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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, 2022.
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, Digital Client Acquisition and Co-Head, New Solutions Group; Mr. Nilotpal Gupta, Head, Data Science Unit; and Ms. Nidhi Kajaria, Head of Human Resources.
[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.
Thank you very much. Very good evening to all of you, and welcome to ICICI Securities Quarter 3 Earnings Call for Fiscal 2023.
First of all, let me take this opportunity to wish you all and your families a very happy new year. I'm sure that by now you would have already perused through our investor presentation, which has been uploaded as was mentioned on our website.
Let me start my narrative with sharing a few highlights of the industry performance in this quarter that has gone by and take you through some of the key aspects of the performance of the company.
In the previous quarter, I'm referring to the quarter 2 of this fiscal year, we had witnessed some encouraging signs on most metrics. However, in comparison, this quarter, I'm talking about quarter 3 now, was in some sense a mixed bag as far as some of these parameters are concerned. Some of them saw an improvement on a sequential basis, while some others saw moderation.
So let me just bring out the aspects that actually saw an improvement. The first item that saw an improvement in this quarter sequentially was the F&O trading activities, where the ADTO grew by about 18%. The second was the systematic investment plan in mutual funds continue to show an increasing trend growing at a 6% clip sequentially. Gross flows into equity mutual funds also increased by about 1% sequentially.
Equity capital markets fund raise activities picked up as the primary market saw some activity and some issuances coming back on the back of slightly more supportive market conditions. These were on the positive.
On the flip side, cash volumes declined 5% on sequential basis. New demat accounts continue to witness some moderation, and they declined actually 7% on a sequential quarter basis. NSE active clients continue to show a declining trend for the second straight quarter and it declined by about 5% sequentially. Gross flows into debt mutual funds declined by 15% on a sequential basis.
So against this backdrop, you would have seen that our quarter 3 revenues increased by 2% on a sequential basis to INR 780 crores almost. It, however, declined by 7% on a Y-o-Y basis, owing to a 24% decline in the retail cash ADTO that we saw under Y-o-Y basis. And the second reason was a muted capital market activity compared to the corresponding period of last year.
As far as the profit after tax is concerned, it declined 6% sequentially to INR 281 crores. And this decline was mainly on account of the finance cost, which was the cause of increase in interest rates and the hikes in the interest rates that we witnessed. It declined on a Y-o-Y basis by about 26% as we continue to emphasize on franchise-enhancing spend to harness medium-term growth prospects of the company.
During the quarter, there were four key focus areas for us. We focused on all the input parameters. The number one focus was improving market share across various areas of business. Number two, our focus on diversifying our revenue mix and intensifying the focus on the wealth franchise because we clearly are seeing this reduces cyclicality in our business model, which is an important focus for us. Cost efficiencies continue to be an area of attention, but it was done in a manner that we don't compromise on medium-term growth prospects. Cost efficiency has been a key and simultaneously, the fourth area of focus was building a product proposition so that we are future ready and ready to take on all market opportunities.
So I'll just quickly take you through what all happened with respect to those four focus areas. The first one with respect to market share, we saw a continuing improvement in retail derivative market share. It inched up sequentially to about 3.8% and there has been growth not just in market share, but I think the fabric of growth has been peppered with increase in number of customers, number of orders, number of lots and so on and so forth. It's been a granular growth.
We maintained our retail market share at about approximately 10.5%. And this is just to remind you that this increase was after the 90 basis points that we saw in the previous quarter. We continue to remain in leadership position in the margin trade finance business. Our market share remained broadly steady at about 23%. Commodity has been an area of a recent addition to our portfolio. Our commodity trading segment continued to show positive traction and market share increased sequentially from 5.5% to 5.6%. As far as mutual funds is concerned, market share was stable at about 1.7%.
So while we gained or maintained market share in the above parameters, I must just highlight that our NSE active market share and incremental demat market share declined. And this was, in some sense, due to a conscious reduction in the new client acquisition as we continue to focus on acquiring quality clients. And due to this focused acquisition strategy, we were able to gain and maintain market share across most of the parameters, as I just highlighted about. And we also saw a revenue increase on a sequential basis. This is despite the fact that the new client acquisition NSE active, both of them actually declined. So quality has really played out and helped us increase market share as well as the revenue that I spoke about.
Coming to the second area of focus, which is diversification, reducing cyclicality continues to be an important part of the strategy. This quarter, despite the fact that cash ADTOs fell by 24% on a Y-o-Y basis and capital markets had been muted on a comparative corresponding last quarter of this last year in this specific quarter. Our revenues in quarter 3 declined by just 7% as compared to quarter 3 of FY 2022. This is a result of the focus on diversification, texturization of revenue base as well as focusing on scaling up the margin trade finance proposition as well as the Prime plan that we brought out about 2.5 years back.
Generating revenue from multiple products has been another cause for this kind of a diversification. We also -- I think gained by strengthening our derivative proposition and sharpened our focus on the wealth franchise.
Going forward, we will continue this journey of diversification and focus on generating multiple sources of revenue and not just multiple sources of revenue, but meaningfully getting these different sources to contribute to further reduce the cyclicality component. So we are really focused on trying to reduce that cyclicality which is brought about due to the cash broking and capital markets business as a part of our business model.
I mentioned about our wealth business. Our wealth assets increased 15% on a Y-o-Y basis and 5% on a sequential quarter basis. And as at 31st December, it was at about INR 3.2 trillion. The revenues from the wealth franchise remained approximately flat at about INR 260 crores for the quarter that ended FY 2023, quarter 3 -- quarter 3 of 2023.
With regards to cost, the cost for the quarter increased sequentially by about 9% and 16% on a Y-o-Y basis. This increase on a sequential basis is mainly on account of finance cost, which is actually all linked with margin trade finance. While increase on a yearly basis on account of finance cost, employee costs and tech cost. As we move forward, we continue to look at cost in judicious manner so that we optimize the cost impact on our P&L, even as we press on our growth levers.
Finally, on the last aspect of focus, talking about product launches, initiatives to be future ready. We made -- we brought out a few very interesting products like Flash Trade. We integrated watch list and we brought i-Alerts, which is basically a risk-based alert system, which is now being made available to our customers on WhatsApp.
As far as our apps are concerned, the total downloads of all our apps combined gross 9 million. As far as our issuer and advisory business is concerned, we have a strong IPO pipeline. The pipeline stacks up to about INR 41,000 crores across 21 deals. In addition to this, we have 16 deals where the amount is yet to be decided. We are optimistic that as and when the market supports these IPOs, the deals are near state of readiness, so they can be quickly executed given the state of readiness as and when the market gives the opportunity.
As we move forward, I would like to specifically bring attention to what we will focus on to bring growth. There are five key focus areas to propel growth that I would like to list out. The first one is wealth management. The second is derivatives. The third is insurance. The fourth is loans and we're going to be using personalization and analytics to drive all of this business.
As far as the wealth management business is concerned, we are seeing increasing number of HNIs and these are across entrepreneurs, professionals, CXOs. We find that this customer is underserved and there is a need for bespoke wealth management products. Our key strength here, as we've been highlighting in the past is our ability to give the much-needed trust that this segment requires, supporting it with very strong relationship and products and platform proposition. So that we have a holistic offering for our customers, very strongly supported digitally.
I spoke to you at length on our wealth franchise during the last quarter call, I would just like to reiterate that what is unique about our wealth proposition is that it is brand-led, it is proposition and RM supported, and this really makes it much easier for us to scale this business. And all this, what I'm saying is demonstrated by the fact that we've emerged as one of the largest wealth franchise in the country with about 76,000 clients now where each client has at least INR 1 crore with us, and the aggregate wealth is now, as I mentioned, INR 3.2 trillion. And just 3 years back, this number has grown from 33,000 and less than INR 1 lakh crore to the numbers that I just described.
What we also find is that this customer segment demonstrates high persistency and revenue salience and all the details -- more details of this, you will find in our investor presentations.
Going forward, as we think about this business as a growth lever for us, we have identified certain pockets of growth in terms of geographical locations and to harness this, we will be strengthening our RM footprint and couple it with our tech investments and analytical capabilities so that we are able to do a very efficient coverage of our clients and drive growth out of business.
Coming to our derivatives segment, we feel that it has relatively more structural sort of support in terms of growth. We've made investments on areas like pricing, customer experience, various kinds of tools and the API architecture to gain market share. As I already highlighted, we have started seeing some gains in market share for 3 consecutive quarters. And we are seeing improvement in various parameters as already explained.
Derivative revenues have been increasing by now for 6 consecutive quarters. And therefore, its share in the retail broking is also on an update.
Most of our new product launches in this space, whether it is Flash Trade, different types of algos, APIs, products like Option Plus are all seeing increasing traction since we have launched it. We are redoubling efforts to communicate all these launches to our customers. Above the line, television campaigns are now visible. You can see them on CNBC and some of the other channels. And we are also significantly pumped up our social media engagement and some green shoots in terms of results are visible in this particular space.
As far as Insurance segments are concerned, it's again a big opportunity. We've already scaled up the life insurance business. We recently partnered. We've enhanced on the general insurance, health insurance side. We've recently partnered with Aditya Birla Health Insurance and Manipal Cigna Health Insurance and we will soon be adding more partners, both in the health and general insurance side given the recent IRDA guidelines.
General insurance to some extent, and I would say even health insurance is very amenable to digital way of engaging. And in order to provide customers with digital journeys and seamless experiences here, we've announced our partnership with CoverStack which has already been integrated onto our platform now. And I -- we believe that this partnership and enhancement in partners will help us scale up general insurance in the near future.
In order to grow our life insurance, we are using more of the analytical tools and the PASA, the preapproved sum assured methodology to improve the quality of our leads. As a result of all this, our life insurance revenue has grown from about INR 49 crores in FY '20 to about INR 70 crores in FY '22. And we've already achieved about INR 53 crores in the 9 months of this current year. General insurance is something that we are optimistic about growth as we move into the current quarter and the year to follow.
As far as loans are concerned, we aspire to emerge as a digital consumer lending distribution powerhouse. We offer the entire suite of products and services with a tie-up with various partners, lending partners that is. And we have enabled end-to-end digital processes and unsecured consumer lending products. We recently started credit card distribution, and we will be soon launching personal loans on our platform. We are clearly seeing a very strong demand, and we also find that from a distribution margin point of view, the margins per personal loans are higher.
We launched loan against mutual fund with TATA Capital and loan against securities is expected to go live very soon in the current quarter. Our loan against securities with Bajaj has already been made life in the last quarter.
Also, just to give you an update, we had tied up after the changes in the Reserve Bank of India guidelines with respect to ESOP funding with a partner, Cholamandalam Finance for ESOP Finance. And we have now seen that the total disbursement since that tie-up about roughly 2 quarters back has crossed INR 100 crores. All this would be, of course getting [indiscernible] .
Our account aggregator framework has gone live. And as a consequence, we've sort of identified the first use case, not really for loans, but for F&O. And we are using this for account aggregator framework for identifying customers through a very simple process, internal customers for a very simple process. And there are multiple other use cases which are getting explored with that AA framework there.
This quarter, we distributed for the first time in our history, INR 1,000 crores of loans. This has now -- what we disbursed in this quarter was the entire year disbursement in FY [ '22 ]. So we are fairly optimistic with the digital initiatives and our emphasis and focus on loan, we will continue to see this growing trajectory.
Finally, coming to personalization. We are deploying various market tools to offer products to customers in a hyper-personalized fashion by developing synergies between the data models and various modes of engagement. The [ Adobe ] project that we had introduced has been completed in quarter 3. And as a result of this, we have started seeing some improvement in our strike rates with customers. This has resulted in better cross-sell numbers as our customers with 2 or more products is actually witnessing a steady uptick. And this number now stands at about 1.2 million customers with at least 2 products as of December 2022.
To sort of conclude, I would just say that the strong -- we have strong medium-term prospects for our industry. I think we are very, very strategically placed to harness this opportunity. We are making relevant investments in key focus areas, and we are optimistic of growth as we move into the coming Q4.
I'd like to end and throw it open for questions that you may have. Thank you very much for a very patient hearing.
[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.
So two, three questions here. First, on your customer acquisition. So you mentioned that you have focused on acquiring quality of customers. I think that is the reason what I see in numbers that your customers from non-ICICI Bank channel has gone down in share significantly. It is now, I think, 58% of the 3.4 lakh customers you have acquired this time. While I see that the run rate for ICICI Bank remains steady, the non-ICICI Bank trends has gone down drastically.
So two questions here, then what would be the strategy going ahead? Then are we going to focus more on ICICI Bank customers? And if that is the case, then, then are we again reorienting ourselves to more cash-focused customers and not derivatives? So that is the first part.
Second part is, is there any kind of -- what kind of challenges you are seeing, say, in the quality of customers who are outside the ICICI Bank channel? And would that mean that we should continue to see an impact on our active clients as we go ahead as those customers complete maybe a reasonable trading cycle post [indiscernible] activity? That would be the first question.
Yes. Thanks a lot for your question. So to say that we are moving back into ICICI and aborting the non-ICICI will not be accurate. We have been guiding that we have grown our digital acquisition engine, and there are at least 4 or 5 different sub channels in the digital side, which leads to a certain quality of each channel -- each subchannel leading to a certain quality of customers.
For the first few quarters, we just -- I would say, first 5 or 6 quarters, we just increased the number of customers. But with an experience of about 5, 6 quarters and experience of the behavior of these customers, we identified which channels are worthwhile in terms of serious customers. And once again, this is not about investors or traders. It's about anyone who's interested in investing in equities, whether as a trader or as an investor, we are completely neutral to that.
We found that there are certain channels which are more conducive. Our investment of effort, time and money has been towards that channel. Those channels are tougher to acquire. They are time consuming to build up, sort of a brand and a name to get more and more of those customers, which is what we've been focusing on. It's a hard working, relatively more hard-working method of getting the quality customers. And therefore, that number of customers, which are less serious about investing, we have sort of started muting. That is why this mix has changed.
We are -- as we increase our -- I would say, ability to attract and scale up these quality customers from digital channels, this should only increase. We are still, I would say, 4, 5 quarters or 6 quarters young in this space of digital acquisition. Some of the people who have done extremely well in this space have been around for several years. I think we are catching up at a reasonably fast rate, and we'll continue to do that. So I don't want you to think of it that there's a pivot back to ICICI and there's a pivot to the cash customer. We are completely neutral. We want a good quality customer, whether it is cash or whether it is derivative.
As far as -- I think a couple of other notable points I'd just highlight is that apart from ICICI Bank, we have also tied up with -- just to remind you, HSBC some time back, IDFC some time back and both these channels have also started contributing quality customers now. I think the numbers have started coming from both these channels. So -- for us, it's a multichannel strategy. ICICI Bank is an important partner. It will continue to remain an important partner. Completely neutral to whether cash or F&O, we want quality customer.
So I hope I kind of responded to your question the way you were.
It was very clear. Sir, coming to my second question. So the various categories of customers that you mentioned in your disclosure. So one is Prime, one is Prepaid and the third is Neo about which you gave some numbers. So two things which I wanted some comments from your side. One is that the share of Prime and Prepaid in the broking revenue mix have started to go down. So I was a bit curious there what is happening because is it only a function of a better rate or has there been some contraction in the trading activity also, if you could throw some light on that?
Then secondly, sequentially in third quarter, the number of new customers have gone down slightly. Now I'm not sure if -- what could be the -- I mean, what could be the reason for a delinquency out here, if you could maybe throw some light on that? What happened to that? Although the number is small, but since you have started to build out on this side of the business very recently and also the fact that I think this is one of the key levers of growth you are expecting? If you could throw some light on this?
So as far as Prime and Prepaid plans are concerned. So these two plans continue to contribute majority of our revenue. And historically, I mean, if I go back about 3, 4 quarters, these two plans were contributing about 65% of our revenue. And even in the present quarter, the picture is not very different. So that is one part of the Prime revenue.
Second part of the Prime is how many new customers are we getting into Prime and what is the renewal fee which we are getting. So I would like to state that on the new Prime enrollment, where the focus is very high on the high value trends, the numbers continue to be robust even in Q3 and even when we compare those numbers with the Q1 and Q2.
Secondly, on the renewal part, we have made only the high-value Prime as a lifetime proposition. However, our base plan, which was INR 299 and INR 900 plan, those plans continue to be in the renewal state, and we continue to get the revenue from the renewal on month-to-month basis. And that run rate also continued to maintain.
So as far as Prime and Prepaid business trajectory is concerned, I think there is no disturbance. Both the plans are continuing to do as expected.
As far as new enrollment is concerned, quarter 3, two things have happened. One, the market sentiments were slightly muted. So the activity levels, as far as new customer acquisition was concerned, it was not that high. And second thing, even as you know that there were few compliance-level things which were implemented in October, November and December. So that caused a little bit of disturbance in terms of getting this plan activated at the time of acquisition itself.
Now things are settling down as we entered in Q4 and we expect that, that run rate will be able to gain back. And even those customers which we acquired in Q3, we are reaching back to these customers and getting them now enrolled for the plan as there was some delay in activation, that is why the numbers took some beating.
Just one added point, I want to remind you that this has been a quarter where we -- activity levels in the market itself has been muted, which is reflected in a slightly lower industry level numbers. So whatever you are seeing with us in some sense is a reflection of the industry also. So we have to view it in that context.
Right, sir. So I just wanted to understand in the sense of the new numbers that this is a stock number, right? So it is a number of customers [indiscernible]. So I wanted to -- I mean, I could not visualize the scenario where that could go down. I mean, even if they're inactive for a period, they will still be in the base. So that's why I wanted to know.
Am I audible?
Yes, you're audible.
Yes, yes, you're audible.
So that's why sir...
It refers to active numbers, they are not stock numbers. Stock numbers, you're right, would be up. The active numbers would have gone down because some of the new customers in that particular quarter, given the market would have not traded.
Okay. Okay. Got it. Got it. All right. Sir. And one last thing before I join back in the queue, if you could give your comments on what would be the impact of, a, this SEBI circular which came yesterday on blocking of funds for trading in secondary market, what impact you would have? Because you have come into this new plan where there would be some float income. So some quantum of that and if that would be helpful?
And any impact of the T+1 settlement that is also going to come?
These are great questions. So as you know, that bulk of our business operates on the block model, and that's the way we've been operating historically. I think from a customers' point of view, this is a great step from SEBI. It in a way, ensures that the funds are secure in a banking setup and not sitting with a market participant.
We have always operated in that model historically. And it's actually the rest of the market, which doesn't operate there. So I think this question of the impact will be more on people who operate with that model. Most of the people, discount brokers actually -- in fact, all the discount brokers operate on that model. So there would be a significant impact there.
As far as we are concerned, the impact of this on our recently launched business will be a very, very small fraction of the total, I would say, revenue that our dependence on float for the purpose of revenue, which could potentially get depleted because of this new circular is a very minor part of our total sort of story. So I would say, a negligible impact only for us as far as this is concerned.
But certainly, lots of operational investments will be required by all of us to make it work. I also understand, though it is still early days, that this will be given as an option to the customer. So the customer can continue to choose the option of being in the old -- the current model or he could switch to a block model. So some customers may choose to remain in the current model. So to that extent, there could be some kind of a moderation of the impact, but it's to be seen.
As far as industry is concerned, more impact, as far as we are concerned, it's going to be, I would say, a negligible impact. T+1 seems to have passed without much fanfare and without much noise. The last tranche, but an important tranche is coming on the 25th, I think of January, 25th of January. We are not anticipating any significant impact either at the industry level or certainly not at the company level.
So I think things have settled down. This is the last but an important part of the market moving to T+1 settlement.
[Operator Instructions] The next question is from the line of Piran Engineer from CLSA.
Sir, just a couple of questions. Firstly, on wealth. Now we've added about 5,000 new wealth clients this quarter. Just want to understand how many of them are actually new to I-Sec and how many of them are just a big cross the INR 1 crore threshold and hence, they converted from like a normal client to wealth client?
Piran. This is Anupam here. So of the client -- so of the clients that we add our strategy are broadly twofold. One is to really look at our existing customers and really through data analytics and through better engagement, we are able to really increase the share of wallet. That continues to be bulk of it, and that's go to our strategy given the large base of clients that we are working on. That typically is almost always broad or closer to 90% of the acquisitions that we do. And through the open market sourcing, it is typically 10%.
Okay. Got it. Got it. So in that case, is the open market thing -- do you think you need to like rebrand yourself out there in the market to be perceived as a wealth manager? I think ISEC Wealth has also done some rebranding exercise. In order to sort of step up this number, open market number?
It is probably too premature to talk about it. At the right time, we will probably talk about it. But it's a very interesting thought, which we also are discussing internally. We leave it there for now.
Okay. Fair enough. And just the second question is on F&O. So our ADTO has doubled Y-o-Y, but the revenue is up only about 25% or so. So how do I really correlate that because we've been on a fixed pricing model largely even in the base quarter a year ago or so, what really explains this?
Yes, Piran, it's the function of Neo. So Neo incremental is a fixed pricing model as well as [indiscernible] model both are there and fixed pricing model adoption has been increasing quarter-on-quarter. So when you see Y-o-Y, that will be the key impact.
Okay. So if you can just share broadly ballpark what percentage of our revenue or trading comes from Neo customers in F&O?
So today, we have reached about 65% in terms of volume coming from Neo.
Got it. Okay. Sorry?
About 65% to 70%. If I may just give a ballpark-ish number. So 65% to 70% of our trading volume has started now coming from Neo, which a year back could have been in the range of, let's say, about 25% to 35%.
The next question is from the line of Prayesh Jain from Motilal Oswal.
I have a couple of questions. Firstly, on the margin base funding book. How do you see this business because it's been kind of growing at a very strong pace? And to me, it was -- I understood it could be a cyclical business. But can you help me understand how are you thinking with respect to the business model? And do you think that the growth here is sustainable? And the 23% market share, do you think it can further increase, you want to increase this further? And also some granularity on the cost on how the funding costs have panned out and how much have you transpired this -- transmitted to the customer? That is question number one.
Second is on the mutual fund business, I guess this has recovered after 2 or 3 quarters of consistent decline but still your market share on the SIP book seems to be declining consistently. What are your thoughts there as to why is it happening? And how do you think you can regain some of the lost market share? I understand some of the digital customers have increased digitally. The platforms have kind of taken up their market share in terms of numbers but ours is like value market share loss. So could you explain those 2 elements for me?
Yes, fine. So let me start by giving -- responding to your first one, which is on the MTF. So first and foremost, I think we look upon MTF as very strategic. And at the same time, we want to grow this in a responsible manner because we want to only deal with the type of customers who are amenable to MTF.
We are systematically identifying such potential customers and then offering this to them. And we find that over the quarters, we have not only increased the book, but we have also increased the number of customers doing this business with us. So it is being built in a granular way.
Secondly, I would say that we should look upon NPS as a product which works very well when the outlook is positive. When the market outlook is buoyant and constructive Obviously, there is a lot more interest for this product rather than when this kind of a sentiment is not present. So the velocity of growth of this book is dependent on the market outlook sentiment that the investors have from time to time.
In the recent past, the third point is how does it behave. I just thought I'd share some practical experience, in the recent past, we've seen that headline numbers of NIFTY moved from in the ballpark of about 18,500 to down 16,000 briefly. So we did see a swing of about 13%, 14% when that market correction had taken place before it started rebounding again.
We did not witness a dramatic reduction in our book. And while the market moved back, we actually saw growth. So I think there is this -- there is a tendency for when the market corrects sharply for the book to come down, but it is not in the same correlation as the market decline. It is much more smoother in decline than actually the indices indicate.
We have been very -- we find that the MTF customers is very valuable in terms of revenue that they gave. There is a very high level of stickiness as well. We also find that the MTF customer tends to typically have multiple product relationships which is something that we really like. So as our cost of funds has gone up, we have been passing on this in a judicious manner because the spike in the cost of funds has been fairly fast in the context of interest rate hikes.
We did not want to sort of mirror that kind of an increase back to our customers. Approximately 25%, 30% of our cost increase is what we have transmitted yet. Probably all of it may not have been captured in the revenue numbers that you would have seen in this quarter because the last hike was done only, I think, 15 days or thereabouts before the quarter ended, less than 15 days actually before the quarter ended. [ Foreign Language ].
So we keep looking at opportunities to keep in a calibrated manner, passing on the increase. We do not want to give it a complete shock because it's a very valuable customer. So that's how we are looking at the MTF business. We have a 23% market share. I think it's a fairly decent market share to hold. We will be happy holding that market share. It's certainly not very easy to grow from this number.
Market itself, as volumes increase as participation increases over time, I think, should also start increasing. So that's how broadly we are thinking about our NPS strategy.
I'm just going to swing this call to Vishal. He may want to add a few more points.
Yes. So I mean, just to give some comfort on numbers, whether we are getting new MTF customers still because last time around the same time, we had similar questions whether this book will continue to grow and whether there's a headroom for this book to grow.
So the last year number of unique customers who have traded in entire 12 months, we have done 20% more than that number by quarter 3 end. And we have one quarter to go. So I think comfortably, we will register a growth in terms of unique customers trading in MTF in this financial year.
Second part is the seasonality of the MTF products, I say, I mean there are 2 benefits which comes out of MTF. One is in form of interest and second is in form of brokerage when the new positions are created or churn happens.
In a muted period like this, in a consolidation phase of market is trending down. As we just said that the book doesn't unwind in the same proportion, but the interest income continued to accrue. So I mean these are two component ones, of course is a seasonal, which will get impacted with the market condition. But the second part is the interest, which continue to accrue even when the volumes in the markets are not too high.
And Prayesh, moving to the second [ question ] here. So yes, as you rightly noted, I mean, the SIP flow has gone up, but the share is still lagging. We are cognizant of that, what we are doing is that we are actually also streaming the team over there, and we have taken a couple of more initiatives to kind of get the SIP on a market share basis up to grow at a higher care. The growth momentum is there. However, it is at a -- for this quarter was lower than the market growth.
Also, we are -- what we have also been doing is that after the launch of the money market, there has been a lower ticket size volume, which has also gone up. So in terms of the number of folios, there we have seen an increase. But yes, on the flow basis, we have lost a bit of market share. We are kind of correcting that in terms of 2 initiatives. One, a bit of strengthening of the proposition over there in terms of the teams and the way they are engaging. And secondly, also by our low-touch digital reach-out plan that we have put together. So these are the 2 initiatives, and we are hopeful that we should start seeing incremental growth.
Harvinder, what was the reason for the fall?
Folios and the gross value, the market share is up. The unit SIP count is down. We believe that's because I think more customers are still going on the lower ticket direct plans. And we will be working on how to tackle them. And we hope by next quarter, we should be able to catch up on that market share.
Prayesh, you have any further questions?
And I just wanted to check what were the reasons for the fall in the -- fall in the market share, it's has been for a year now, almost a year now that -- while the industry has really seen a lot of traction on the SIP book. But we, first of all, saw some decline in absolute terms on the forefront and then we are also losing market share. So what were the reasons that we could you would ascribe this to?
So Prayesh, see, if you look at the broader industry level, there is definitely a trend of tech-based lower ticket size, direct plan as well. So that is gaining traction, that have gained traction and that have contributed to a fair share of SIP volume. So the trend is that the ticket size could be lower. The volume of such folios is higher. The number of customers are higher and the choice is more there. So that has been an industry trend, which has led to a bit of a market share fall in our case, but these are the initiatives that we are putting in place to counter that. But primarily, that would be one of the reasons.
Can I slip in one more question?
Sure.
Yes. Just on the wealth business front, like if I look at the yield, they have been declining. Sequentially, they have declined for both transaction and recurring assets. And so what's the reason for that? And how much of our assets are actually brokerage assets, basically the brokerage [indiscernible] brokerage or the demat account AUM that would be sitting there?
So from a yield perspective, if you see our recurring revenue yields have actually gone up. It is only on the transactional side that there's been a decline because the growth of AUM has been sharper than the growth in the revenue in the transactional assets.
Now just to also kind of elaborate on what our transaction assets would mean, transaction assets could largely mean demat, which is the equity broking assets. You will have fixed income, all the bonds, which are all transaction in nature. And you will have any other product, which is typically does not give trade.
So currently, the transactional AUM is almost 85%, 86% of the overall book, out of which I would say a large part of it is the equity demand because given that our customers are all first generation HNI, there is a pension, there is an affinity for growth assets, which is typically in this case is equity.
The next question is from the line of Aejas Lakhani from Unifi Capital.
My first question is on prime charges. So you mentioned that you've only moved a certain set of very valuable customers to the lifetime INR 999 plan. So out of the 1.16 million customers you have in prime, could you just share around how many have moved to -- has this migration to the INR 999 for the valuable customers already taking place? Or is it yet happening that's one.
Within that -- these balance people, they were paying the INR 299, the INR 999, INR 1,999. So do those still continue and if you could quantify roughly what is the share that is coming from this recurring portion? And what is the nonrecurring portion?
And third, on the price bid is that -- how do you expect to migrate the customers more towards prime? Because you've seen that number being constant for 2 quarters. So could you just clarify, sir?
Yes. So as far as prime customers' market, I mean, high-value prime customer market share is concerned. In the overall 11.5 lakh subscribers, I would say about 30% customers having our high-value prime which are INR 999 or above till, I mean, INR 4,999.
As far as migration is concerned, I would say that these plans are available and we are aggressively marketing it also to the existing set of customers also. So more or less, I would say that the customers with good awareness have already migrated to the new plans. However, a small portion of the customers in the existing INR 299 plan or in a traditional life secure plan will continue. But I would say that largely that phase is over, where the aggressive movement of customers from a lower-value prime or non-prime segment to prime happens, so that period is for almost [indiscernible].
Got it. So essentially, the prime revenues -- prime charges revenue are 70% of the 11.6 lakh customers, which will keep giving us some recurring plus and Neo Prime customer additions. Is that understanding correct?
Absolutely. Absolutely.
Got it. The other thing is Mr. Chandok if you could mention that the way we've been working on this new product for the more youth-oriented which has stimulated the discount broker. So how is that product and platform tracking? And when do you expect to launch that?
Yes. So I think the teams that are working on that, Ketan is the person who's actually driving that. That product propositions have come up pretty well. We've seen demos of this. We hope sometime during the course of this calendar year, we will be doing a soft launch of it and then making a formal scale up through a formal launch this year.
And sir, this will be in the same brand or it will be a sub-brand thing powered by ICICI or something to that extent? Or will you hold it in the same [indiscernible] ?
No, no, no. It is going to be a new brand with -- powered by ICICI kind of -- ICICI direct kind of approach.
Okay. And Chandok you mentioned in your opening remarks that you disburse INR 1,000 crores of loans for this quarter. You mentioned this was higher than INR 1,000 crores you have done in which period?
FY '20. We did in the entire '20, which we have done in this quarter.
Got it. And sir, could you also mention that the MTF book, your colleague mentioned that you've seen 20% more customers in this year in the MTF book -- unique customers than you did last year. But is it being driven more by increasing number of customers or the value per borrowing has gone up?
No, I'm saying -- I'm not talking about value. I'm talking about unique customers traded -- unique customers trading in MTF but that unique customer selling [indiscernible] that number has gone up by 20% in comparison to the whole FY last year.
Got it, sir. But is there also an increase in the book size that each of these customers is taking? Or is it broadly constant?
On the book side, you see, today, we stand at about 23% market share. So we have seen the percentage gain also in the book. Our interest is to have more number of customers other than having...
I think your question is whether the book is concentrated or whether it is granular. The answer is that it is granular.
The next question is from the line of Madhukar Ladha from Nuvama Wealth Management Limited.
Good evening. So just a couple of questions from my side. First, if I get it -- have I got this correctly, derivative broking is 37% of your total broking revenues? So cash is still about 63%, right?
That's correct, Madhukar.
And one thing that was surprising is that Neo clients are not growing. So I wanted some comment around -- given that our total active customer base right now is about 2.7 million customers. How many of the -- how many of them really trade derivatives? And is 0.25 million customers that are Neo customers, what is -- what percentage of the derivative trading customers have actually already taken Neo? What is your expectation? How much could Neo grow? Or how much should Neo grow within the current customer base?
Yes. So Madhukar, so I'll give you a sense. Today, the Neo adoption in terms of volume can be gauged from the fact of the contribution to the trading ADTO. Today, we have grown to about 65% to 70% of our portfolio now coming through Neo.
If you go by the benchmark of, let's say, prime, prepaid, that was our first pricing proposition that we had launched about 3 years back, it took about 2 years, and it has now stabilized at about 70% coming from that portfolio and 30% coming from non-prime portfolio.
So today, the volumes have been 60% or 70% in Neo. So at best 30% is left in the non-Neo customer base. It may travel the whole distance every quarter because we are seeing incremental adoption even now. The 65%, 70% was lower in last quarter and so on and so forth.
Or maybe there could be a few customers at the end of 1 or 2 quarters down the line, which could continue in the non-Neo manner. So broadly about 70%. That's the mix for today in terms of volume.
So even in the prime proposition, it has made -- it has been made for derivative traders also. There are certain benefits which we give in time and prepaid are not I mean, given to Neo without charge, whereas prime, it's a full package. If you take prime, then there are many, many benefits which you get along with the proposition. I mean we have kept both the plans equally attractive, and there are certain customers who will continue to love to win prime and prepaid.
Right. And see, prime and prepaid is about 66% of the revenue. And derivatives is about 37% of the revenue. Now this -- would Neo also form some part of the fragment prepaid? I'm guessing it was, right?
So Neo, Madhukar is a plan for traders. Prime prepaid are essentially targeted as investors or equity customers. So for an equity broking revenue perspective, prime is more relevant. It's possible that a customer may have a prime membership as well as for trading [indiscernible] it is possible. But the prime revenue is primarily on equity and...
Will you consider derivative revenue when you compute prime revenue?
No, no. We do consider. I'm just saying that the large proportion of prime, it is centered around equity investors. It is quite possible that -- I mean our customer is taking equity in prime, he is also taking derivative, continue to be in prime or he has opted for Neo, which is even better. So it is possible, but the main target of a prime customer is an equity investor, the main target of Neo proposition is a trading investor -- trading customer.
The next question is from the line of Sahej Mittal from HDFC Securities.
So I mean, a couple of questions. So what percentage of your customers you're acquiring in Tier 2 and Tier 3 cities are directly starting off with derivatives trading? And what's their wallet size? That is one.
And how is this panned out given that you're already trading customers from Tier 2, Tier 3 cities in the last 2 -- in the last 12 months? So that is one.
Second is around what were the tax spends for the quarter versus last quarter? And what is the outlook on this front? Are we done in the near to medium term in terms of tax spends on our app other than the things which we are incurring on the new app, which is about to get launched.
So this is Ketan here. So are there tier -- acquisition happening from Tier 2 and Tier 3, I would say 2/3 of acquisitions are happening from Tier 2 and Tier 3 cities. Roughly, we see as the investor -- as the behavior of the equity customers are, I would say, most of the customers would start with cash equity as the first transactions. Over a period of time, we see customers getting into more riskier transactions, including intraday equity and also derivatives.
But the customer starting as derivative is the first transaction. We don't really track it in that fashion. We look at the customer's progress over a period of time. And look, roughly, our experience is that roughly 10% of the equity traders move to derivatives over a period of time.
Right. And on the tax spend?
Yes. So on the tax spend, Sahej, this quarter, had a growth -- sequential growth of about INR 12 to INR 14 crores. The overall quantum was about INR 30 crores in terms of operating expenses.
Your other question was that whether we are completely through with larger expense, no. There are some areas which we actually are going to invest in going forward as well. We suspect that it will be another 4 quarters at least, and these are largely in the area of capital expenditure. That is pertaining to some of the new data center migrations that you are doing, moving to cloud and some of those initiatives which will give us agility and modernize our tech stack as well.
So we expect another 3 to 4 quarters of higher CapEx spends.
Can you quantify the spends?
We are looking in the range of about -- let's say, about INR 100-odd crores in CapEx.
This is for FY '24?
So we have not put out exact numbers, financial year wise guys, it's just directional.
Got it. And some color on the customer drop-off. So for the -- also for the overall industry, the drop-offs have started in the last 3, 4 months. So for ISEC, what has been the case, I mean, because the drop-off has been taking place in both the segments, including i-Secure planning and Neo plan, so if you can share the details on the quality of these customers who are dropping off, whether these were derivatives traders or investors? And also whether these were ICICI Bank customers or non-ICICI Bank customers? So just wanted to understand what was their AUM for ISEC?
Yes. So let me just break down the answer into 2 parts. One is the industry specific issue, which also obviously will impact us. And second is something that we are consciously also trying to do. In the industry, we have seen that the activity level has come off. We had seen a lot of exuberance. Last year, we saw a lot of retail customers come in -- new retail customers. The markets were also quite supportive, conducive. And that level of activity has definitely come off. There's a bit of sentiment as well.
So the industry as a whole, as you rightly pointed out, have seen a drop in activity levels, NSE active if that were to be taken as a barometer, although, as we have stated in the past, we don't look at alone as a measure. That has come off, and it has been declining for the last 2 quarters.
So that definitely is one of the portion. So a number of people and that amount of activity that they were doing last year in the kind of environment that was there last year are definitely lower. This is one phenomenon.
Secondly, as Vijay, you did at the start of the call in response to a question, that within our digital channels, there are multiple channels, and we are concentrating on channels which -- now with the experience of 6 quarters of acquiring customers are more prone to a longevity experience with us. That is what our focus is.
And we are muting consciously some of the channels, which are not having a higher level of repeat transaction or investing activity. So that is something that we have taken as a part which is also impacting [indiscernible] active customers. So broadly, I will classify this into these 2 parameters.
It is agnostic. The first parameter is it's agnostic to channel. All across, we have seen a bit of moderation in activity. However, these customers -- the second initiative is, by definition, linked to more digital channels.
You also spoke about AUM. My sense is I don't have the number on top of my head right now, but my sense is the numbers were -- the customers were dropping off and they are not doing their second transaction earlier would be more of younger customers, newer to market and lower or maybe no AUM as well because they would be the first transacting customers. That's what our sense is. Our franchise, both if you look at our wealth franchise in terms of AUM or the overall franchise in terms of AUM, they have consistently been registering growth in terms of assets over the last, if I remember correctly last 7 to 8 quarters or maybe more.
Were these derivative traders or any cash investors who are turning inactive for you?
So derivative traders on our platform have been showing sequential increase, actually. So as Ketan said, most of the people who join us start off on the cash side and over a period of time, a percentage of them turn into F&O traders. Because most of the people who are dropping off tend to be the recently acquired relatively less interested channel customers, which is what we have started muting.
Most of our dropouts are low/no AUM customers who have probably done 1 or 2 minor cash transactions. Derivatives on the other hand, is continuing to show a growing number. We are seeing every month, the numbers increasing compared to the previous month.
So the persistency for the derivative customers is quite high is what I understand?
Actually, I don't think we can conclude that yet. It is a combination of ability to increase the derivative customers at a higher pace than the attrition. I think one should look at it like that. Rather than to say that the persistency is high or low, I think we will wait to watch before we conclude it.
The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.
Sir, could you just give us a breakup of the insurance products, which you have sold this quarter in terms of par, non-par protection? Is it possible?
Yes, Prateek. So I don't have the exact number, but I'll try to give you a sense, roughly about 60% to 70% would be ULIPs. Of the remaining 30%, it will be primarily non-par followed by a smaller part. The exact breakup of 30%, maybe I cannot give you.
No, no. [indiscernible] secondly, just a clarification. Prime customers, what would be the renewal rates in the sense next year or the persistency of this renewal rate?
So Prateek, I'll just clarify one thing. As Vishal explained a while back, we have launched some of the plans which are lifetime prime plans. Today, in our bouquet, we have 2 plans, which is a INR 299 and INR 900 plan, which are the only renewal plans which are there. In those plans, the renewal rates have been upwards of 85%.
And of the 66%, which you called out was a prime plus the prepaid ones, how much would be these lifetime customers, sir, over there? Is it possible?
So overall count, which we have given -- note that about 30% of our customers in the total prime base are high-value prime. And going by the activity level, we don't -- I don't have the number right now, but I can say that definitely the share of high-value prime customers or the lifetime prime customers would be higher and the ticket price will also be much higher.
So our sense, Prateek, just to add is that of the prime revenue, let's say, majority, more than a majority, 75% to 80% of the revenue would be coming from the higher ticket prime customers. In terms of the number of subscribers, the concentration will be more towards the entry plan, INR 299 plan.
[indiscernible], the revenue skewed towards the higher end of the plan.
Got it. And how do you recognize the INR 999, is it recognized upfront or you amortize it over 4 quarters or how is it?
Amortize over...
4 quarters. Okay. Okay.
Sir, last 2 questions. 1.62% yield on the recurring part of the revenue on the wealth management outset, which products are these sir if you may help us understand.
So these would be largely all [indiscernible] giving products like [indiscernible] from AIF, CAT III, CAT II, [indiscernible] from PMS, [indiscernible] from mutual funds and from MTF.
Got it. This is the margin [indiscernible] Got it. And sir, we have our own PMS, right, which has done wonderfully well in terms of AUM. The data which we have disclosed. Is there a conflict of interest here or that's not applicable?
No, not really because the way we have looked at this PMS is largely from growing our [indiscernible] giving AUM only. And there are broadly 2 broad components, the way we envisage in terms of growth of our PMS business. Currently, also of the payment book, we have almost 47% of our book, which is through multi-asset right, which is nothing but an asset allocation model where you're able to offer different kinds of products, including direct mutual funds, ETFs, et cetera, and you are able to charge the customer.
And the second is given that we have a large book of direct stocks or a demand book and a lot of it is passive. There are customers who are seeking active management and which is the other strategy. So both are very integral to the entire wealth management business. And hence, we do not see it as conflicting.
Also from a wealth margin perspective, when we go out to our clients, it's an open architecture model, which means that when we position we have third-party PMS as well. And while we haven't disclosed our AIF/PMS book, but it is large, and I would say that this number would be lesser than 10% are in-house in context of the overall whereabouts.
Got it. And could you talk about your average ticket size on the MTF book, sir? How much is it this quarter?
NPS, we have about INR 6,500 crores of the book and the total number of customers would be of the order of about 80,000 to 90,000.
Okay. So that is quite a high number, isn't sir? In the sense [indiscernible] industry average, right? Look like INR 8 lakh of average ticket size per customer. Is this within the industry norms or this is slightly higher?
Customers have open position as we speak. And the book size as [indiscernible] spoke , I mean the funding size is about INR 6,500 crores, so we can get [indiscernible].
Sorry, it will be a bit higher, Prateek. That's correct. For our customers, the average book size will be higher. I think if you go by the total -- I mean the affluent base on whatever parameter you look at it, we do have a slightly higher asset -- overall asset at INR 6 trillion, I mean in terms of industry comparable even within wealth, I think we'll be one of the largest, we are. And similarly, on the MTF as well, so we do have the ticket size, which could be slightly higher. I mean not everyone discloses the number of active customers.
I think it would be fair to say that we would have a higher -- we have more affluent customers than other players who offer MTF.
So of [indiscernible] customer mix, which is driving this number?
Yes. I think it's a fair conclusion to say that we would -- we are likely to be higher. I don't think any other player has got INR 6 lakh crore of assets, though they don't disclose it, but your sort of comment maybe reasonably correct.
And also, Prateek, if I may add to the comment that you made [indiscernible] it's a function of the customer base. I think I'll just add to that by saying that, see, this is also a proposition which helps us acquiring HNI customers. So it is also relevant to get Neo to I-Sec customers because people value the ecosystem that we have created around this particular product. And thus, by ecosystem, what we mean is that you, first of all, have a very promising and competitive product on the strength of our balance sheet crediting, et cetera.
The second is that you support it actively by research, which is customized or specific also to MTF. So that's the second thing that we have started doing.
Third, it's a very online risk-managed product, which also offers well for scale. So some of these things help us actually get new customers as well. So not only [indiscernible] new customers on the strength of this proposition.
And your net yield on this product is sir how much, if I may ask?
So it is over plus/minus something from 3%. That's what we try to kind of -- sorry?
3% [ quarter period? ]
No, no. NIM is what I'm talking about. Annually.
The next question is from the line of Deepak Sonawane from Haitong Securities.
Am I audible, sir?
Yes, you are audible, go ahead, please.
Sir, earlier in your remarks that you mentioned that we have seen incremental growth in a number of customers trading in F&O right? So and -- as of December, but if you calculate at our NSE active plan [indiscernible] around 31%, right? So [indiscernible] new plan customers are having some kind of higher activation rate than as compared to [indiscernible]
Sorry, I'm not sure Deepak I followed. So what you're saying is that we have seen growth in our total number of derivative customers, yes, that's correct. We have kind of also disclosed that in terms of a normalized number. So that is correct. From there...
Can you just repeat your second part of the question? What was the question?
Yes. My question is our Inter portfolio is operating around 31% activation credit, right? So do we see that -- I mean can you confirm that the Neo customer base activation rate, I mean, those customers, the attrition rate is slightly higher than -- I mean, it will be [indiscernible] as compared to the overall 31% rate?
Normally, that would be correct, Deepak, but the activation rate within the Neo customer base because [indiscernible] is a proposition which are our trader or a customer is specifically opting for carrying out his trading activity. So we do experience of the people who have looked at Neo. This is a higher activation rate. I can maybe come back to you with numbers. I don't have within Neo the activation rates right now.
And if you can just give us color on the prime customer activity [indiscernible]
So prime, we have about 1.2 million customers. And yes, the rate over there would be very high actually because they are very high-intent customers. My sense is it will be upwards of 70% on this, at least.
I just want to make one observation. I think this activation definition, which we are following is a 4-quarter or a 12 trailing month definition. We find a number of customers, by definition, become inactive, but they reactivate themselves when they have to trade.
There are enough and more situations of reactivation. So to simply confine our inactive customer as debt and gone may not be a very correct representation. I just want you to keep that at the back of your mind.
Okay. Okay And my second question is regarding our employee expenses for the quarter. Are we seeing almost around INR 100 crore growth in the expense on quarter-on-quarter basis in Q3? So this is kind of aberration [indiscernible] continue, I mean even in the next few quarters as well.
Sorry, just to correct the numbers Deepak, we are not seeing a INR 100 crore increase quarter-on-quarter.
[indiscernible], sorry.
Yes. So as we have highlighted over there, if you look at the exact numbers, so last quarter, it was about INR 186 crores. This quarter, it is about INR 176 crores, but there is a one-off in that of about INR 7.2 crores, which is a revaluation of retirement benefits. So if we normalize it, it is almost flattish. I mean, INR 186 crores to about INR 184 crores.
[Operator Instructions] The next question is from the line of Dipanjan Ghosh from Citicorp.
Just 2 questions from my side. First is on the mutual fund yields. If you can give some color on how the negotiations on fresh deals are shaping up for flows into existing schemes versus, let's say, how they were 2 to 3 quarters back? Obviously adjusted for the AUM size of any particular scheme. And also in this regard, if you can give the -- if you have done [indiscernible] during the quarter?
Second question is more from a cost perspective. You highlighted that your sourcing strategy in the non-ICICI bank or other bank channels, I mean on the digital side, it has changed a bit towards acquiring customers with a higher lifetime value or higher overall revenue over a period of time. Now if my understanding is correct, this entails higher upfront acquisition cost and maybe also higher retention cost. So in this regard, can you give some color on the cost trajectory of the company with regards to customer retention more specifically?
And last one data keeping question. If you can just give some color on how the incremental new business deals on the insurance side are shaping up given that now the expense of management guidelines have been -- have been kind of mentioned by the regulator?
So we'll go one by one. The first one is on the mutual fund. I think that you had asked.
Yes. So the mutual fund yields -- so there were 2 questions in mutual fund. One is the mutual fund yields and whether we have seen or distributed any new NFOs for the quarter. So I'll take the first one. The yields have been relatively stable. They're slightly inched up, but they are stable at about between 60 to 65 -- 66 bps. That's the mutual fund lead that we are looking at. The growth in mutual fund, AUM is the reason why the revenue has grown.
For the Neo NFO question that you asked, I'll just hand over the dais to my colleague, Guha.
Yes. So after SEBI has put a ban for the first quarter, after that last 2 quarters, we have had a lot of NFOs and especially NFOs that came in the quarter 2, they have been supported but market went up. So this quarter, NFOs are doing well. Even as we speak, there are 2 or 3 NFOs running of big entities. And NFOs do help us acquire a higher order AUM at a higher ticket size, and it effectively helps us in adding yields.
You also asked a question on the insurance yields, that circular is yet to come. They have just noted an idea on revenue share metrics sheet.
Yes, it's under consideration still [indiscernible] because it's not yet a circular.
Circular that has come has allowed us now to go from 9 plus 9 plus 9 partners in general insurance, health insurance and life insurance. But the revenue share, and that will be very helpful for us because we hope we'll get incremental revenues coming with the realignment of commissions.
But none of that is actually reflected in the current quarter revenues.
Dipanjan, you also had a question on our digital strategy and related to that, the cost of acquisition and cost of retaining customers.
Obviously, the efforts are towards acquiring a customer who is high on a lifetime value and also consistently transacting and active. So this cohort of customers also will have various sub cohorts, I would say. Sub cohorts like there will be an [indiscernible] campaign, which will be also acquiring customers. Some customers will be coming from advert campaigns of Google, discovery campaigns of Google and also organic client acquisition. So obviously, the cost of acquisition of individually, each of these channels are very different, like organic customer would come at zero cost practically. And some customers would obviously come at a higher cost.
But from a -- we look at the customer acquisition cost from the lifetime value that we get from the client. And if the lifetime value is high, the acquisition cost, even if it is high, it is okay. There's no real problem with that.
The second part of your question was where we spent high on the retention of these customers, if I'm correct. So I don't think there is any specific spend on retaining our customers. Once they are in the -- on the platform, largely most of these digital customers are on their own, they transact on their own, many did their own research and make their [indiscernible] investment or trading conditions. So I don't think there is any cost involved specifically for digital customers on retention side.
Sure. Just one follow-up, if I may, on the first question?
Yes, go ahead. Yes, sure.
You mentioned on the NFO piece that it is high ticket and yield accretive. So I just wanted to get a sense, are you able to lock in the NFO in for a quantum of type, let's say, 2 or 3 years? Or is it like -- it keeps on changing?
The leads on NFO are same as investment in any other normal mutual fund team as well. And however, because NFO gets marketed well by the manufacturer, it helps us attract more clients to us and people who apply in bulk, come to us and apply. So -- it helps us in realization of higher order yields with these clients. But yields are same for our NFO and for old schemes. There is no difference.
[indiscernible] NFO or anywhere in mutual fund commissions or renovation is completely trading. So there is no either any portion of upfronting or any portion of lock, so it's completely trade.
I was just trying to understand if the quantum differential between NFO versus, let's say, yields in your existing schemes are significantly different? And hence, it can be beneficial if your NFO flows are significantly higher over a period of time?
Yes. So yield is not different, but yes, the quantum could be different, and therefore, the absolute [indiscernible]
The next question is from the line of Sanketh Godha from Spark Capital.
Sir, in the presentation, we have disclosed that Prime contributes around 66%, 67% of the total retail revenue. So intact if you want to know the same percentage for the Neo customer, how much they contribute to the total revenue? Because we said that delivery to contract to contribute around 60% to 70% of EBITDA. So just if you want to quantify that number for the revenue, that will be useful.
And second, to the extension of this question, out of the 0.25 million customers of Neo. What is the overlap in prime or employing customer or they are predominantly I-Sec customers?
So I'll take the first question, Sanketh. Revenue contribution would be roughly off -- of Neo would be roughly about 28% within the derivative. As I said, that Neo is a trading product. So the denominator, you cannot take the entire equity and cash base as well. Within the derivative portfolio, the revenue contribution is now about 30%. The volume contribution we have already discussed earlier, roughly about [indiscernible] That was the first question.
The second question that you had was that what is the common base between prime and Neo? We would not have a lot of customers comment because as I was responding to a question earlier, prime is more targeted at equity investor and Neo for traders. But having -- I can come back you with the exact number, but my sense is it might not be more than 25% to 30%.
Got it. Got it. Okay. And second question was with respect to the wealth number of clients, which increased from 71,000 to 76,000. So one would be because of the natural increase in INR 1 crore number. Financially, organic growth, which is by adding number of Neo customers, which last quarter was INR 1,500 crores, 1,500-odd people. So that number in the current quarter would be what?
Sorry. I didn't get the last part of the question.
See, I was saying that the growth in the number of people in the wealth has been from 71,000 to 76,000. So out of which the people who got added organically, which means they became a customer of I-Sec [indiscernible] which is I believe that number was 1,500 last quarter [indiscernible] that number in the current quarter might be what?
Sanketh, your voice is fluctuating. Can you speak with a handset?
No, that's okay. We got the question. We got the question. That's okay.
Yes. So, Sanketh, as I had explained earlier as well, the way we onboard a customer, there are 2 broad engines of onboarding. One is from deeper mining the existing clients. And the second is from acquisition of a new client. With the acquisition of a new client also, there are 2 parts to it. One is that the customer comes with a INR 1 crore plus check. Those customers have probably 250 of them in this quarter.
But there are a lot of other customers who may have got onboarded, but they do not come because the definition of an HNI customer is a customer who crosses INR 1 crore with I-Sec which means that we may have onboarded them, but they do not reflect in this number. And those clients through deeper mining gets upgraded in subsequent quarters. And that -- and these 2 components really combine to make the growth from 71,000 to 75,000.
So Sanketh, if I may just paint a slightly larger term trend, it would be fair to say that in a year, in a financial year, we are able to acquire anywhere between 1,100 to 1,500 customers in 1 year who will start a new I-Sec relationship with more than INR 1 crore of starting value. Actually, the average is higher, but at least INR 1 crore. So that's roughly about 1,000 to 1,500 and on a quarterly basis, there will be roughly about 2,500 customers who have kept on getting upgraded. So broadly, the run rate is what Anupam was saying in an earlier question as well, about 10,000 to 11,000-odd customers through, let's say, what we call investment going up, upgrade or internally and about 1,000 to 1,500 from Neo to I-Sec customers. I hope that clarifies your...
Perfect. This answers the question. And Harvinder one small data keeping question. So if I want to ask you the NIM, what you made in FY '22 and second quarter FY '23 and what you are making today in [indiscernible] I just wanted to see how much compression it has happened? And by what time you expect that to recover in subsequent quarters?
Yes. So Sanketh, exact numbers we have not put out, but I'll give you a directional sense. We try to get around 3% NIM. Today, it would be slightly lower than that.
A year back, we would be about 100 bps higher than that. Of the compression, we have had cost increases or borrowing cost increases of roughly about 150 to 200 basis points. And we've been able to kind of pass on roughly about 30% to 40% of that. And the remaining is as Vijay said earlier also, in a calibrated manner, we are looking at taking actions to pass this off.
The reason why I'm asking this question [indiscernible] given our ticket size is a little higher in NPL. So how sensitive these customers are to absolute interest rate what you charge? I believe that number today calculated is 9.6%. So suppose if you want to increase it to 10%, 10.5% to improve your NIM whether the growth in the NPL book would take a back seat or not because you got reached...
I got -- I got your question. Okay. So just to give you that sense, in the last 2 quarters, we have taken 5 corrective actions on NIM. Each corrective action has been at least 15 to 20 bps corrective action. That's what we have tried to do. The book has held. It's a very conscious part of our monitoring strategy, Vijay elaborately explained that.
Sanketh, more than the amount, it is a shock factor. You try and do it in one jerk you will probably get an adverse reaction, but doing it in a more graded manner that we have done, we've seen book actually not only hold but actually steadily increased.
Conscious is that you cannot do a transmission of a back-to-back mirror shock.
Thank you very much. That was the last question for today. I would now like to hand the conference over to management for closing comments.
Thank you very much for a very active participation. Really appreciate all your questions. While some of you asked questions, I think there were some data points which we said that we will probably give you an indicative and approximate response to it. We circle back separately through our IR team and give you very specific responses to that. If there are any specific questions that you may have as an afterthought, please feel free. We'll love to engage with you. I love to spend time with you and respond to whatever questions you may have. Really, really appreciate all the support you've been giving us. Thank you very much, and good night.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect.