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ICICI Securities Ltd
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Thank you very much. Good evening to all of you. And welcome to the ICICI Securities earnings call. This is to discuss updates on our strategy and the Q4 FY '20 financial results. But before I get into the results, I just wanted to ask you, I trust all of you and your families are staying safe and healthy, and I do hope it remains that way for all of you. Well, I begin by talking about the fact that it is on this very day that 1 year back, I had embarked upon the journey with this great institution, ICICI Securities. And as I complete the first year today, I'm compelled actually to reflect on the year that has gone by as we get into our results quarter. So it has been, I think, in many ways, an eventful year from many perspectives, be it the macro environment, be it our own industry, be it our own company specifically. And it has been an exciting journey, and I believe that we have been able to transform ourselves into a stronger, a more robust, a more open, a more agile version of ourselves, ready to capitalize on the opportunities that lie ahead. So first, let us take a look at the macros and the market. To our mind FY 2020 can best be described as a tale of 3 very distinct seasons -- 3 -- tale of very -- 3 very distinct phases. In the first phase, which lasted till about September 2020 (sic) [ 2019 ], we saw global economies facing slowdown fears. We also saw India's GDP -- headline GDP numbers slowing down quite dramatically. It touched 5.1% in quarter 2 FY '20, a 26-quarter low back then. All this sounds like such a high number today, but it was a 26-quarter low back then. And as a result of all this, financial markets remained weak in most part of FY 2020. Then the second phase began sometime in Q3 of FY 2020, which extended during the early part of Q4 of this fiscal year, where we saw green shoots emerging, fears of slowdown, recession in the U.S. market had faded by then, trade tensions between U.S. and China had started easing, interest rate regime was turning expansionary. All this was aiding the liquidity, and it was beginning to drive global financial markets northwards. And at the same time, Indian government had started -- has announced a number of policy measures in the FDI arena. They started releasing funds for recapitalization of the banking sector, public sector banks. Corporate tax rates were cut, and several other measures were taken for the real estate sector with an idea to boost growth. Clearly, positive intent was demonstrated by the policy measures, and it was also coupled by the fact that we had benign global liquidity. And therefore, liquidity started flowing into emerging markets like ours. It started attracting flows. This is despite the fact that the macros remained weakened. So we started seeing a broader market participation with some traction coming in mid- and small-cap companies. Indices started hitting lifetime highs with NIFTY touching high of 12,430 and Sensex hitting a high of 42,274 as on January 20, 2020. And then gradually, the third phase began, and the third phase commenced probably early March, and the tide turned very, very rapidly. Starting with, to our mind, the crude shock and then the local events like the Yes Bank event, which played out in that period, and it was followed with rapid proliferation of the COVID-19 pandemic.So today, the total number of COVID-19 cases have topped 3 million globally. And in order to flatten this curve, many major economies around the world have imposed lockdowns. The disruption that is caused by this virus is unique; unprecedented; in many ways, impacting supply chain, impacting demand, giving market shocks across. And in light of this, we have seen that there is, in some sense, a coordinated response being taken by central banks and global economies to overcome this weakening sentiment and macros due to COVID. Flight to safety has triggered a major sell-off in all major markets. Emerging economies also saw huge capital outflows, growing bond spreads and currency becoming weak. FPI flows from the emerging markets were actually close to about $59 billion, more than double the outflows that we saw in the immediate aftermath of the global financial crisis in 2008. NIFTY recorded one of the biggest quarterly falls, declining by 29% during the quarter, falling 23% in the month of March alone and as the foreign portfolio investors pulled out a record amount of $6 billion from the Indian equity market during this quarter.As a result of all this, large caps gave up all their gains, ending fiscal 2020 with a decline of about 26%, whereas the mid-cap NIFTY 100 and NIFTY Smallcap 100 Indices fell by 36% and 46%, respectively. So that was as far as markets were concerned. Now let me turn our attention to provide a perspective on the impact all this volatility and the virus COVID-19 has caused and the lockdown has caused on our business. So first of all, let me give a brief update on the context to the people who are joining from outside India. Clearly, the Indian authorities have followed an approach of a complete lockdown, with both state governments and center working in tandem and coordination. The government started with a 3-week complete lockdown on 25th of March, during which only defined essential services were allowed to operate with limited capacity. Thereafter, the government has continued extending the lockdown, albeit with certain modest and gradual relaxation.During this whole period, our company, which is linked to capital markets, comes under essential services and has been in operations consistently with whatever is the permitted staff that was allowed during this period of lockdown. And also the sales, our key priorities have been, first, to ensure the safety and health of all our staff and employees. We have also put our full attention on ensuring continuity of service so that we are able to engage with our customers through this period at all times. Thirdly it is to safeguard any unfavorable impact that an event of this nature can have on our financials, following a very prudent risk management approach. And as we have been doing this, we have moved into gradually a stage where we started identifying avenues to strengthen our business in the emerging times going forward and strengthen the business model as we are entering into a virtually -- a mode where digital is going to be center stage. So as we have been in this above pursuit, apart from all this, we also felt it was our duty and a key priority that as a responsible Indian corporate citizen to contribute to the fight against COVID, and in our own modest way, we have played a role. When it comes to employee safety, just wanted to elaborate that all our teams have been enabled with work-from-home tools so that they are able to work in a safe environment. We have also taken steps like rostering periodic sanitization, fumigation, et cetera, of our workplaces so that whenever they are at the work premises, they are working again in a safe environment. And I must use this opportunity to actually acknowledge the contribution that has been played by our employees, all our partners who are working with us and associates who have ensured that we have been able to maintain continuity of service for our customers during this rather difficult period. The second point I just thought I would elaborate is that during these times, we find that customers have an -- company needs to reach out to their relationship managers for advice. They want to take action on their portfolios by either taking new positions or altering their positions in line with the environment and their own risk appetite. And I'm happy to report that our technology team, the infrastructure team has ensured that during this entire duration, we were able to provide an unrestricted services where volumes actually started touching unprecedented peaks.We've been processing peak orders of about over 3 million, 3.2 million per day. Earlier, our peak used to be in the 2 million range. I'm told that this has even crossed one of the leading broking houses, equity houses in the U.S. They do something close to 2.7 million, 2.8 million. So we actually exceeded that large broking outfit in the U.S. by processing about 3.2 million orders per day. Simultaneously, concurrent users on our platform have actually started peaking. Earlier we had close to about 48,000 users. This is all -- now all crossed. We have sort of increased this number way beyond to over 65,000 users during the course of that quarter. As far as risk management is concerned, I would say the items like risk becomes very, very critical in times of high volatility like we have been seeing. And particularly so in our business, risk actually leads to brokers going out of pockets where margins that have been assessed at the time of taking positions may not be sufficient to cover the price movement. And during this period, proactive and real-time risk management, which is supported by a robust technology and prudent risk management framework that we have, becomes critical. And during these times, these capabilities, these policies help us tide over market volatility, and it has been able to -- we have been able to do this without any material impact.In fact, we entered into a mitigated risk mode in the month of March and systematically reduced our exposures to products like MTF and ESOP books. Our total combined book for these 2 products actually came down to INR 5.8 billion as at 31st March 2020, down from INR 11.5 billion that we stood at December 31, 2019. Similarly, I would say that we also adopted a very cautious approach when it comes to participating in the derivative markets in the wake of this extreme volatility. And as a result of this, we did a trade-off, and we actually allowed our derivative market share to actually come down, which we felt in the month of -- specifically in the month of March, the second half of March, which we felt was a prudent tactical trade-off in the current context.Talking about our business model. I would say that our business model is predominantly digital, and this digital business model has held us in good stead in dealing with the current scenario. We have a very wide array of products and services, which are available on our platform, and our clients consume these digitally and electronically. So 97% of our equity transactions and 94% of our mutual fund transactions are conducted online by clients themselves. This, coupled with a prudent risk management approach and a real-time ability to monitor risk complementing this digital capability.Along with this, at an overall level, we believe our business construct also has got certain inherent strengths, like having no balance sheet risk arising out of credit risk. We do not carry any physical inventory. We have a low receivable risk. We have high ROE and a strong liquidity position. In fact, during this quarter, we were able to use this liquidity to buy back some of our outstanding commercial paper that was issued by us in the past, which we did not feel was required as we scaled down our various products. So going forward, our focus would be to rapidly digitize more products to make them available online without the need for any physical presence. One such example is in the area of client sourcing. There -- definitely, there is a need for physical movement of meeting clients to open their accounts. This is how it used to be in the past. So we launched an ICICI Idirect Insta investment account, which is our end-to-end digital account opening solution for clients who can open it themselves without any need for any physical meeting.This process had one leg. This is the leg of picking up the power of attorney. And this also we have recently eliminated by implementing a digital POA version. With the help of this, now the clients can start transacting on our platform immediately after opening the account, and the need for physical interaction is completely eliminated. So this has actually helped us in maintaining our new client sourcing run rate despite the fact that our ground-level teams are unable to meet customers in times like this. A similar approach is being worked on product by product to make them fully online without the need to actually meet clients at all, meeting them either digitally or on -- simply on telephone. Last but not the least, our prayers and wishes are to those who are facing the effects of the pandemic, and we just wanted to update you that our group -- the ICICI group has committed a sum of INR 100 crores or INR 1 billion of which about INR 0.8 billion is towards the PM CARES fund and INR 0.2 billion towards the state and local authorities spends. Towards this, our humble contribution has been a sum of INR 10 crores or about INR 0.1 billion as part of our CSR initiative. And we have also played a role in the local community by providing certain personal protection equipment in the state to people who really need it. So moving on, as we have been handling this scenario in the manner I just explained, I now come to the performance for the quarter. Our company registered a consolidated revenue of INR 4,819 million for quarter 4 FY '20 as compared to INR 4,283 million for quarter 4 FY '19. So this is actually a growth of 13%, 1-3 percent. This growth is aided by our equities business, including broking and other allied income, that grew actually by 32% during the same period. Our profit before tax for quarter 4 FY '20 increased by 10% to INR 2,077 million, up from INR 1,889 million. Our total operating expenses, these are expenses excluding interest expense for quarter 4, increased by 7% over quarter 4 FY '19. This increase, however, needs to be viewed in the context of the fact that it includes a onetime contingency provision of INR 91 million, which we have created for our MTF and ESOP portfolio. As discussed and as a measure, that impact would be standing us in good stead, and also due to increase in the variable cost payout to our employees. Our interest expenses actually increased by over 100%, in line with the ramp-up that we have seen on our NPS and ESOP book. Our cost efficiency measures are helping us rightsizing the operations.Our employee count as at March end was 3,790, down 4% sequentially and 6% Y-o-Y. We have also reduced our branch count. Our branch infrastructure was down to 172 from 199 a year ago. Our profit after tax for quarter 4 FY '20 increased by 28% to INR 1,559 million compared to INR 1,215 million for quarter 4 FY '19, partly helped by lower statutory taxes. We are also happy to share that the Board has approved a final dividend of INR 6.75 per share. This is up from INR 5.7 that we declared last year, a dividend payout ratio of 66%. Therefore, considering the interim dividend that was paid earlier, the final dividend for the full year actually was now to INR 11 per share, which is up from INR 9.4 per share that was given out last year. So our return on equity continues to remain robust, standing at about 48% for the financial year FY '20. In quarter 1 FY '20, we had articulated our direction of transforming our business into a comprehensive financial services provider, catering to all 3 needs -- financial needs of customer, which is investment, protection and asset borrowing needs. And all this is powered digitally. In order to achieve this, we have embarked on an approach with a twin objective of strengthening our core business model and as we've been building for the foundation of the new business model that I spoke about. And we felt we will do this by focusing our attention on 5 areas of focus, which I've spoken to all of you in several times in the past. A detailed progress on all these focus areas -- those 5 focus areas that we have shared with you in the past forms an integral part of our presentation, which has been uploaded on our website. Let me right now just focus on the outcome of -- which are arising out of implementing several of those strategies under the 5 focus areas. So the first one is with respect to our client acquisition. One of the most important trust area of our strategy is to ramp up scale and value of clients sourced. Our acquisition and retention strategy towards this objective has got 3 prongs. I think the first prong is that we need a product design and a proposition which are relevant to each micro segment of the target customers. And it is here our deep understanding of client behavior, the preferences, ranging from risk appetite, frequency, pricing discipline, the importance of liquidity, which we have -- and so on, which we have gathered over 2 decades of dealing with clients in this market has helped us design and sharp shoot and target clients with very unique propositions like the prepaid plan, margin products that we have, liquidity-oriented products that we have like the eATM, the Prime plan. And more recently, we launched something called the Options 20, which is targeted at the derivative customer. So first is -- that was the first leg of our client acquisition plank.The second is the fact that we have built a multi-modal customer service architecture, which comprises of an online model and also for the very affluent clients supported by a relationship manager mode. The third and one of the most important prong of scaling up is scaling up this distribution and expanding our distribution capability. Towards this, we have worked towards increasing both the depth and quality of distribution by becoming a multi-channel, open-architecture, customer acquisition company today. So we have worked towards enhancing the quality of clients sourced to ICICI Bank, which is -- and one of the lead indicators of quality is the activation ratio. That is a proportion of clients who start giving us revenue in the same quarter in which they get acquired. Over the year, as a result of all these initiatives, the activation ratio of ICICI Bank to those clients has consistently kept improving from 26% in quarter 4 last year to 71% quarter 4 of FY '20.The impact of improvement of this lead indicator will be visible in the coming quarters as the lifetime value of customers improves drastically, if you're able to attract the right segment of the customer and couple that customer by a high retention franchise by offering these products that we have on our platform. Then we have also focused on digital acquisition of clients. Earlier in the quarter, actually, on February 25, we had launched our Insta ICICIdirect account wherein, as I described, we had gone open architecture with respect to bank accounts. And we have now also digitized the account acquisition process and the power of attorney process that I just explained a few times -- a few minutes earlier, doing away the need for in-person meeting altogether.So the company now need not open -- need not necessarily be only an ICICI Bank customer. He can be an any bank customer, and he can sort of link that existing bank account and other payment modes without any human intervention and the -- just ICICI Securities. And since this launch, we are also pleased to announce that the initial signs are quite promising. We have already opened, from the date of our launch, about 6,000 accounts till the end of the quarter. Since the quarter, I think the run rates have also started improving beyond -- much beyond this, and we started clocking about 1,000 accounts a day now. So this includes, of course, the accounts that our sales personnel are also -- been opening in the past. They have also shifted to a digital account opening process. So the digital account opening process has now crossed 1,000 accounts a day in the current times. Another lever of focus for us is growing through our business partners and alliance networks. So here, our network increased by about 32% in numbers for the quarter FY '20 compared to the previous quarter. And today, we have more than 9,400 network partners. New client acquisitions through this network actually increased by 73% year-on-year in quarter 4. Albeit we have to keep in mind that the base is still small, the percentage may look high. Now consequent to all these measures that I just described above, we added about 1.1 lakh new accounts during the quarter, growing our operational client base to about 4.8 million customers in all. And we were able to grow our revenue-giving clients, these are the clients which are activated, to 56,000 in this quarter itself, which was 26,000 in the last quarter of last fiscal year. Coming to our equities business. We have been successful in increasing penetration of our subscription and prepaid plan to 40% of our total industry active base as compared to 35% that, that was there in the previous quarter. The Prime proposition, which is a prepaid proposition, which was opened up for all our existing customers from 1st October 2019, continued to generate very decent interest. The total number of subscriber for this plan as at 31st March 2020, actually stood beyond a little over 3.1 lakh, adding 80,000 net subscribers in the quarter 4 that is what visible. So Prime has actually helped us improve our quality of sourcing and level of activity, as a result of which, despite the relatively low yields, the revenues have increased on account of improvement in volume. Our blended equity market share actually increased by 170 basis points Y-o-Y from 7.4% in Q4 '19 to 9.1% in Q4 FY '20. Our NSE active client base has grown to 10.8 lakh clients, a growth of 27% Y-o-Y compared to 15% that the industry has seen. So clearly, as a result of which, our market share in terms of active customers increased from 9.4% in quarter 4 last year to about 10% in quarter 4 this year, a 40 basis points gain in market share in terms of access.As discussed earlier, due to increased volatility, we had taken some proactive, conservative risk position in the month of March, as a result of which, there has been a decline in our derivative trading activity as compared to January and February months, bringing down our derivative market share by about 60 basis points on a Y-o-Y basis. So derivative market share stood at 8% for the quarter. So we have been able to, I must say, recoup some of this market share in the early days of April itself compared to the last 15 days of March because we have started gradually seeing a change in the level of volatility, and we've been gradually opening various products on our platform as well. Further, we are also in the process of launching our trading strategy formulation tool for derivatives. This is in association with a fintech partner. This will help customers to convert their views on stock or indices into actionable back-tested derivative strategy. So this would be launched quite soon going forward.Our interest income from ESOP and MTFs actually grew by 78% Y-o-Y to INR 335 million, while our Prime subscription income grew 44% sequentially to INR 79 million. Consequently, our retail equities and allied business revenues increased by 35% Y-o-Y to INR 2,915 million, driven by a strong growth in equity brokerage revenues of 28% as well as doubling of allied revenues of interest income and subscription fee. As a result of these, our equity business has become more broad based today, with allied revenues contributing more revenue than it did in the past. On the institutional equities front, revenue increased by 13%, 1-3 percent, aided by increased traction in block deals. Moving quickly to our distribution business. Our engagement initiatives are focused on reaching out to clients with a hyper-personalization approach digitally and at scale. Towards this, we segmented our client base using 400 product combinations and identifying 23 clusters for personalization. These have been identified by dipping into their transactions, analyzing their online behavior and preferences. These clusters are being used and would form the basis of forming this personalization approach of identifying such clients, reaching out with them, designing propositions, customizing them and for -- engaging them to come on to our platform and transact on more different product line items. This is supplemented by our efforts to expand product suite to meet various needs.So our mutual fund revenues for quarter 2, which were impacted owing to also the full year impact that we've seen on the TDR, declined by about 4% Y-o-Y on account of the lower yield and also decline in the AUM. Our focus is to grow net flows and AUM, and our gross flows grew faster than market, thereby increasing gross flows' market share marginally. However, it was redemption that we faced in the month of March due to the volatility in the market that we have to still deal with. A number of steps are being proposed to ensure that in the ensuing fiscal, we will further strengthen our mutual fund business. In order to offset the regulatory impact of the changes that have taken place in the mutual fund business, we increased our focus to certain identified nonmutual fund distribution products. Nonmutual fund distribution revenues increased by 13% Y-o-Y, mainly driven by growth in fixed income and also life insurance products. Our life insurance business revenues increased 7% Y-o-Y to INR 171 million because of the increased focus that we did towards protection and traditional products amidst the higher volatility, and in spite of very less business in the last 15 days due to lockdown, which is really the busiest period for the insurance business.So we have also expanded our loan portfolio to distribute 12 loan products now. Earlier, in the previous quarter, we've been distributing only 6 loan products. Today we've expanded it to 12 loan products. And the total loan disbursed through ICICI Securities during the quarter actually topped INR 2 billion during this quarter. Overall, I would say that the distribution revenues came in at about INR 1,155 million aggregated altogether. This was up 3% compared to what we experienced last year. Further, as a result of our initiatives on both the equities business and engagement initiatives on distribution business, we were able to increase our overall active clients now to 14.8 lakh in Q4 FY '20. During the ISEC Day that we had in February, we got a chance to meet some of you, and we discussed about our wealth management business. As stated there, ISEC wealth management business model is a unique brand platform RM-led model. What that means is that we have a large set of clients who have grown to become wealth clients over a long period of association with us. They value the brand and the platform and are then followed by the relationship manager in that order, which is quite different from the traditional wealth management models that exist in India. So this model has a deep strategic advantage to us as it gives us more stickiness, as is evidenced by the fact that more than 54% of the revenue coming from this segment actually comes from a client which was acquired 10 years ago. So it builds deeper brand association and relationship, and we believe that this model is scalable digital wealth management model. So our wealth management team today comprises about 300 RMs, catering to 32,000 individual wealth clients. Each of these wealth clients have a minimum of INR 10 million in assets with us. And in aggregate, the total AUM is about INR 832 billion as at March 31, 2020. The comparable number was about INR 990 billion as at 31st March 2019. This decline is primarily on account of corrections that we've seen in the market values in the month of March. Of these total assets, the transaction assets, that is the assets, which -- on which we earn fee based on transactions happening, example, the Demat assets of our clients, are INR 654 billion. This number last year was about INR 798 billion in 31st March.Then we have the recurring assets. So these are assets on which we earn fee by way of AUM-linked commission, which as an example, are mutual fund assets of our clients. And this was at INR 178 billion as at the end of this year. This was as against INR 192 billion in FY '19. Our total revenue from these clients increased by 53% Y-o-Y to INR 866 million in Q4 versus INR 566 million in Q4 of last year, resulting in income for the full year being INR 2,590 million in FY '20 versus INR 2,175 million in FY '19, on account of various initiatives using -- taken by us during the course of the year. Moving on to the Corporate Finance business. This business faced downward pressure on revenue due to subdued market conditions. Revenues in this business segment actually declined by 23% Y-o-Y to INR 99 million. We executed 4 investment banking deals in quarter 4, and we have a SEBI-approved IPO, FPO, InvIT, REIT pipeline of 12 deals, amounting to INR 378 billion. We are currently ranked second amongst the domestic financial advisers by a number of deals in the M&A league table. Our aim in this business is to diversify the revenue by increasing the contribution of the non-IPO deals. IPO, as you all know, tends to be episodic. So idea is to grow all the regular business in this front. Coming to our treasury. Our treasury income was about INR 105 million, which was down from an income of INR 112 million a year ago. It was impacted negatively by prevailing market conditions. So I would say now to sum up and to put the year in perspective, it would be fair to say that many parts of our strategy are playing out in the intended manner. We are fortunate that we have an all-weather business model that has low balance sheet risk, no physical inventory, low receivable risk, high ROE, a strong liquidity position, which will help us stay steadfast in the current space. However, as we move into the current year, there are a few areas I just want to highlight. The strategy remains relevant and intact in the current context. But 4 areas are going to get special attention in the current year.First, our attention will be to rapidly increase digitization at all levels within the organization. So that's an area of intense and immense focus. Second, we are putting even a higher focus on increasing cost efficiency in the current environment. We are exploring moving certain teams completely to work-from-home mode, and that will probably reduce our need for branch infrastructure, as an example. Thirdly, we are using this opportunity to actually invest in technology. So technology will get a good leg up in the current times for investment. Our focus will be to upgrade our infrastructure, improve capabilities in areas like our data warehouse, so that we are able to perform big data analytics through robotics, machine learning, use of artificial intelligence.We are also investing in implementing a best-in-class CRM tools, both for our institutional as well as retail business. We are obviously going to fortify surveillance tools to reduce cyber risks, and that's another area of investment as far as technology is concerned. It will further strengthen our resolve and ability to work from home, and ensuring business continuity and also maintaining salience on speed of our platform. And finally, the fourth -- last area of attention is with respect to technology investment, in improving our UI/UX tools so that we are able to improve interfaces and experiences of our customers. And the fourth area of focus for us is to see how we can use this time and period to fortify our talent pool, so that we are positioned to fill up whatever talent gaps we may see in the company, so that we are able to strengthen our position for the future. I must say as I conclude, that we are aware that the situation is dynamic and extremely dynamic, and we as a management team recognize this. And we remain, I would say, agile, and we will keep evolving to manage risks. And we believe that today, we are well positioned to take advantages of all the opportunities that may arise in the current context. I'm going to end now. So thank you very much for a very patient hearing. We are open for any questions that you may have.
[Operator Instructions] The first question is from the line of SivaKumar from Unifi Capital.
Yes. My first question is regarding this open architecture that we have unveiled in Q4. Now that the non-ICICI Bank customers can also be onboarded onto the platform, are you getting into any strategic partnerships with other banks, wherein they would also do what ICICI Bank is doing for the platform, which is basically the RMs of those banks bringing in customers? Are there any plans in that direction?
Yes. So first of all, digital openness will mean that we can acquire any bank customer without need for any specific partnership. But as you correctly pointed out, this is -- the motivation of coming onto the platform is either through digital marketing or through clients' own sort of motivation to come on our platform. So that channel is open and taking. Apart from this, we are also looking to discuss with some other banking partners who will do exactly what we just said. It is still WIP as we speak.
Can you give some sense as to who will be those banks who would be interested in doing such a tie-up? Would it be the private majors or tier 2 banks or someone in the PSU space?
So actually from a -- if you look at it from a bank's perspective, any bank would be excited to do this partnership, and the reason is very simple. The reason why this will help the bank is that it gives them 2 things. Whenever we attach a broking relationship of the nature that we had here, we see an uptick in the CASA balances for the bank and we see an uptick in stickiness for the bank. So from a bank's point of view, these are 2 very important and big pluses. It is really for us to choose which banking partner we want. Obviously, while any bank would be interested in this, our endeavor would be to largely focus on noncompeting sort of banks to an ICICI franchise. So our focus is, keeping in view that the ICICI Bank is a principal partner, so we will work with more people, which will not be a direct competition in that sense to ICICI Bank. And there are enough and more number of banks in that kind of a format.
Okay. And when can we see some traction in the direction, wherein those partnerships will be sealed and those banks would start pushing ICICIdirect platform?
I think this year, something should be visible. Safe to say that.
Got it. And just one question on the Prime plus prepaid subscriber base. Last time, in Q3 call, you had mentioned that almost 1/3 of the active client base has moved to either Prime or prepaid. How does it look currently?
It's 40%, SivaKumar. So it was 30% for last quarter. It's moved to 40% now.
Okay. That's good to hear. So what has it done to our yields from the broking segment? And how should we see them going forward?
So SivaKumar, as we have said earlier also that yields is something -- we are more focused on, let's say, revenue per customer, because it could so happen that this -- even with a lower yield what our experience has been, for example, Prime. As our proposition has brought in a lot of customers, the volumes have actually gone up. Our revenues have gone up. Also the price plan is at a lower yield. So therefore, it is -- for us, it is more important to see the revenue for our customer, and that is a area where we are looking at traction.
So I'll just supplement, SivaKumar. The yield is an interesting but not sufficient item to look at because we have added so many products by the side, like margin finance, Prime fees and so on and so forth. Yield in isolation would not be a complete way to look at it, and that's how we are looking at it. We are looking at the total revenue that we can earn from a client, and that's the number that you are seeing is helping us grow our business. That's why during this quarter, you would have seen our equity-related income actually up by about 35%.
Got it. And can you give some sense as to how that is panning out in April in terms of active clients and also subscribers to the Prime plan?
Yes. So SivaKumar, I mean, it really depends on the market condition. April, it will be too early to say, obviously. But yes, the initial trends are okay.
Okay. And coming to your mutual fund AUM, we see that...
I'm sorry to interrupt, Mr. SivaKumar, but may we request you to rejoin the queue as there are several participants waiting in the conference?
Sure. I'll do that.
[Operator Instructions] We take the next question from the line of Shreya Shivani from CLSA.
So sir, I just wanted -- keeping in mind the way the circumstances are currently, if you can help us understand segment by segment, which segments do you look at for FY '21, where you will see greater struggle and where do you expect to grow and support your revenues for next year? Also on the -- second question which I have is on the SIP count. So I was looking at the number, which is currently at 0.66. Now this number used to be at around 1.1, 1.2 level back in -- I mean, it touched a peak of 1.1, 1.2 in 2Q of FY '19. So I want to understand, was that a peak and we have fallen off, and FY '20 has just seen 0.66 through all the 4 quarters? Or can you just help me understand that?
Sure. This is Harvinder here. So let me take the second question first. It's a data hygiene question. So earlier, Shreya, what we used to measure was that number of unique customers who have triggered a SIP in a trailing 12-month period. So for example, if I'm sitting on March 31, I would look at 1st April to March 31 how many customers have given us an SIP. What we realized was that, a more important factor in SIP is continuance of a book. Now what we measure is that every month end, how many SIPs have indeed got triggered, and that is what we have been measuring for the last 4 quarters, at least. That number has been in a very narrow range, ranging from about, let's say, 0.69 to 0.66, around that sense. So that is the difference. It's more of a metric issue. And it has been pretty stable at there. Coming to your first question, what are segments we are looking at? Obviously, as Vijay also made a reference to, in such an environment, huge amount of focus on digital parts of our business, which fortunately for us is a very, very healthy proportion in terms of transactions that recur. That is our approach, how can we digitize more and more products, get them on...
See, if you really look the way we are structured today, we are a high operating leverage company. Everything is digital. Acquisition is digital. Transactions are digital. All the infrastructure is already created. Our endeavor has been to keep adding as many propositions and products as possible and make them available digitally, so that we are able to attract all colors and types of customers without any negligible incremental cost of acquisition. So given that kind of a model, we believe that most of the businesses we will -- we are, I would say, ready to capture any upswing that may happen on account of broader market participation, be it the equity market, be it the mutual fund business, be it the institutional equities business. All these are possible to do remote and digital. Having said that, there are certain businesses in the distribution side like insurance, which has a physical leg. In fact, earlier this week, we were discussing ways in which that also can be digitized. We already have a model which is created by the likes of the aggregators in form of Policybazaar, et cetera. So there are learnings that we can do to digitize that. So those are also areas of attention to be given. Very soon, I think every aspect of the business can operate from our platform. So wherever the opportunities are, we are there, and we will capture it. The only area which is going to be impacted is, I would say, the Corporate Finance business, which is -- tends to be episodic, like I said. Fortunately, for us, that's a very small part of our total contribution. So that's the way we see the landscaping. We are ready to participate in every spot opportunities there, particularly on the retail side.
Correct. So what I understand is, if there is an upswing, say, in the equity market, or in general, in the economy, you will be there to capture that through your digital business model. But otherwise, I mean, if I look at the distribution revenue from mutual fund and life insurance business, those businesses might itself be struggling in FY '21. So if the businesses struggle, that will flow into your -- that will impact -- that will be a drag on FY '21 revenues for you as well, right?
Yes. So you're absolutely right that even today, our fortunes are dependent on the way the markets are going to behave. Our endeavor, therefore, has been to broad base ourselves into as many sort of categories of revenues that are possible from a life stage that a customer offers to us. That is why we have opened up protection, which is slightly different from financial market, investment market. That is why we've opened loan distribution. I don't know if you've just -- I referenced that we have started now distributing 12 types of products on an open-architecture platform, which was virtually not there. So we have opened up more areas of revenue pools precisely to, number one, participate in the natural growth that is there as well as to offset declines that may be there on account of industry -- sort of muted industry outlook. So that's the way we are really sort of positioned today.
The next question is from the line of Piran Engineer from Motilal Oswal.
Yes. Congrats on the quarter. I just have a couple of questions. Firstly, in April and May, how has the trend in redemptions or net inflows been for the Mutual Fund business?
Yes. So Piran, Harvinder here. So see, redemption has been a pressure point for us. That is something that is an area of focus for us. We've had, as Vijay also mentioned in his opening remarks, that we have had decent growth in gross flows ahead of the industry, but redemption is an area that we are looking at. We are looking at various initiatives in this direction. For example, we are working on a mutual fund-only app as a specific initiative to engage with a mutual fund customer.
So for us, again, singularly looking at equity, singularly looking at mutual funds is not the right way to look at it. We don't look at it from a product segment point of it, the way you're asking us the question. We look at it from a customer viewpoint. If a customer is reviewing his mutual fund, we have something else to offer, a fixed income, for instance. So for us, it is a capture of AUM within the network. So while it goes out from one space, it goes into some other space, and that's how we look at it. So if you singularly look at a product, have you faced redemptions, yes, but we are facing higher inflows than what we have faced in -- the gross inflows for us are higher than industry. If there are redemptions, redemptions are not disappearing away. It is staying within the network somewhere, in some other form, either it gets into equities or it gets into fixed income or it gets into some other investment sort of categories. That's how -- and in every space, for us, the customer is more important than the product.
Okay. Fair enough. And so in April and May, have trading volumes and equities been as high as March in that case? Or has that...
Piran, it will be difficult to comment on April and May right now. Yes. So it has -- I mean, it has a correlation to the overall market sentiment, et cetera. So it will be difficult right now to comment on April and May. But as I said that the initial trends on the things that we have started seeing an increasing traction, for example, number of active clients, number of total clients, number of digital clients. And on the input parameters that we are addressing or that we are tracking, all those parameters have been improving and continue to improve within the month of April, in fact, much better.
See, I'll just add by saying that, while we don't want to talk about Q1, it's too premature, we entered into the crisis with the industry also already consolidating. I think those consolidation trends are getting stronger, and people who are strong will get stronger. So that trend is reasonable to expect.
Okay. Good enough. And just lastly, one clarification. You mentioned something about opening 1,000 accounts a day. I didn't catch that. What exactly was that about?
Yes. So these are...
Insta Idirect?
Yes. Yes. So these are accounts that are getting opened digitally. Without us meeting any customer at his worksite, he can open an account. He can start transacting on our platform. This number is what has started clocking about 1,000-plus a day currently.
The next question is from the line of Haresh Kapoor from IIFL.
Sir congrats on a good quarter. First, I think, if you could just help me reconcile this broking and commission line item. So basically, maybe I'll just read out some of the numbers. Total broking and commission was INR 461 crore, out of which your retail equities is INR 291 crore; institutional equity is INR 37 crore; MF, INR 57 crore; and non-MF is INR 53 crore. So broadly, you are at around at INR 440 crores there with a gap of INR 21 crores. If you could just help me understand first what is that gap in particular.
Sorry, are you looking at the segment results? Is that what you're looking?
Yes. I'm looking at your Slide 34, 35 and Slide 40.
Yes. So in our segment results, what also happens is that we have, for example, in our Corporate Finance business there will be some revenue sharing that will happen between intersegment. So that will be one of the aspects which will be missing. Second would be interest income that we have on FDs, et cetera. So in a segment, what we are trying to look at is that this business, which is a equity and commission business, what are the assets which are contributing to that. So this is the missing piece between the segment and the individual line items.
Okay. Because your Corporate Finance was just INR 10 crores. So I'm assuming there is an advisory line, which is also around INR 10 crores, and I'm assuming it's going there. That's what I understood. And it should -- largely because interest income, MTF is pretty much part of retail and allied, and that's what I've taken. So again, it comes back to that INR 21 crore gap. So just trying to understand that.
What I meant was interest income, which I earn on fixed deposit. So MTF and ESOPs are specific products, right, which is an income line item. What we also do is that, for the equity business or commission business, you place fixed deposit with stock exchanges and you earn FD interest rate on that. That is not a part of our specific product, but it is a part of that particular business. So when you do your segmental, you allocate that particular interest that you're earning from that business to that segment. So that -- there's a very small portion would come from the revenue share that I spoke about. So these would be the 2 items.
Sure, sir. So that's perfect. That's good. Second just want to understand the momentum here. You're talking about a redemption there. There is an element of MTM fall plus redemption across the market in various parts. So first, if you could just talk about momentum that you are seeing on the nonbooking side, particularly, so, let's say, because large part is digital. So are you seeing good traction on the life insurance product? Or is that still to pick up? Or is in -- on the redemption side, is it more private wealth or is it in the retail clients? Just some broad comments will be helpful on that front.
You're talking about the first -- you're talking about the month of April?
Yes, month of April. So largely the momentum right now, because you commented on March previously too, just in terms of the trajectory because the question now is different from the trajectory.
The trajectory is better than last year currently.
In terms of inflow you are talking about that.
We are talking about -- I heard you ask questions around insurance. I heard you...
Nonmutual fund.
Yes. So nonmutual -- so nonbroking business trajectory in terms of business momentum because large part is digital. So are you seeing uptake on the insurance side because there is a lot of talk on protection? Are you seeing -- even in terms of retention, are you taking -- seeing that in terms of private wealth channel or retail channel? How is -- from where are you seeing that trend? So just to understand which part is more stable, which part is seeing some challenge? And how should we read through on that?
Yes. So retail is more stable. Wealth side, particularly wealth credit funds, is where the outflows are happening when it comes to mutual funds. Non -- you asked specifically, I think, trends that we are seeing in the nonequity, nonmutual fund business. Those are showing better trends than past year.
Okay. Fine. And obviously, March has been a pretty good -- Q4 broadly has been a pretty good month for broking and good revenues. But in terms of trajectory, obviously, on the nonbroking side, there is some hit in the short term. So maybe going into next year, a lot of -- to make tough for the revenue impact, a lot of people are talking about cost rationalization. So how do we read that? And at what pace? And when do we finally decide in terms of what decisions we need to make on that front?
So cost, like I said, will get heightened attention and focus. We have, again, like identified areas which can be digitized. And therefore, adding to our efficiency. We also need to be clear that these are times where you have to be empathetic and sensitive to the market environment. So we will keep those factors in mind. The way to handle this is that there is a natural attrition, which happens. Those attritions need not get replaced because we find that we have enough and more within the system to take care. There is also infrastructure rationalization, which need not wait for any changes to happen. And infrastructure rationalization can happen in 2 ways. One is just giving up certain places, which no longer are required. The stuff that we saw in our narrative and we explained the reduction in some of the branches, as well as there are folks who renegotiate infrastructure -- fixed infrastructure cost. All of this are WIP as we said. Every element is being looked at very, very closely.
The next question is from the line of Umang Shah from HSBC Securities.
I just wanted to have 1 clarification. So when we are talking of open architecture and the third-party business, so this would include mutual funds, nonmutual fund, basically, open architecture across, right?
Yes, yes. For mutual funds, we've been open architecture for 20 years, I mean, forever.
So for all the product categories that you mentioned, we are already open architecture. We distribute about 30 different AMCs schemes of about 2,500 schemes, [ so it be around schemes. ] So we are a fairly open architecture in the third-party distribution product.
Even on the insurance side?
So insurance, life insurance currently distribute with...
On life, we are not open architecture at this point in time. We are open architecture on health.
Okay. All right. Fair enough. And just I wanted to see some clarification on the contingency provision, but I'm sorry, I missed that. So what is this INR 90 million onetime provision pertaining to?
So looking at a COVID scenario and the scenario that can unfold, we have seen almost 30%, 35% drop in a very short period. We have seen very high VIX level. And obviously, we are also working from home, et cetera, et cetera. So all these scenarios coming together, what we have assumed is that supposing we were to, again, have an instantaneous shock of, let's say, 30% instantaneous drop in market value from here. And because of either work from home or restrictions of lockdown, et cetera, we either, by way of operating control or by way of our technology, being in a work-from-home environment, if we are not able to react and act in a very timely manner, then there could be an out-of-pocket expenses. If such a contingency or such a scenario were to unfold in the future, this provision takes into account that aspect.
All right. Sure. And so it's fair to assume that there would be no such provisions, which would be recurring in nature, right, maybe for 1 or 2 quarters? We don't see any recurrence of these...
No, no. That's why it's very clearly a onetime management overlay...
It is a management overlay that we decided to put considering the very extreme scenario we've been facing.
It's a stress scenario that we have assumed and we have assumed that our systems are not able to react the way they do, and the people are not able to react the way they do. All these things working together is what we have assumed.
Perfect. And just one last thing. Would we have seen any losses or provisions from the risk management perspective, maybe on our MTF business, or maybe on the client side, where we would have had to bear the cost?
Yes, we do see out-of-pocket expenses on our business every quarter. It's quite a routine item, but that number is very negligible. It is...
It's nonmaterial.
It's nonmaterial number. And even this quarter, we have seen that number remaining well, well within our risk appetite. So we have it in policy and risk appetite. We've been well within that. And this happens every quarter, but it's been for several years, and it's been a very, very low number.
The next question is from the line of [ Bharat Gundani ] from [ Tata Invesco ].
My first question is, what is the utility served by the ICICIdirect branches? You've been saying that you're shifting to digital and the open architecture platform. So how does the utility of the branches change going ahead? And what would be the right-sized number of branches that we can look at a couple of years down the line?
Yes, I'm going to just request Kedar Deshpande to step in. Kedar, as you know, heads our entire distribution business.
Yes. So if you look at the Idirect client segment, you can broadly classify them into 3 large buckets. One is the wealth management segment, which is the upper crust. Then there is a large base of mass-affluent clients, which is what we service through these branch network. The idea being it helps us in increasing our cross-sell penetration of nonequity products. It helps us retain the relationship. And what we have over a period seen is that, that is the segment which produces or gives us the tomorrow's wealth management customer as well. The longer it stays with us, the higher is the probability that he becomes wealthier, and our lifetime value of the client goes up. So yes, as digitization and getting process automation and robo advisory and other products and services kick in, technically, there will be lesser and lesser requirement of a physical network or a relationship manager network as a percentage of clients. So more we keep growing, we will require relationship network to engage clients, handhold them, guide them because not all clients are well-versed with all products.In fact, many of our clients begin their investment journey with us. And they not necessarily even have the time to spend on investments and engage a relationship manager or get some other service providers. So the idea is that we handle only the mass-affluent clientele through the branch network, whereas our acquisition strategy acquires the client across the spectrum. So that is the utility this segment plays a role in. Plus it also helps us in getting the early momentum when we launch new products, new services. It helps us increase our cross-sell revenues, which is incremental revenue over and above a cyclical equity market business. So when the equity market business is in a cyclical nature, products like bonds, insurance, mutual funds, stable AUM, et cetera, are the foundation revenue lines that have got built over the last 10, 15 years because of this network.
But the thing is that the equity advisory and the equity business, which is mostly a do-it-yourself kind of a business, that can be conducted online. Now when you talk about nonequity products to be given to equity customers and increasing the distribution base for mutual funds and your PMS, AIFs, et cetera, you would -- wouldn't these branches be very essential? And you're saying you're servicing mass-affluent clients. They would -- if somebody's PMS ticket size is INR 50 lakhs and an AIF ticket size is INR 1 crore, they would necessarily want to interact with people and want to get that comfort before book or doing the investment. So wouldn't these branches be crucial? So I'm just trying to understand the strategy behind closing down the branches and at the same time saying that you want to increase the distribution business.
So actually, Kedar -- I'm stepping in. Vijay here. So Kedar elaborated historically the construct of the branches and the utility of the branches. And as you correctly pointed out, times have changed quite dramatically. I think as somebody put it in weeks, decades happened and something like that is happening. So many things -- many of the clients who -- of this nature who wanted a physical interface and engagement are dramatically changing their own approach. In such a context, obviously, we are asking ourselves the question the need for infrastructure of this nature. Everything is up for question. And I mentioned it a few quarters back when we spoke that no holy grail within the company. We are questioning everything as markets are evolving. So this also is an area of active discussion and debate within the company. We will take a judicious call in the course of the time. We've already reduced from over 200 about a year ago or thereabouts to about 172. And this journey is something that we will keep evaluating and we will keep seeing ideas to be efficient, ideas to be relevant and ideas to be totally giving all our investors a demonstration of operating leverage.
I got it. Just one more question on the risk, since we've just seen some of the -- because of the oil contract going about, we've seen some risk parameters coming to the fore. I just want to understand, if you could just kindly explain your -- how your systems are better than, let's say, some of the other brokers, assuming they are better. And if risk management is an entirely process-based approach or there are calls to be taken by the risk management team as well and under certain market conditions. So I just wanted to briefly touch upon how that works.
Yes. So I'm Vishal. So as far as risk is concerned, as you know, that we have micro segments of the customer and very, very customized product offering for them. And right from the beginning, the approach has been very clear that no risk should be managed manually. So we'll take a leveraged position. You said at the top price. And the moment that price is reached, the provision automatically goes for the square off. You have stop-loss orders where you get the stop-loss. What happens during a time like this, that you play or you change few parameters to manage the volatility. But that is not something which happens on very active basis during the market. That's a call which we take basis the VIX, basis the volumes, what are happening. But I'd say that we rely upon completely -- there's no manual intervention. It is completely on system, which rise our risk. The risk parameter is set by the risk committee by the business looking at the various market parameters, which is very, very fast in an environment like this. So that's how -- I mean, I don't know how other systems are operating exactly but this is how ICICIdirect risk management system is operating.
Do we have commodity as well -- commodity broking?
Not as of now, but we are in advanced stage of bringing back.
The next question is from the line of Aditya Jain from Citigroup.
I just wanted to touch upon 2 aspects. So one on the non-ICICI Bank account openings. You mentioned 6,000 accounts have been opened. So if you could just clarify, this was over what period? And also, you would have seen a few weeks of this data. So what sort of trends do you see in this? Do you think the run rate of this acquisition can improve a lot? Is there something in which you are making this concerted push via SEO and so on?
Yes, absolutely. Is it focus area? It's absolutely a focus area. This number of 6,000 is what we saw during the period of 25th of February till 31st of March, right? Things have changed after that. Currently, everything has shifted to digital. So as I mentioned about broadly 1,000-plus accounts are getting opened every day, which I think it would be fair to say that the split between ICICI and non-ICICI at this point will be about 30% to 70% in favor of ICICI. Since it's early days, we -- if you look at what the other digital players in this business are doing, we believe that there is a dramatic and a large opportunity for us to scale up because in many ways, we have pivoted to the larger market opportunity, which is, in many ways, 7 -- 90-plus percent of the total market opportunities outside the ICICI Bank. We are actually pivoted ourselves to that market opportunity. So it is really left to us to see how we are able to do it. Others have done it. We believe that we will have to work towards growing that base in that similar direction.
Got it. And so just to understand, so the only difference -- the main difference in experience for a customer who takes this product would be that he would have to pull money from his bank account into a, say, pooled account, which would -- the funds would lie with you, whereas with the ICICI Bank product the funds used to lie within his savings account in ICICI Bank. Is that right understanding?
Perfect.
Okay. Perfect. And secondly, on the ESOP plus MTF book, is it right to assume that the decline in the book was predominantly back-ended because the income just increased Q-o-Q?
Yes. Yes. It is all back ended, absolutely back ended 20 days or 15 days.
It's back ended and proactive, Aditya.
Got it. And going forward, what is your stance on this? Are we still in that cautious mode and how are we looking at sort of normalizing that?
No, no, it is -- we haven't -- actually, honestly, this is a business that is -- we are not worried about scaling it up when the times are right. We do not believe that it will be a challenge at all. We continue to remain cautious, but we are seeing that some semblance of stability has started returning. So we have also started growing this book again.
The next question is from the line of [ Aditya Goel ] from Elara Securities.
This is Ritika Dua from Elara Securities. Sir actually, most of my questions are follow-up to what has been asked by people in -- before. One on this account opening, just to close the -- one thing here. This 1,000 number that we are seeing on a daily basis on a digital mode, how are these people approached? [Audio Gap]
large market opportunity for us to harness. We are hoping that a situation like this only accelerates our ability to get there.
So Madhukar, just to add to that. I mean, if you imagine the loan portfolio as we discussed maybe last couple of quarters back also, so for us, it is also expansion of the bouquet. And we also spoke about N equal to 1 strategy or a very segmented strategy. So the approach that we are trying to take is that how do you kind of harness the potential of an existing customer base and try to meet their need sets. So the statement that we are making is that there is intense focus on a particular product line, looking at it from a product line lens and trying to proliferate the customer base on various loan needs, adding also the principal. So that also adds to the overall breadth of the product line. So this is where the difference of approach from the earlier part is there. And as Vijay said that I mean the market is very huge in terms of overall total disbursement, et cetera. It's a huge market.
Right. And I was -- just one last question. The provision of about INR 9-odd crores, Vijay also, I think, mentioned in his opening remarks that it was related to the ESOP and MTF funding book. Is that correct or is my understanding -- is there any chance of a sort of a NPL being created over there or something of that sort?
So let me just try to explain that, Madhukar. One, it's a contingency provision that we've created as a onetime contingency provision. It is on all our receivables. See what happens is that if there is an extremely high volatility, this has been some 70%, 80% in the last 15 days of March. That kind of a scenario, what can happen is that your margin computation, the way you're doing, sometimes the price movement can be higher than margin computation. So in such a scenario, what we have assumed is that it's an instantaneous, that word is important, is there's an instantaneous shock of about 30% drop in asset values. And along with that, if our automated real-time risk management system is not able to function effectively because we are doing work from home and there are constraints -- operational constraints of people visiting offices, et cetera, et cetera, if all those things come together, then this could be the out-of-pocket. It could be on any overnight position. It could be ESOP, MTF or any overnight position. So that is what that contingency provision we are talking about. As I was also responding to a bit earlier that it is not what we have experienced right now but since we have seen a 37 decline -- 37% decline on a couple of -- I mean, in a matter of a very short period, that is the reason why, as a contingency, we have made this provision.
The next question is from the line of Manish Poddar from Nippon AIF.
Congrats on the set of results. Just wanted to get first a bookkeeping question. So when I look at the interest income for this quarter roughly about INR 71-odd crores compare it to the base quarter of about INR 45 crores or INR 46-odd crores, can you probably give us a breakup of the INR 71-odd crores? Now what are the larger parts up here?
So primarily, 3 parts over there. First is a steady state income that we get on the fixed deposit that we keep with exchanges. So you see on our balance sheet, the fixed deposit under lien. That is a number of about INR 1,400 crores to INR 1,500 crores. Then we keep those monies with exchanges. We earn an FD interest. That is 1. It is relatively stable and it will depend on the fixed deposit which is kept.
Can you give the amount of it, if it's possible, the 3 parts which you mentioned?
Sorry?
The 3 parts, which you mentioned, can you give the breakup of it, let's say, in INR 71-odd crores, what is the breakup?
So we've not put out the breakup, but I think -- I'm just trying to give you a sense of that. So one is, as I said, there's INR 1,400 crores to INR 1,500 crores and over the past couple of quarters it has remained in this narrow range, give or take, a few hundred crores. But FD interest is what we are earning on that balance. That is one part of the interest income. The second part is our ESOP and MTF book, right? So we have a book of about INR 600 crores August end. We had a book of about INR 11.5 billion as at December end. Average is really slightly higher, but that is the second and we earn NIMs over there. So that is the second part. These 2 predominantly would be the more material element. The third would be something that we will earn on our proprietary portfolio. But that will be a very, very small portion as compared to these 2.
Okay. And if I -- if you could probably highlight what are the trends, let's say, you're seeing in the distribution part of the business, let's say, come April and May? Any broad trends qualitatively, that would be helpful.
Sorry, I did not get that. Could you just repeat please?
I'm saying the distribution part of the business, largely the mutual fund part of the distribution business, if you could highlight any broad set of trends, which are happening in the month of April and May. Relatively, not quantitatively, probably.
So while, I think, it would be not fair to talk about April and May in great detail, at trend level, I think what you've seen in the industry is that you have seen outflows going out from mutual funds. We have seen similar trends. It is largely centered around credit funds. It is largely centered around higher segment -- wealth segment of the market. So that's the kind of trends that we have seen. Other segments have been relatively more stable. And specifically for us, we have been attracting more gross flows than the industry. I think this is what we are seeing as initial sort of period. And our approach is not looking at it as a product level as a company, but at the customer level. So if monies are going out from mutual funds, the monies can -- will need to go somewhere out of mutual funds. We have a range of products to offer, fixed income, other investment avenues. And our endeavor is to look at the wallet of the customer. So that is how we look at it, not necessarily from a product segment level only.
The next question is from the line of Kunal Shah from Carnelian Asset Management.
Congratulations in the first place for a good set of numbers. First question is if you could help. With the SIP book that we have in the MF AUM, I mean, you shed the account details, which could help with the SIP book amount?
Yes. So as I said, number of SIPs is about 6.6 lakhs. The SIP book, very broadly, although we have not disclosed the number but very broadly, it is about 25% to 30% of our overall AUM.
Okay. Just one question, if I understand that correctly. The 1,000 account opening every day that we are doing, out of which, 30% is non-ICICI. So if I understand that correctly, it is through basically our branches and all those stuff. That is the Idirect branches and all those stuff that we are opening. Is that understanding correct? Or it is through digital marketing and all those stuff that we have been doing, which is enabling us to help us at our -- open the accounts online. I mean, if you could just help understand that.
There are 3 sources and channels of non-ICICI. Channel #1 is digital. Channel #2 is our network partners, the brokers, sub-brokers, IFAs, et cetera, that we have. I spoke about the network that has become larger. And third is our own network of RMs.
Okay. Okay. Okay. And as far as the active client addition goes, we have done fantastic from 12.73 lakhs to 15 lakhs. But as well as -- I mean that was stated at the start of the year as well. The first idea would be to make the clients, which we have, more active on our portal. Now going onward, we have been adding 3.5 lakhs to 4 lakhs to -- I mean a broad range of 3.5 lakhs to 4.5 lakhs client addition every year, and this year also has been 4.5 lakhs. Now we're doing over 1,000 accounts every day. So broadly, another 3.5 lakhs, 4 lakhs. How should one look at this number going forward, if you could help your thought process of the same as well?
I can share our intent. We are not giving any guidance. Intent is to increase this number. Clearly, we feel that there is underpenetrated opportunity, and there is a general trend towards digitization. There's a general trend towards consolidation. I think both these statements should help us. So it is really in our hands to take advantage of these 2 trends and show growth. We have a fairly high ambition and aspiration, but no guidance being given.
The next question is from the line of Roshan Chutkey from ICICI Prudential Asset Management.
Congratulations for a great set of numbers. Sir firstly, we have announced 3.1 lakh Prime customers, right? Now what proportion of our brokerage revenue comes from these clients vis-à-vis the non-Prime segment? I ask this question particularly because I assume a lot of non-Prime customers do not trade as much and probably, therefore, they do not utilize the Prime subscription. Otherwise, Prime clearly adds value to this -- to any customer who trades frequently. So just wanted to understand the bifurcation between the revenue -- the brokerage -- the broking revenue within the 3 segments?
So I would say that in equity revenue, the spread is equal among Prime and non-Prime customer. So it has reached to a fair degree of contribution. So close to about, say, 40% of the revenue would be coming from Prime customers. So this is what the broad...
So that means that people who are non-Prime haven't yet realized the value of Prime and therefore, over time, we should have lot more of them converting to Prime?
Yes, possible, because there is always -- is a migration which happens from existing plan to the new plan. So as customers is realizing -- see, it's a retail franchisee. So there will be many customers who will be logging in also after a period of time when they find opportunity. So retail, you can't expect the migration to happen in a quarter or so. So as and fine -- as and when customer is -- they intend to trade, they will see value, they will adopt. So I mean this is happening.
Okay. And second question I have is, essentially, what kind of trends have you seen in terms of broking accounts getting opened in the month of April, given the turmoil in markets? March, I recall you mentioning that it has been on an ascend, right? So what is the kind of improvement or numbers that you have seen in April month also? I joined the call late if you have answered this before.
Yes. So that's what we said that through our completely digital online, we have started seeing daily run rates of upwards of 1,000 accounts. So that is the number, and we have a few other channels also. But yes, the run rates are improving, and with the help of the process simplification, which Vijay elaborated, even Vishal spoke about, we expect that this can sustain and improve. I mean that traction can build up. These are early trends. We'll have to keep watching. I think next quarter when we meet, we'll be able to have a more informed decision -- discussion on this.
So basically, that means customers aren't deterred by the market movements primarily even in the month of April, not just March?
So our experience right now has been that the traction is there. People are joining. People are wanting to participate. People are wanting to open accounts. That has been our experience. As I said, it's early in the quarter.
Sure. Any interesting analytics that you have seen based on the market movements and any customer insights that you can share in terms of how people trade and -- or maybe when do you think a redemption cycle, if it were to come, will come based on whatever you have seen so far?
So 1 of the things that we've observed is unprecedented level of participation in the market. If you really dive in and see the texture of this, you can probably think of it in 3 ways. One is you have a bunch of customers who are traditionally regular players in the market. These are, I would say, a bunch of customers who have been active, and they continue to be active even when times have become like this. Then you have a bunch of customers who are traditionally investors, and they don't play a very active role in the market on a daily basis or even a weekly basis or sometimes even a monthly basis. They sit by the side. They have built a portfolio over time, and they tend to get into market periodically when they think the opportunity and time and their research is advising them to do that. We found that currently even these customers have jumped into the market because all their assumptions and portfolios have gone for a -- the assumptions have gone awry. So they have to correct their positions and revise their positions in the current world and current context.So they are either buying or selling or doing a bit of both. So that bunch, which are generally semi active have become very active. And the third insight that we are seeing is lots of people who have been sort of fence sitters, who always said that, "Oh, I wanted to invest in the markets, but now the markets are too high." And if you just go back a few months into the past, we've started seeing quite a smart improvement from November onwards in the market. So there are lots of such investors who have been sitting on the sideline. So they've also sort of seen a multiyear correction in the market in the month of March, and they've jumped into the market. So we've started seeing very broad-based participation from the regular, the guys who are the fence sitters, and the guys who are the periodic investors, all of them actually actively jumping into the market. And that's what is -- actually explains the current trend that we are seeing at least with us as a company.
Sir, but do we have any age-based distribution here, age-based analysis? I mean, is it a lot of less than 30-year olds or less than 35-year olds who are doing a lot of this activity? Just typically...
Yes. So we do this analytics. But honestly, that is more for our internal profiling, internal insights. We've not really gone and shared with the external system.
No, the reason I'm asking this question essentially is, typically, you should expect retail segment to succumb or rather to given in at this point in time, and typically, it's the bottom, right, when retail exits the market, it is a bottom of the market. So that's on that -- from that perspective, I'm asking this question. It's very counterintuitive at this point in time as to how retail is taking in -- I mean, embracing the markets in these kind of market conditions. So trying to understand that. Is there a change in behavior altogether because of a new set of -- new age customers, youngsters, understanding the behavior of market or is there -- are there any trends, historical data that we have?
So Roshan, a couple of things. This period has been too short. So what we have seen, definitely, as Vijay said is that, with volatility, with interesting positions getting created, lot of activity starts happening. People churn their portfolio, people will take positions, et cetera. So we've seen a general rise and that is -- that goes even for a retail customer. In fact, it's more for a retail customer that people who have not traded for some time, they start becoming active because they start spotting opportunities, et cetera. So that's I think the generally the trend that we have seen.
Millennials. So last couple of years, disproportionate millennial acquisition has happened with Idirect client base. And when the market has thrown opportunity with almost a 30% dip in March and which led to a fairly large surge in client participation, it will be a very, very broad bucket, full of -- every segment would have participated right from people, like what Vijay said, who participated to balance their portfolios, to asset-heavy clients who wanted to sell off the junk and buy quality, to the millennials who thought this is a beautiful opportunity when the markets have bottomed out.
The next question is from Alpesh Mehta from Motilal Oswal.
Congrats on the great set of numbers. Just first question. From the segmental results, I can see the trading, investment banking and the trading-related segment has seen significant increasing through the network allocation. Any specific reason for that?
So network allocation is proportionate to the level of positions. So a significant increase as compared to what you are saying, Alpesh.
So basically, if I see the number, if I see the trend, 1Q was -- network allocation to investment banking and trading was around INR 28 crores, which increased to INR 83 crores in second quarter. Third quarter was around INR 117 crores. And in the last quarter, it's almost INR 400 crores. So the trend has been going up quite sharply. So anything to read from this?
No, so 2 things happened. So, for example, if a broking and commission segment is there or any of the segments that you take, what will increase the network allocation? Network is an internal allocation where we say that what are the kind of resources. So if, for example, overall trading volumes are going up, there's a higher proportion of funds which will be deployed, for example, as FD if broking and commission activity is going up. And that will be supported by an equivalent liability increase as well. So no specific trend over here to highlight, Alpesh.
Sir, there is a prop trading-related element here, right? And just because -- because that segment shows investment and trading, it's not only -- sir, I don't know how to...
Yes, yes. So we do have proprietary debt, which is where the segment comes in. And what we do is, for example, if there was a opportunity in the debt segment of G-Sec where there was a yield play or any kind of a yield this thing, there, we can take a position for interest income. So I mean -- but that is not a very large proportion of the overall position.
Okay. Second question is on the wealth AUM. I believe last quarter, we were at around INR 1 lakh crores or so. And right now, it's INR 83,000 crore. What's the bifurcation between the MTM impact and the actual net outflows or the inflows into that segment? And any ballpark number will also do, if you guys don't disclose it properly.
So on a net basis, it's largely the MTM impact. The net flows are actually higher only. But largely, it is the mark-to-market. I mean, difficult to give a breakup, Alpesh, but largely, it will be MTM.
Okay. And one more clarification. Out of...
Sorry, Alpesh, just one sec.
Yes. This is Anupam here. So, broadly, yes, so you're right. So from INR 1 trillion to INR 83,000-odd crore has been the fall, and it is largely, obviously because of mark-to-market. And from a net inflow perspective, I think it's not disclosed here. But broadly, since you've asked for a broad number, it's been close to INR 4,000-odd crore of net money that moved into the overall INR 83,000 crores that I kind of -- the number that we've shown.
And Anupam, one more question. The total revenue that you disclosed of around INR 260 crores on the wealth segment, would this be largely a distribution revenue? Or there would be some element of interest income as well? And if at all, then what would be the proportion of that?
So this INR 259 crores, right?
Yes, around INR 260 crores, that's right.
Yes. So INR 259 crores is largely your broking and distribution business, while it has a component of ESOP and MTF as well. But in the overall scheme of things, they are segments that we want to grow but at this point in time, they continue to be small.
So Alpesh, just to answer in another way. What you see over here is that INR 259 crores broadly broken up into roughly about INR 100 crores of what we call a transactional income, which would be typically from Demat assets and fixed income assets. And about INR 150 crores coming from recurring assets, which will typically be things like mutual fund, life insurance, et cetera. So this is at 1 levels of data. Within, let's say, the equity or within these product segments, Anupam mentioned ESOP, MTF, et cetera. So if you look at it, ESOP, MTF, Prime, all these 3 equity allied income, they contribute to roughly about 14% of our overall equity revenue. So in wealth segment also, the proportion would be similar.
So if I get...
That is a diversification that we are trying to, which Vijay also mentioned in his opening remarks, that within the equity franchise or equity business, we are trying to diversify and add more and more different sources of revenue. So this number used to be about 8% last year. The proportion contributed by these sources, the non-brokerage sources to the equity business, that has grown from 8% to 14%. And similarly, wealth also is expected to be on similar trend.
Great. So the way I get it, almost 35% of the distribution income comes from the wealth management side. Is my understanding correct now?
How have you arrived at that? INR 151 crores on [indiscernible].
Around INR 450 crores or something, around INR 400 crores, INR 450 crores, somewhere in between that. Because INR 150 crore is just the distribution income.
Yes, Alpesh, I think -- let me come back to you. Broadly, I think what you're saying makes sense, but let me come back to you.
The next question is from the line of Mohit Surana from CLSA.
I had a question on your ESOP financing book. So could you -- you said that you've tied up with several corporates on this book. So would you share some color or texture in terms of industries or segments where you have a presence as far as ESOP financing is concerned?
So it will be difficult to comment on the industry or a sector, but largely the approach is a listed player which clear the risk parameters. We have an internal policy of choosing a particular pocket from the listed world where ESOP book is there. I'll request Vishal to come in and elaborate.
So largely, I mean, this list, who all are giving ESOPs is available in public domain. You can visit NSE or BSE and you can get the list. Now we have not disclosed that out of that list, in what all corporates, we are present. So we take call based on each and every corporate as well as we look at the volatility in the stocks, the recent movements, et cetera, and based on that comfort, our Risk Committee takes a call on a particular stock financing.
So we have a policy. It has to meet the cuts of those policy. It has got to be a listed company. We don't do ESOP finance for non-listed. Most of the ESOPs come from amongst the larger companies in India.
Okay.
39 the new corporates we added where we are open to do the financing in financial year '20.
Okay. And the second question is, in terms of the revenue sharing arrangement that you have with the ICICI Bank, the new arrangement that you disclosed close to a year back, how is that progressing? Any color on that?
Yes. So just to recap, the revenue share agreement was that 35% of the 1 year -- first year revenue from a new client and 25% of the second year revenue from a new client is what we share with ICICI Bank. This strategy was intended to be able to attract the right set of clients and more affluent and wealth or higher segment of clients within ICICI Bank. What we have seen, as we have completed 1 year is that as a result of this, the quality of clients have gone up as evidenced by our activation ratio.
And higher number of revenue giving customers.
Higher number of revenue giving customers. So I'll just give you some trend. When we started the year, we used to have 26% of 100 clients. Supposing 100 clients, of whom 26% started trading in the same quarter. That number has gone to 71% by Q4. That has been the progress on the ratio. Similarly, in terms of absolute quantum, as Vishal mentioned, that number has gone up from 26,000 to 56,000. So that has been the increase that has happened. And this is just the first year. So our approach is that if we get the higher or better quality customer, the lifetime value revenue of such a customer will start building up with vintage. And that there is enough data that we have which says that the vintage revenue keeps going up. So that is the strategy. Early results are encouraging. After 1 year, these are the -- some of the results.
The basic purpose of revenue sharing is to guide relationship managers of bank branches to approach the right segment and the remunerative segment of the customer. So these 2 datasets, which Harvinder just disclosed, these are indicative of -- that -- indicative of the fact that the strategy is moving in the right direction.
Okay, okay. And just, lastly, in terms of this lockdown, et cetera, and the extension, earlier 40 days and now another -- till 17th of May. So how is the distribution piece of the business getting impacted by the lockdown scenario in this situation?
So like I was explaining, we have delinked the need for physical presence for either acquisition or transaction. We are only linked with market movements. So lockdown or no lockdown, it doesn't impact our ability to acquire customers. Lockdown or no lockdown, it doesn't impact our ability to enable transactions of customers. It all can be happening. Either we have a problem of inventory pickup, not inventory delivery like most of the e-commerce companies have because everything is acquired, bought digitally, consumed digitally. So nothing on that front.If the market participation is good, we will be a beneficiary. If market participation is weak, we will, to that extent, not be a beneficiary. That is how it is playing out. And generally speaking, we are seeing that there is a trend for consolidation. And people who with good brand and good digital capabilities are better positioned than people with lesser brand and lesser digital capability. So that consolidation that we sort of entered into this scenario, which was already happening in the industry, is only getting sort of hastened in the current situation.
[Operator Instructions] The next question is from Kashyap Jhaveri from Emkay Investment Managers.
First question is on this employee count of 3,790. If you could give a breakup of this in terms of acquisition-related employees, client acquisition, and I understand RM number is roughly about 300. Is that the correct number?
So let me try to give you a color. So 300 is what we mentioned is our wealth RM. The second is what we have is a affluent distribution segment, which we call select. So that's on our branch network. So there we have roughly about 12 -- about 1,000 to 1,100 RM. And we have an acquisition team which helps us in sourcing 3-in-1 account. That's roughly about 600-odd people. So that's the broad breakup.
So that totals up to roughly about 1,900, right?
No, no, no. So 300...
300.
300 plus, I said about, 1,100, 1,200 plus about 600 to 700 of channel sales. That's -- yes, so that's roughly the 2,000 count. Then it is followed by, I mean, all other teams and business teams and product teams. These are the channel sales -- these are the sales feet on the street.
Okay. And second question is on, should we...
Sorry, we have -- sorry, just one more aspect which I missed. We have a team of about 350 people who are equity advisers who help the clients with a relationship desk. So that's about 350.
Okay, okay. And second question is on your equity yields. Despite the fact that we are gaining actually share in cash and not so much in derivatives and yields continue to still slide downwards. One part of it obviously is pricing. But in conjunction with 1 of the earlier questions also, is it got to do with the demography of the client? In the sense, probably, if you could give some highlight as to typically are this like buy and sell today, intra day or are this sort of clients who hold on to the position. If anything, you can probably highlight on the holding period of the securities, because cash has significantly picked up from almost about 100, 150 basis points of market share. So if you could help on that.
So a couple of remarks over here. One, as we're discussing earlier also in the call, we don't look at yields. It's more of a revenue from a particular customer. That is the approach. Secondly, the biggest determinant of the calculated deal, if I may use that word because you'll take revenue and you'll divide it by ADTO, the biggest determinant of this calculated metric is the product mix. And as you righty said, derivatives, which are growing at 4x or 5x or 3x the rate of cash, they obviously have much lower yields -- calculated yields again, as compared to cash. So if -- and that's a structural trend in the industry in derivatives. If they are continuing to grow at a much faster rate, the calculated yield will keep coming down. That's the second remark. The third remark is that as -- what we are focused on is that even if the yield or the price per transaction is lower, if the volume and quantum of transaction that a customer is doing and the number of active clients that we have, those are the things that we focus on to get the wallet share of that particular customer.
So couple of more things. I mean, it also depends at what kind of opportunity market is showing. So there are times when the index is very secular and you see new levels approaching but the volatility is absent. In those kind of markets, we'll see good cash volumes, but at the same time, trading volumes may not be much. There may be times when markets are drifting lower and there are no cash buy-sell opportunities but because of volatility, the trading volumes are also very higher. So it's very, very difficult to put finger on just 1 or 2 factors which can conclusively prove that what is the reason of yield going up or going down. Besides the reason like you also have launched pricing plans like Prime, where the call is very, very conscious.
The next question is from the line of Anand Bhavnani from Unifi Capital.
We can't hear.
Mr. Anand Bhavnani, you may go ahead with the question.
Hello? So maybe he has dropped out or he's not able to --
Hemant, could you take the next question, please, then?
Yes. The next question is from the line of Nirmal Bari from Sameeksha Capital.
Most of them have been answered. I just have 1 clarification question. You said that the tie-up with ICICI Bank on revenue sharing, in that the number of active customers have gone up from 26,000 to some number. So what exactly is this 26,000 and if you can explain this.
Yes. So I'll explain that. So in a particular quarter, supposing we acquire 100 customers, off 100 customers, earlier, 26 customers used to start giving revenue within that quarter itself. We call that activation ratio. So this is 1 metric. Second metric is the total number of active customers of a new customer who have started giving revenue in that quarter. So both these metrics, the numbers have gone up between Q1 and Q4. So first metric, 26%, has become 71% in Q4. On the second metric, the total number of customers who got acquired and they started giving revenue also in the same quarter, those were 26,000, which went up to 56,000 in Q4. These were the 2 numbers I quoted.
Okay. And the second 1 was on the ESOP and MTF book. We have decreased that book till March. But post that, we have seen -- are we growing that book now?
So as we very briefly discussed earlier also that this particular book, proactively, we had brought down in March following the COVID-related impact to INR 600 crores and we keep on evaluating if there's, for example, a bit of stability. We are...
Whenever we feel the environment is safe and conducive and it's right for the client, we will ramp it up. We do not believe that ramping it up is going to be a challenge at all. Already some ramp-up has started taking place.
Thank you very much. Due to time constraints, we'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
So thank you very much for a very patient hearing. It's been a long day, long time, and we've had extensive discussion. We continue to keep this dialogue going. Whatever follow-up questions you may be having, please don't hesitate to ask us. Once again, thank you very much. Keep safe and all the best to all of you. Good night.
Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.