digitize.
Right, sir.
Simultaneously, we have opened up our pipes with other lenders. So it's not just ICICI Bank, we've also piped in with HDFC Limited. We've also piped in with few other banks, the Bank of Baroda, et cetera. So we have public sector partners, we have HDFC partner, we have NBFCs also as partners. So the idea is exactly what you said, create a very nice, smooth revenue pool. Now to talk about the size, we haven't -- we feel that whatever business we take in the more medium term, we should get at least 10% market share. If we don't get 10% market share, then we feel that we are under-powering ourselves.And to give you a sense how big is this market, this market -- a bank -- a typical large public -- private sector bank, you can assess from the amount of payout that they give to their partners is in the ballpark of about INR 1,000 crores a year. This is one bank. So if you extrapolate to other, you will get a sense of how large this can be. And our ambition is to at least get 10% market share over a more medium term. So we will invest, we will invest in digital, and we will invest in making it a multichannel architecture for acquisition.
The next question is from the line of Alpesh Mehta from Motilal Oswal.
Am I audible?
Yes, sir.
Congrats for the good set of numbers. Just 2 questions. One is on the equity market share part. How -- what would be our delivery markets? And just a qualitative statement, if you are not quantifying that, would that have increased on the -- in October, November, December?
Short answer is yes, it's increased. Because we've offset the decline in intraday equity with increase in equity cash delivery.
And what would be the magnitude of that? And would that be sustainable? That is first. And secondly, even if it is sustainable, with this Neo plan, would the revenues come under pressure under -- in that particular segment?
Cash deliveries unimpacted by Neo. It is, in fact -- yes, it is only on the intraday, not on cash delivery.
Okay. So that won't be…
In fact, it is, in a way going, to feed in because you -- on intraday, you take the Neo plan and for cash derivative you take the regular plan or we take the Prime plan. Customers who are cash delivery heavy tend to prefer Prime because of the liquidity feature, which is a unique feature. So the one -- I think one of the reasons why this growth is also happening is because people like our Prime. We are not only seeing growth in cash delivery volumes, which is again reflected in the revenue growth. But also the eATM utilization we are seeing is handsomely increasing, actually, which is something that makes us feel a little pleased because we've seen that increase in eATM service facility means that customers are using it, liking it. And in a way, when that happens, it sort of gives you that less reasons to migrate because you have an unique feature attached with your need.
Sure. And directionally, would that be what, 100, 150 basis points up?
Which one?
The cash delivery market share.
So Alpesh, the cash delivery market share, I mean, you don't get the retail delivery volume split -- and therefore, it's very difficult to estimate. But yes, directionally, as you asked directionally, we believe that the volumes are up.
Okay. Sir, secondly, what kind of -- in case of a transactional assets and the wealth management fees, can you just give some qualitative idea about what kind of assets which are contributing this -- to this because the growth has been extremely strong on that particular line item?
Which -- what kind of assets we…
In transactional. Would that be a custody assets only or it's more to do with the onetime investments? So what kind of -- because when you are adding the new customers…
You're referring to that INR 3.4 trillion, is that what you're referring?
No, I'm referring to INR 1.47 trillion. [indiscernible] And within that, there is recurring and the transactional, right? And transactional is growing very fast.
Yes. So specifically, if your references to the wealth portfolio, growth has come on account of equities. Most of the HNIs have done churning of equities and participation and buying of equities. So less oriented towards nonequity business during this period.
Okay. And sorry to harp on this point again, in terms of the operating expenses, employee expenses. So far, the -- at least the way looks like the -- our policy was around 28%, 30% of the top-line used to be like our employee expenses. Now in this quarter, certainly, that ratio has dropped quite sharply. So would that be the absolute number that would be the driving force going forward? Or this ratio still holds true?
Yes. So Alpesh, this year has been a bit different. Over a long period, as you rightly said, it has hovered between, let's say, 30 to in some of the years and quarters, 26. So that has been the range of this particular ratio. Obviously, our endeavor is to keep improving operating leverage and keep bringing it down sustainably. But this quarter should not be taken as an average. I think we can take maybe a full year number. And over a longer period of time, it has hovered between the 25% to 30% range. As Vijay explained, because of a higher growth of revenue, there will obviously be a cap that we would ourselves put, and we have a pretty robust Board governance framework, which puts a cap. So variable cannot keep on increasing. And a higher revenue has therefore resulted in a drop in ratio. But you should not take this quarter, but you can take maybe a [ INR 9 million ] 01:30:56 kind of a number…
Which is around 27%.
Yes. So -- yes. And depending on quarter-to-quarter, it can keep going, but for a longer-term model, that is gradually coming down direction. That is, I think, the way we are thinking.
Perfect. And last question, Harvinder, in case of the network partners that you are onboarding, is there any upfront cost related to that? Or it's completely variable model? And what is the number that you are looking at as far as the network partners are concerned?
We'll just tell Kedar to step in.
Can you hear me?
Yes, I can hear you.
The operating network here, they own variable fee based on the clients they acquire. So there is no upfront payment done to them. So it's a more beneficial model to us and to them as well.
The next question is from the line of Vijay Karpe from Bryanston Investments.
My question is on the cash delivery side of the business. So sir, as you said that the cash delivery revenues for us helped us during the quarter. So do you think because of -- and this might be for the industry as well, so do you see any increased competition here on the cash delivery side and hence lower yield?
So sir, just to understand your question, you're saying, do you see any increase in the composition of cash delivery and hence lower yield? Is that what you're saying?
Correct.
No. So cash delivery actually, amongst the various business segments, will be having relatively higher yield rather than lower yield. Right now, we are seeing increase. So cash delivery contribution, it went down. I mean, if you look at delivery and intraday, that contribution at one point in time went down to as low as, I think, 17% or 18% and now it's at a more 23%, 24% kind of a number for the industry. So it is a higher number right now. But the yield actually will have a positive impact, if at all, on yield, not the negative impact.
All right. And my last question is on the loans against mutual funds. So what are the yields that we get on -- in this product?
No. What are the what? Yields?
Yes, yields.
No, no. It's not a balance sheet product…
Only a distributor. We don't get any yield. The yield that is taken by the lender. We source the business and therefore we make a commission for sourcing.
Okay. So what are these yield that -- which lender charge to customer?
Loan against mutual fund yields, lending rates.
So it would be similar to around, let's say, 10% to 12%. I mean it will obviously vary, but about 10% to 12% is the yield that…
The next question is from the line of SivaKumar from Unifi Capital.
Sir, only 2 questions from my side. First question is, are you getting into any exclusive deals with any bank out of the ICICI Bank ecosystem when you have a similar arrangement with respect to sharing the revenue generated from the clients?
Yes.
Any time line, sir? And what are the number of banks you're working with?
See, these are -- I mean, this kind of arrangement takes a lot of time in terms of integration and in terms of understanding. So we are in process of -- the validations are going on with a couple of banks and more opportunities are being explored. So this is how it stands as of now.
Yes, but we are expecting to introduce something shortly with WIP.
Great. Sir, my second question is on the employee expenses. So in Q1 and Q2, what we saw, the bump up in employee expenses, it's more of a provision for variable pay, right?
That's right, Siva.
And you do it over the course of the year and you pay it after the year, right? Or do you pay from a quarterly point of view?
No, no, it will be paid out -- so it will be paid out after, let's say, the Board looks at the year…
No payout is given in the…
On a quarterly basis, there's no payout.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Chandok for closing comments.
Thank you very much. Thank you for a very healthy participation, and thank you for all the questions. Appreciate the interest taken. In case there are any follow-ups, more questions, we'll be very happy to -- please do reach out to us, and we'll be happy to take them on separately. Good day -- rather I should say good night and take care.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.