ICICI Securities Ltd

NSE:ISEC

Earnings Call Transcript 2022-Q4

[Operator]

Good evening, ladies and gentlemen, and welcome to the Earnings Conference Call of ICICI Securities Limited for the quarter and year ended March 31, 2022.

We have with us on the call Mr. Vijay Chandok, Managing Director and Chief Executive Officer; Mr. Ajay Saraf, Executive Director; Mr. Harvinder Jaspal, Chief Financial Officer; Mr. Vishal Gulecha, Head, Retail Equities; Mr. Kedar Deshpande, Head, Retail Distribution, Product and Services Group; Mr. Anupam Guha, Head, Private Wealth Management; Mr. Subhash Kelkar, Chief Technology and Digital Officer; Mr. Ketan Karkhanis, Head, Digital Client Acquisition and Co-Head, New Solutions Group; Mr. Prasannan Keshavan, Head, Operations; and Mr. Nilotpal Gupta, Head, Data Science Unit.

[Operator Instructions] Please note that this conference is being recorded. The business presentation can be found on the company's corporate website, icicisecurities.com, under Investor Relations. I would now like to call Mr. Chandok to take over the proceedings. Over to you, sir.

[Vijay Chandok, executive]

Thank you. A very good evening to all of you, and welcome to the ICICI Securities quarter 4 call as well as where we are taking the full year earnings call for fiscal 2022. So I'm sure that by now, you would have already perused through our financial year numbers and also the quarter 4 results and also, of course, our presentation which has been uploaded.

I will start with highlighting a few points. First, on the financial side, 3 things I would like to highlight. If you look at the FY '22 revenue, this stood at INR 3,438 crores, registering a 33% growth over the last fiscal year. This has been led by strong performance across all businesses that we are in. Our profit after tax for FY '22 grew by about 29% and it came in at about INR 1,382.6 crores. The Board of Directors approved a final dividend of INR 12.75 per share, taking the full year dividend to INR 24 per share for fiscal 2022.

As we look at the operating side, this year what we find is diversification as a theme has really stood out, and it has stood out for us in the areas of revenue mix and also in terms of the client segmentation.

When I talk about revenue mix, what here we see is that the broking as a contribution to total revenue has now come down to about 45% in fiscal '22, which used to be 58% in fiscal 2021. In fact, when you look at quarter 4, it has come down further from 45% to 42%.

The retail allied equity income contribution to the total equity has actually increased now to 32% in the full fiscal, which was 16% last fiscal. And if you look at quarter 4, it has actually further increased to 38% of the total retail equity. This is on the back of traction from Prime and MTF, which has gained by quite a margin.

We also see diversification with respect to age group and revenue mix. Of our total equity retail revenue, what we find is that 40% of revenue is coming now from millennials and Gen Z. 30% is coming from 40- to 50-year-old, and another 30% coming from above 50. 60% of revenue in each of the fiscal '14 to '22 is contributed by greater than 5-year vintage customers, referring to -- relating to our ability to retain vintage customers as we move along.

With respect to client sourcing and the client mix, we see that there has been a strong momentum in client addition. We added close to 22.7 lakh customers in fiscal 2022, which is the highest that we've ever done in any year. Today, our customer base has now expanded to about 75.6 lakh customers.

In the last 3 years, the millennial and Gen Z has now constituting more than 80% of our active customers, and 65% of our customers acquired in FY '22 are actually less than 30 years of age. 84% of these customers are from Tier 2 and Tier 3 cities.

Pursuing with the theme of diversification, the open architecture strategy has actually helped us reduce our dependence on ICICI Bank for new customer acquisition because today, we find that 78% -- 79% actually of customers are sourced from channels other than ICICI Bank.

The other point we want to highlight with respect to this year is that there is clear traction in product propositions and our digital properties which we've been launching in the past few quarters. So to name a few, our PMS book has now crossed INR 700 crores. The Prime proposition to our customers has now crossed 1 million customers, so we have more than 1 million Prime customers on our platform.

The Markets and Money app that we have launched have crossed a combined download of about 1 million, and the Markets app is rated 4-plus on the Play Store. There is clearly a gaining traction that we see on some of our properties like One Click baskets, which is both for equities and mutual fund. Premium portfolios, Masters of the Street, these are very interesting products that we've launched to gain share of business in the equities business -- the equity side of our market opportunity.

The MTF book on an average for this fiscal actually scaled up by 3.6x from what it was last year. And we're clearly a market leader with a 22% market share in the MTF side of the business.

Also, finally, when we looked at the year, our efforts were actually recognized by various awards that we won. I don't want to talk about them. I'll just highlight 2 of them actually. One of them is where we were ranked as India's Best Securities House by Asiamoney 2021. And the second one I'll highlight is the Digital Wealth Manager of the Year award by [ Triple A ], which is a digital award for 2022.

I'll now turn our attention and talk about quarter 4 performance. So while we look at the entire fiscal as a -- and look at it as a strong year on a whole, the quarter gone by was a mixed bag as far as the industry was concerned. We witnessed in the industry a reduction in cash equity volumes and also postponement of various primary market issuances owing to uncertainty in the market led by the geopolitical tensions arising out of the Russia-Ukraine war.

The retail client additions to this industry, whether in terms of NSE active or also in terms of total number of DMAT accounts also lost momentum in this quarter compared to the sequential previous quarter. While the cash volumes reduced in the quarter, derivative trading volumes continue to show growth. But clearly, there was some moderation in the growth rate related to the previous quarter.

So on quarter 4, our revenue grew by 21% on a Y-o-Y basis to INR 892.3 crores, and again, this is on the back of growth in all our business segments on a yearly basis. However, when you look at it on a sequential quarter basis, revenue declined 5%. This decline is primarily attributed to our issuer and advisory business, which was impacted, as I mentioned, due to postponement of various public issuances due to the geopolitical uncertainties going on.

When you look at our distribution business, it actually showed an improvement. Equities business overall remained flat on a sequential basis. Even when you look at our cost structure, there it remained flat.

As a result, profit after tax for the full year increased 5% and declined -- on a quarterly basis, increased by 5% but declined by 9% on a sequential basis. This came in at about INR 340.3 crores. This sequential decline in profit can be attributed to lower revenue in the issuer and advisory business.

Let me now just take you through some of the key highlights of our performance for the period. In the past, all the feedback that you've been giving us to increase our disclosures. This time around, we have gone ahead and added additional disclosures. This is -- for the first time, we are giving you a disclosure on our retail market share and equities and derivative side.

On the retail equity market share, we are happy to report that our market share improved by about 30 basis points in quarter 4 on a sequential basis as compared to quarter 3. So market share now has crossed 10% and is at 10.1%, which was at 9.8% in quarter 3. This is clearly as a result of the traction that is coming on various products that I just spoke about earlier in my commentary.

On the derivative side, however, our efforts to regain market share continue, and it remains a focus area as our market share in derivatives actually declined in quarter 4 to 3.3%. To recoup this market share, we have identified 4 key investment levers, namely pricing, experience, various tools to facilitate derivatives and finally, the algos and the open architecture platform.

To update you on the pricing front, we have already launched Neo, which is gaining traction. On the experience and analytical tools side, we have launched our new Markets app, One Click Derivative platform, new trading view on charts, Option Express. We've invested in improving UI/UX, among some of the other initiatives.

As far as the open API architecture is concerned, we have very recently launched the same called Breeze API, and it is currently in the adoption phase. It has several industry-first features. We've, in a short period of its launch, signed up with more than about 1,000 traders. A lot of that has to actually play out in the times forward.

On the back of these measures, what have we seen? We have seen an improvement in some of the input parameters like number of customers, like orders, like [ slots ]. And there are many more initiatives in the pipeline which are in the domain of algo-trading platform. We are coming out very shortly with a platform, which we have branded as [ Meta Cockpit ], which is directed towards volume -- high-volume traders. We are also coming out with one-touch simplified options trading product, which we branded it as [ Flash Trade ]. All these initiatives being launched, we remain totally committed to start showing you a gain in market share as we move forward.

On distribution business, this witnessed a growth in revenue driven by insurance and other distribution products. Our loan base broadened with distribution of home loans and also some of the other loans that we distribute picking up momentum. We registered market share gains both on a sequential as well as Y-o-Y basis for flows into debt and equity mutual funds. We feel satisfied when we look at the strong gains that we have made at a granular level on the SIP count as far as mutual funds are concerned. This is on the back of the launch of our Money app, which has seen good adoption from customers.

So when you look at the mutual fund data, the noteworthy points are as follows. The mutual fund average AUM is up by 22%, which is an all-time high for us. The AUM market share increased from 1.6% to 1.7%. Market share in SIP improved and it came in at about 3.7%. SIP count for Q4 touched 1 million per month. This used to be 700,000 a year ago. And the SIP flows increased by 31% Y-o-Y now.

So in context of our insurance business, we are working on multiple prongs to harness the entire insurance opportunity. We are working on creating intuitive customer journey, which is highlighted by our partnership that we recently announced with Coverfox. In fact, the product with Coverfox has also been launched a few days back. This is enhancing our product suite that is helping us integrate with insurance, and it is helping us provide an analytical-driven personalized experience for our customer, which is leveraging our Money app.

Loan distribution continues to scale up. This quarter, we disbursed INR 660 crores as against INR 530 crores that was done last year same quarter. As far as the Issuer and Advisory business was concerned, it was impacted in this quarter considering the environment not being very conducive for IPOs. Having said that, the franchise continues to strengthen its leadership position and the pipeline is pretty strong. We also continue our efforts on growing recurring sides of the Issuer and Advisory business like UIT blocks and other advisory services.

Having looked at Q4, I'll now shift our attention and give a little bit perspective on the way forward. As we enter FY '23, we are entering it on the back of a slowing market environment. However, we continue to believe quite strongly on the medium-term story for the industry. That story remains intact despite the short-term headwinds. So FY '23 will be a year of investment for us. We will be making strategic expenditure on investments on technology and marketing. This is in line with our endeavor to stay ahead of the curve.

Investment in technology will be to magnify our digital capabilities, modernize our data center and also help us transform our tech architecture to become cloud-enabled. Key areas where we are spending on technology are cloud migration, launching new digital properties, addition of digital layers to existing ones to enhance customer experience, and finally, building a reliable and a risk-protected data infrastructure. This year, our tech cost increased by 70% as compared to the previous year. And in the year, that is FY 2023, we are budgeting a commitment of 2.5x what we spent in the year that just got concluded.

Marketing spends is primarily proposed on brand-building activities and increasing promotion and awareness on new properties, products and features to increase our presence. Today, if you look at the listed fintech space, we would rank as amongst the most diversified business models, and this diversified business model has a meaningful presence and market share in several business segments. And today, it would be fair to say that we have established ourselves as one of the leading [ fintech ] players in the country.

We continue to press the pedal to strengthen our franchise and gain market share in the equities side of the business and continue, as we do so, to diversify into other revenue opportunities of insurance, loans and other distribution products so that we can emerge as an open architecture digital Neo financial services of them all. I'll end my commentary and throw it open for questions that you may have. Thank you very much for your patience here.

[Operator]

[Operator Instructions] The first question is from Kashyap Javeri from Emkay Investment Managers.

[Kashyap Javeri, analyst]

Congratulations for a good set of numbers in challenging times. A few questions from my side. First, I just wanted a clarification. You mentioned about some budget being 2.5x versus last year. Was that marketing and promotion with it, is that what you mentioned?

[Harvinder Jaspal, executive]

No. Kashyap, this is technology spend. So technology spends have been growing so that was higher by 70% this year. And on top of that, we spoke about 2.5x for the coming year approximately.

[Kashyap Javeri, analyst]

And what would be -- so would that be expensed in P&L or this would be like a capitalization balance sheet?

[Harvinder Jaspal, executive]

It will be a combination. So I mean, the overall outlay is both CapEx as well as OpEx. Bulk of it would be CapEx.

[Kashyap Javeri, analyst]

And would you be able to quantify FY '22 number?

[Harvinder Jaspal, executive]

FY '22 number would be -- in terms of CapEx would be of the order of about INR 60-odd crores.

[Kashyap Javeri, analyst]

Okay, so thanks for the clarification. A couple of questions from my side. One, we have again sort of reclassified revenues in our presentation, both in terms of, let's say, equity and allied as well as distribution. So if you could help us understand how do we compare even Q-on-Q -- sorry, how do we compare that with the previous classification, what has changed?

Second question is in terms of client addition. While you mentioned that for the industry as a whole, the addition has declined and -- which is pretty much visible in some of the large players also. But the decline for us in terms of new clients -- new active net client additions has been much a sharper decline vis--vis, let's say, competitors in this quarter. So what would explain that sharper fall?

Third question is in terms of your interest expense by MTF and ESOP, interest income has grown by about 1.6x versus last year. Interest expenses have grown almost about 3x. So what has driven that number?

And last question is in terms of employee cost. Was there any one-off write-back or something in the same quarter last year where the costs have sort of gone up from about INR 105 crores to INR 170 crores?

So these are the 4 questions which I have: reclassification of revenues, slower than competition client addition, interest expenses and employee costs.

[Harvinder Jaspal, executive]

So Kashyap, let me try to take it in the reverse order. Those answers are fairly straightforward. Yes, last year, if you remember our commentary, we had a slightly upfronted variable cost for the first half. As a result of this, Q4 was relatively lower than the run rate. In fact, our cost-to-income ratio -- our employee cost-to-income ratio was one of the lowest in Q4, which was 20%. And we had given a guidance that a more normalized number is of the order of about 23% to 25%. So against that normalized number, the increase is primarily on account of growth in the employee base and increment. So that is the answer to the fourth one.

Now let me go to the third one where you're saying that the interest income increase is on account of 2 parameters. Number 1 is, as you've rightly said, growth in MTF and loan, the entire loan book. The second is also that we have interest income increase because of FDs that we placed with exchanges. And those FDs have to keep on increasing as the volumes keep on increasing. So that is the interest income on account of FDs. Both of them put together is showing that growth, which is 3x. Your third question was...

[Kashyap Javeri, analyst]

When you say it's 3x, my question was that INR 30 crores, the [ interest ] expenses gone up to about INR 90 crores. So sort of I couldn't understand what you're trying to say in terms of FD. So are FDs with the exchanges that we've put, we would -- is there any expense that you are clubbing over here? I couldn't understand actually to be honest.

[Harvinder Jaspal, executive]

No. So let me tell you, on the interest income there are 2 line items: one is interest income that we generate from MTF loan books, basically. That is one interest income. The second interest income is from the fixed deposit that we place with exchanges. These 2 line items, which impact the overall interest income. On the expense side, the borrowing, which funds both these line items is basically commercial paper borrowing, which comes under finance cost. So the finance cost increase is for both these line items. That is what I'm trying to say.

[Kashyap Javeri, analyst]

Okay. So if I look at NII level, what would be growth at NII number if [indiscernible] net of these expenses?

[Harvinder Jaspal, executive]

Yes. So on an NII basis, the growth would be primarily the growth that you're seeing in the MTF interest component, that would be the growth. Because FD and the commercial paper borrowing would be almost even-steven. So there is no negative carry or a positive carry.

[Kashyap Javeri, analyst]

Okay. Sure, sure.

[Harvinder Jaspal, executive]

Now moving on to your third question, which if I remember, was on account of slower growth in NSE active, if I remember, that is what you asked, vis--vis players. As you rightly said, one is a bit of a moderation that we have seen in Q4 in the market and in most of the players. I mean, you've seen month-on-month for Jan, Feb, et cetera, the numbers have been softer. That is one theme.

The second theme, as we have been articulating is that we are focusing on improving the quality of the mix. And consciously, we are wanting to have a scale, which helps us to improve the mix of the sourcing, after which we want to scale. So that has been a conscious effort because of which you are seeing a slightly more delta vis--vis some of the other players.

[Kashyap Javeri, analyst]

Would it be also because if I look at attrition from the client addition, this quarter is slightly higher for us, the dropout of the clients at the net level. So I'm just trying to calculate open plus whatever you have added, which is about 618,000 and closing is about 3.03 million. So dropout would be roughly about 3.4 lakhs, which is significantly higher than what we have seen in the past?

[Harvinder Jaspal, executive]

Yes. So Kashyap, in fact, our emphasis on quality is from this particular aspect that once a client does even a first transaction, getting a second transaction is where this parameter of quality comes in. And once now we have got an experience of, let's say, 12 months, 13 months of the sourcing -- a higher scale of sourcing, we are trying to gauge the channel which gives us more sustainable quality. And that is the reason why, yes, you've seen a higher drop-off, and that is also leading to our conscious effort of improving the mix before scaling.

[Kashyap Javeri, analyst]

Sure, sure. And lastly, on the reclassification?

[Harvinder Jaspal, executive]

Yes. So reclassification, let me clarify once again, I think you're referring to the retail equity and allied, which is 1 line item. We have always been saying that retail equity and allied is our total income from equity businesses. We also upload, apart from the presentation, we upload a very detailed Excel spreadsheet, which gives you all sub breakups.

But the point that we wanted to make was that the INR 521 crores that you're seeing for retail equity and allied, that is the total income that we have been able to generate in our equities business, and it includes the income that we earn from broking. The interest income, the charges that we have and it has to be seen together. And that's why this is the way we look at it. And that's why what you see at an allied level is consistent. It is INR 527 crores and INR 521 crores, these are the two numbers. The breakup between broking and allied is also there detailed as a disclosure annexure.

[Kashyap Javeri, analyst]

But I think there is a change in the institutional brokerage number also, which this quarter, you have reported at about INR 63 crores. And in this presentation, the previous quarter number is about INR 69 crores. But if I look at our Q3 presentation, that number in that presentation was only about INR 44 crores. So -- and similarly, if I look at even distribution on Y-on-Y basis, there has been change. So has that been changed across the line items?

[Harvinder Jaspal, executive]

So here, even in the institutional equity business, what institutional equity business does is 2 types of business. One is the flow business. The second is it also helps in the corporate finance deals or investment banking deals. And there is a revenue sharing which is an industry practice. That is what is called the allied income, which also the details are available in the disclosure. So this is what we started from the last quarter with that exclusion.

[Operator]

The next question is from Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Firstly, on the corporate finance side, you mentioned that the recurring segment is growing. Could you give some color as to what is the share of that recurring segment right now? And how do you see this business shaping up in FY '23? But you have a good pipeline of lease in store, but looking at the market conditions, do you envisage a sharp decline in the revenues from this segment? That was my first question.

Secondly, on the MTF book. With market volatility increasing, would you take a call to [indiscernible] to reduce the -- reduce the income or reduce the lending on this side of the book? And thirdly, on the distribution side, do you think that like the growth momentum that we've seen will continue in next year as well?

[Harvinder Jaspal, executive]

Sorry, Prayesh, if I may just bother you to -- the last question, if you can repeat, I missed that, the last one.

[Prayesh Jain, analyst]

For distribution income, what is the kind of traction you expect in the next year?

[Harvinder Jaspal, executive]

Yes. If I can answer your first question on the profit finance side and a bit of a predictability there. What we are doing also is, given our dominance in the equity capital market with a 70% market share last year, what we had built it -- invested is building up on the advisory side, which is the private equity M&A. And we are seeing traction. So that kind of gives a bit more stability on the incomes while continuing our dominance on the equity capital market side.

Prayesh, could I move to the second question, do you have any follow-up?

[Prayesh Jain, analyst]

So basically, I wanted to understand, so in FY '22, what would be the kind of revenue you would have [indiscernible] others, if you can give that split-up?

[Harvinder Jaspal, executive]

So overall revenue, we have disclosed, Prayesh, which is -- it was INR 65 crores for the quarter as compared to INR 110 crores. Within that, predominantly, it is capital market activities and that is definitely our key strength. There, we have a strong pipeline, about 870 billion is our pipeline. A lot of deals with strong [ left-lead ] mandates. But as Ajay commented and it will depend on how things evolve. But yes, that is our strength and market share over there is important, which is where we have worked towards and tried to gain.

[Prayesh Jain, analyst]

Sure.

[Harvinder Jaspal, executive]

Prayesh, if I were to move to your question on MTF. Now MTF, with a bit of an uncertain environment, our endeavor -- so MTF is a product strategically that we have been focusing on. It has given us dividends in terms of revenue diversification. It also is a key source of attracting customers with a high-value transaction base. Going forward, our endeavor would continue to be to focus on this product with diversification of the theme and broad bases. So reduce concentration, broad-based, have more number of customers, increase penetration, these are the themes. But per se, the product is something that we are focusing on, and we, in fact, intend to scale it up even further.

[Prayesh Jain, analyst]

Okay. Just following up on that, sir, there is also ESOP funding impact that would be seen -- sorry, ESOP funding impact would be seen in next year, right? What would be that count?

[Harvinder Jaspal, executive]

So ESOP funding right now is roughly about INR 1,400 crores out of the total INR 7,500 crores that you see. And it is a bit of a rundown, so next year, we should expect it to have a bit of a slow wind-down because of the regulatory changes that we discussed last time. But right now, it's holding -- it's at about INR 1,400 crores.

[Prayesh Jain, analyst]

So the next year, it could be much lower than this? Is it slightly different, INR 1,400 crores or possibly half of that?

[Harvinder Jaspal, executive]

That's reasonable to assume, Prayesh. Vishal, you wanted to add on the MTF point?

[Vishal Gulecha, executive]

Yes. So as you said that market volatility also has a role to play. So I just wanted to keep everyone informed that we work with [indiscernible] risk governance system and all the positions which are open are governed by that. So if you go back March 2020, actually, we wrote-down the book by almost 40% to 45%, keeping in mind the market conditions, et cetera. However, when we saw the opportunity to scale up, I mean, we immediately put all levers in place. And quarter-on-quarter, we added to the funding amount.

So we'll have adequate margins. And as Harvinder said that the effort is how many more stocks we add, so that the risk is diversified among quality stocks and also how many more customers we have. So there is no concentration on a particular set of customers.

[Harvinder Jaspal, executive]

Prayesh, also, you had a question on distribution traction and what we can expect in the coming year. So our focus consistently over the last many quarters has been to diversify our revenue. Distribution has shown good growth. We are seeing improving traction on many products: mutual funds, insurance, loans, fixed income, et cetera. These are some of the products which did well. Our focus is to build up this particular franchise.

The loan book, which is scaling up. Insurance, where there are partnerships that we are trying to do. We are getting more partners, insurers, manufacturers on our platform. And also digitizing journey. So these are some of the initiatives that we are taking. Our endeavor is to improve and build up traction in this -- across all products.

[Operator]

The next question is from Aditya Jain from Citigroup.

[Aditya Jain, analyst]

So a few data-keeping things. So could you give us a breakup of the total INR 373 crores of brokerage revenue into retail and institutional?

[Harvinder Jaspal, executive]

Yes. So if you look at retail brokerage and -- for the quarter, it's about INR 325 crores for retail brokerage and institutional brokerage would be INR 48 crores. This is the brokerage income. But as I clarified earlier, retail total business revenue, retail equity revenue is about INR 521 crores, including allied.

[Aditya Jain, analyst]

And institutional, the amount which is there, that is including IB revenue share?

[Harvinder Jaspal, executive]

Yes, that's right. That's about INR 14.8 crores of allied plus INR 48 crores of broking, totaling up to INR 63 crores of institutional equity business.

[Aditya Jain, analyst]

Understood, perfect. And could you tell us the number of new subscribers and operational accounts? I know that separately, you haven't mentioned this number for a couple of quarters, but if it makes sense to share that number, the number of operational accounts and the newer subscribers now.

[Harvinder Jaspal, executive]

Yes. So one, in terms of the data points, Aditya, offline also, I will direct you to our disclosures, which is a separate link that we have where all these data, including historical data is there. The new customer base is now 2.2 lakhs right now as of quarter end. The total client base, again, is disclosed over there at 7.6 million.

[Aditya Jain, analyst]

Got it, perfect, sorry. I was looking in the wrong portion of the website, I guess. And then two qualitative things. So one, the API business which you are building more, so how does monetization in that happen? So is it like some sort of a bulk pricing? Is it volume-related, just broadly to understand how that works? And sort of in a similar way in the partnership with Coverfox, how does that work and which part of revenue will it enhance?

[Vishal Gulecha, executive]

Yes. So API monetization is, again, by way of the brokerage which customer generates and also the allied income. So just 2 months old initiative and as Vijay said that we have crossed 1,000 customers. When we look at the initial patterns, we see that the number of orders have grown almost 2x in the same period, right? So it is kind of nudging customers on various opportunities, giving those opportunity to customers and customers are able to encash that. So that is how we see the monetization happening.

We are adding many features, first of this kind of, I mean, features in the industry like giving historical data, one minute candles, et cetera, which is not the industry standard so far. And we also want to bring the complete back-testing model, also many strategies which customers can form using our platform. So I'm sure that the volume and the brokerage plus allied income will justify and -- justify the monetization.

[Harvinder Jaspal, executive]

Aditya, just to kind of further elaborate, so we have various plans. API would be a manner of transacting from the customer to us, depending on whichever plan the customer has chosen, for example, if it is a new customer versus a Prime customer or a Lifetime Prepaid, depending on whatever plan he has chosen, the brokerage will be charged on that on overall volume that is done through API or directly. Either which way, we don't have, as of now, any plan which is a bulk pricing, one payment, unlimited volume plan.

[Aditya Jain, analyst]

Got it, very clear. And on the insurance side, sorry?

[Harvinder Jaspal, executive]

Yes. On your second question was with respect to Coverfox. And so there, the partnership with Coverfox is expected to help our insurance business. They are helping us build a technology interface with the assisted digital journey for both general insurance, health insurance, some of those products which we are focusing on, and our expectation is that, that is where the traction should build. The partnership is Coverfox being a technology provider and us doing the marketing, so that is the partnership.

[Aditya Jain, analyst]

So a customer of ISEC could buy insurance on the ISEC platform, and because Coverfox already has linkages with insurers, you could leverage on the back of those rails to offer that insurance plans to customers. Is that the right understanding?

[Harvinder Jaspal, executive]

Yes, that's right. And the way we have worked out this partnership is that we have kind of agreed of kind of a revenue share with them. So that jointly, both the players will work towards creating or scaling up this business. That is the way we have designed the commercials. But what you're saying is right, the model is a tech partner, JV and us doing the...

[Vijay Chandok, executive]

[indiscernible] Yes. So just to elaborate, conceptually what you have explained is correct. But for our partnership, Coverfox is giving us a specific UI/UX customized for us, and the back end is tied up with our partners using our license. He's just a software service provider, right? So that is the arrangement. So whoever our insurance distribution partners, the pipes are connected only with those insurance partners. In our case, it will be the general insurer partners that we have, the health insurance partners that we have. And as and when we launch life, it will be the life insurance partners that we have. But it's ICICI Securities partners that could be on the back end.

[Aditya Jain, analyst]

Got it. So the broker on record will be ICICI Securities on the insurance policy and not Coverfox?

[Vijay Chandok, executive]

Correct, yes.

[Harvinder Jaspal, executive]

Just to clarify, technical term would be corporate agent. Broker technically is a different term in insurance parlance.

[Aditya Jain, analyst]

Okay. So we are working under a corporate agent license and not a broker license?

[Harvinder Jaspal, executive]

Correct. That's right.

[Operator]

The next question is from [ Karthik Shahmi from Mirad Asset Management ].

[Unknown Analyst]

So I just wanted to ask one question that would be around your spend that you're aiming of 2.5x compared to FY '22. And you said that this will be a mix of both CapEx and OpEx. So I just want to understand what will be your cost-to-income, given it's 49% right now and your target being around 40%, if I'm not wrong, could you just give me some color on that, please?

[Harvinder Jaspal, executive]

Yes, sure. So Karthik, this spend will enhance our cost-to-income ratio maybe for the next year, we have been guiding on this earlier as well. That a journey to 40% or a much -- I mean, higher operating leverage compared to today might go through a slight increase before it starts coming down because we are investing in couple of areas in the coming year. We could see an expansion further up from the current 49% in the coming year before it starts trending down.

[Operator]

The next question is from Aejas Lakhani from Unifi Capital.

[Aejas Lakhani, analyst]

Congratulations on the result. Two quick questions. One is I'd like to understand your thoughts on how or why a trader will come and trade on the platform more? What is the key driving metrics? So if my understanding is correct, you guys have the best rate on the MTF in the industry and that provides leverage. Despite that, you were not able to garner incremental derivative market share. So can you just expand a bit on that front please because that is quite crucial for us the way I understand.

[Vishal Gulecha, executive]

Yes. See, every product on ICICIdirect, I mean, we take it as a separate customer segment, right? So be it cash, be it MTF, be it intraday, equity trading or derivatives. Within derivatives, again, futures is a separate market for us and options is a completely different market. Now the effort is in each and every product how do we create that niche which customers -- which adds value to customers.

So we have looked at each and every product. I mean, as I said that all these 5, 6 products and try to add features, tools, attractiveness in terms of rates. Also, the other important commercial parameters like interest, et cetera. On derivatives, number of initiatives we have taken apart from the new pricing in terms of tools, in terms of APIs. Even in the current quarter, when we look at the initiatives, I think we have completely simplified the derivatives journey on our website. We have also simplified our journey on the Markets app.

We have added a number of tools and it is getting traction, like One Click Derivatives, which has a ready-made strategy execution tool, which otherwise users will find it very difficult to do in segmented way, the execution of that strategy. That also is getting traction, like other initiatives like Option Express, APIs, where we are trying to give set of data and also connectivity, which is not the market norm so far. I mean, it is completely at a different level and we keep adding value to that. So that is on derivatives segment.

As far as cash is concerned, I think the Prime is a key proposition there. We have added a new attractiveness by bringing lifetime Prime plans now. Just 2 months, and we have seen a very healthy adoption rate from the dormant customers, from the new customers and also customers who want to explore our products more like MTF, et cetera, and needs that absolutely fine commercial terms. So that's what our endeavor is, that each and every product should be looked at as a separate market, separate customer segment, and we should fine-tune each and everything what matters to customer.

[Aejas Lakhani, analyst]

But sir, on the derivative side, I just want to understand since switching costs are low, what is it that, that segment would require from us that we were lacking today, which causes the shift, right? So is it platform? Is it -- because they're already used to the traders used to executing his space on a different platform. So is it price that is determined to -- for him to move or is it futures? Or what exactly is that, that will -- that you have that you didn't have earlier?

[Vijay Chandok, executive]

Yes. So I'll just add to what Vishal said. What Vishal was basically saying that every sort of product that you're trying to offer to your customer, you need to have a winning proposition around it, right? And you create an entire ecosystem supporting that product so that it gives the customer a winning feeling and you have a winning outcome.

So with respect to derivatives, there are 4 items required to win in our assessment, right? A trader always looks for low cost. It's a high-volume, low-margin business. Therefore, all types of costs that we incurred, hidden, nonhidden, direct, not indirect, has to be the lowest. That attracts him. The second is it's a fast game. He wants a platform which is fast, responsive, salient, giving him easy entry, easy access and multiple platforms to access. And the feature that he expects on each platform has to be consistent, right? That's the second thing. So I would summarize all this by calling it a great experience.

Third, he needs tools to win. Today, tech has given the ability to create a number of tools, which translates its strategies into simple trades which he enters English and gets an outcome, which can be sort of executed to at a very short notice. So I'll call this as tools to win. The fourth is APIs and algos because then he creates his own front end and uses us as an execution platform. So these are the 4 sort of elements that are required.

We have actually been investing in some of the other areas to modernize, to upgrade, to improve. And you would have seen that on the equity side, we've been able to successfully do that and we are seeing gains in market share. It would be fair to say that we made a rather late start with respect to derivatives. And we were able to meet that market -- higher market share in the past because of the extra leverage that we were able to give, given what was possible in the pre peak margin norm. It is only after or around the peak margin norms that real proposition investment started beyond the leverage proposition.

Pricing, that piece is done, significantly done and getting absorbed in the market. Great experience is about 7- or 8-month-old story. I mentioned that there are many more refinements doing. You will never make this argument in the first go. But we have a good app now, good acceptance, close to 1 million downloads on the Markets app alone, together with our Money app, it's crossed more -- much more than 1 million. We are seeing a 4-star-plus rating there.

Tools to win. I elaborated, there are several tools that have been added and more tools are coming. But these tools are all, I would say, 3 months to 4 months old tool in the platform. So there is still familiarity which is going on. So there is a lot more marketing and communication efforts that we need to do. And then finally, APIs and algos. Algos is yet to be launched. It's going to be a Q1 launch. APIs have been launched a few days back, maybe a couple of weeks back, and we've got 1,000-plus traders sort of taking that facility.

So if you really look, we are a youngster in this fleet, and it may sound a little strange to hear this from me, but the fact is that in these areas, we have -- our investments are a few months old. We remain -- we are going to invest in fundamentals. We are going to invest on investment input parameters. And we are quite confident because we've been able to invest in input parameters and we got an output parameter on other sides. This is 1 area where we have not got the output parameters. I must say it is disappointing. It's disappointing for all of us. It changes a lot.

And we remain totally, totally committed on building these capabilities into the company so that the trader feels that, yes, he's got a winning ecosystem here. That's the eventual sort of a place -- are we seeing green shoots? Definitely, we are seeing green shoots because we are seeing, on a daily basis, improving number of trades, increasing number of orders and so on and so forth. Yes, it's going to translate into gains at a faster clip than what we are seeing for sure, there's no running away from that. And that's what we are committed for. And we hope that during the course of this year, we'll be able to really cross that hurdle.

[Aejas Lakhani, analyst]

That's very helpful. And sir, just 1 question to you that we've seen month-on-month additions in clients as high as 2 lakhs and then probably at the lower end because we are choosing the channel mix like you have rightly called out for quarters. So in terms of the run rate of clients, what is the number that we should sort of be thinking around? Is it more on the more recent lines? Is that how you're looking at client additions? Or is it that once this -- once you figure out all of this, the acceleration will take place in the latter half of the year?

[Vijay Chandok, executive]

Yes. So I think there is no perfect answer for this. Yes, so let me tell you how I'm thinking about it, how all of us are thinking about it. The pullback in numbers, it would be fair to say is a deliberate pullback. And the reason why we pull back is because we said that, okay, like I probably would have explained in some of the earlier calls that we've done, digital acquisition is not an amorphous acquisition. There are at least 5 or 6 sub channels of acquisition. Each subchannel has got its own cost and its own behavior characteristics and its own participation in the market.

Obviously, out of the 5, not all 5 are of the same quality and caliber. Some channels are really good. Some channels are really bad. And as it would be natural, in anything which is giving you not so good quality is probably the easiest for any team member to acquire. And in the initial stages of our growth, we got a mix which was not -- certainly not optimal. We've learned that the good channels, now that we have about 5, 6, 7 quarters of data with us. And clearly, there are what we call green channels, orange channels and red channels. Red channels, we are suppressing, which means that some of the clients which were coming off not so good quality have just been sort of shut off.

The orange and the green channels are the channels that we are pushing the accelerator on. These are tougher channels to acquire but we have to invest in this so we will continue to invest. We are in the ballpark of around 200,000 per month kind of a rate. I mean, at this point in time, we are broadly running with that kind of a run rate. But it's a review on a fortnightly basis. This number is something that we can ramp up and ramp down based on how the market is sort of giving us a lead and how our own behavior is coming.

So we are running right now, as I told you, at a broadly 2 lakhs per month kind of a run rate reviewed on a fortnightly basis. We obviously -- in the quest for quality, we cannot be giving up the growth numbers also. So we are conscious of this. I'm trying to just do a balancing act right now. If the market giving us more traction, we will press the pedal to get more.

[Aejas Lakhani, analyst]

Got it, sir. So we should think of the [ 600,000 ] a quarter as the benchmark for at least sometimes the acceleration journey starts.

[Vijay Chandok, executive]

So I'm taking it 15 days at a time.

[Aejas Lakhani, analyst]

Yes. Got it, sir. Got it.

[Operator]

The next question is from the line of Arash Arethna from IIFL.

[Arash Arethna, analyst]

Yes. So I just had a couple of questions around overall revenue growth. So I think if I just look at the retail brokerage line, I think you've grown 2% Y-o-Y in FY '22. Now this is despite a 90-plus percent growth in NSE active clients. I understand the equity volumes have come down this year. But overall, what is the outlook on the broking revenue? And I'm just talking about broking, not broking and allied next year.

And in conjunction, for overall revenue growth is from what I gathered from the call, you intend to scale up on the interest income with the MTF book on the distribution side. And on the issuer side, you would probably see some sort of decline. So along with the broking revenue, what is the sort of overall revenue and broking revenue growth that you are seeing going forward?

[Vijay Chandok, executive]

Yes. So let's take this broking revenue. When we started this journey of transformation, we said that we want to move away from this product-centric sort of focus to a client-centric focus. What we find in the market is that the vein which customers are charged for performing an equity transaction is paid for the services that you avail, right? So while the act of the brokerage is low or 0, there are several other services that they perform, like fund movement, fund transfers, various other things that a customer does in terms of taking a position, cutting of margin, [ shares as ] margin. Each activity is charged separately.

This is what we call -- we never used to charge our clients like this in the past. So we have moved to consciously said we will move away from being fixated on broking as the sole way of collecting revenue from customers and make it broking and align the way others are charging in the market and moving to an activity-based style of pricing. So we are, in a way, in the journey of moving from 1 style to another style. So as we are moving into this kind of a format, judging ours on broking singularly would not make sense because we are deflating our broking revenue and we are increasing our allied revenue to make the business model more robust.

So you have to view us as the total equity because as we are deflating broking revenue, please understand we are getting closer and closer to the best pricing in the market, and we are still managing to hold our revenue growth. In fact, we have seen continuous growth in our overall revenue, right? So please view us because we are seeing this as a combination and not as a singular or 2 different blocks. So that's 1 point.

With that background, we are focusing on input parameters. We are focusing on increasing market share. So what is going to happen in this year, I think you were wanting to know what's likely to be the outlook. I mean, I can tell you input parameters will get all its attention. If markets are going to be supportive, you should get amplification. If markets are not, then you will obviously bear the consequence of what would happen.

As far as issuer business, et cetera, is concerned, you have to see that issuer business is approximately between 15% to 20% of our total revenue and profit pool, right? So its impact would be, to that extent, limited, at least, I would say, about 20% to 25% of that is not necessarily linked with capital market activity because it's a flow business, as I said, and somebody else had also asked. Our efforts have been to keep increasing that share so that the predictability about the issuer services increases, improves further.

On an overall basis, obviously, we are planning for growth in the context of tough market conditions. We hope that we will be able to deliver that because we clearly see that right now, headwinds are there in terms of what the markets are offering in front of us. However, we strongly believe focus on input parameters, keep your operating leverages in place, keep your expenses variabilized. And that's another thing that we are focusing so that you're able to manage your performance based on market conditions and not really become a slave to a completely high fixed cost angle. You would have noticed some of our fixed costs have, as a percentage of total costs, have actually continued to show a declining trend quarter-on-quarter, including this quarter.

[Arash Arethna, analyst]

Sure, sure. Fair enough. Point taken on the way to look at revenues. I just basically, combining all, I just want to see [indiscernible] Y-o-Y growth you said in terms of revenue, would that be mid-single digit or double digit? Any sort of indication on that side?

[Harvinder Jaspal, executive]

It will be difficult in our kind of sector to have any kind of a projection. But as Vijay said, I mean, our focus areas would be this. And I mean, we have seen almost double-digit and a very strong double-digit growth over the last 2 years. I mean, it completely depends on a lot of factors.

[Vijay Chandok, executive]

Let me give you some past data. Viewing our type of business and giving -- seeking of 1 year, 6 months kind of a guidance is very difficult. I can tell you what's happened over 10 years and taken in blocks of 3 years. Take 10 years and taken in blocks of 3 years, you will always find that there has been any or any part of the contiguous blocks of 3 years, you will find that the CAGR of profits have been at least 17%, 18% during this decade as sort of a phase. And revenue growth have been in the ballpark of 30% to 40% in that kind of a range. And profits have been between 17% and 25%. So that's the [ digital ] experience but seen over a block of 3 years, any 3 contiguous years.

So that's been the trend. We do believe that, that kind of a trend should be contained, should be sort of there in our business model. On top of that, we are trying to reduce the cyclicality so that more predictability comes by adding nonequity revenue, which is again an area of focus. So taking guidance from me from -- for the next 6 months, 9 months, 1 year would be very tough. Input parameters, yes, we'll keep improving. We view this business in a block of a 3 year, any 3 contiguous years and you'll get a growing -- secular growing trend.

[Operator]

The next question is from Sahej Mittal from HDFC Securities.

[Sahej Mittal, analyst]

Congratulations on a great set. Sir, a couple of questions from my side. Firstly, just wanted to get a sense on what are the number of orders executed on an average in a single day on your Idirect markets app, if you could give out that number? And the second 1 was around how are the new investors sharing in such volatile markets with customers, which ICICI Securities has? Are these customers making profits in the F&O segment or I mean, how is the trend looking like? And the third 1 was around what was the marketing spend in 4Q and for the full year and what's your target for FY '23?

[Harvinder Jaspal, executive]

Harvinder here. So on the first one, Sahej, as of now, we have not put out the number of orders on this. As we have said in the past also, within due course, I mean, we would keep on adding to the disclosures as we have done in this quarter as well. But as of now, we have not put out that number. Second, your question was that how are the new and the younger guys bearing in terms of whether they are making a profit or not? I will just request Vishal to comment.

[Vishal Gulecha, executive]

Yes. See, our efforts is to take customers through a very, very disciplined approach, be it any product. So in cash like, we encourage customers to go by our [ reserve ] recommendation. So we have given about 125 recommendations in the Q4 with a success rate of about 75%. And derivatives also a product like one-click derivatives where strict stop losses are followed, hedge positions are created. However, I mean, the market is very, very spread out. So customers do take their own decisions -- at time, decisions go right, at times, decisions go wrong. But as long as they follow a very, very disciplined approach and guided by research, I think we have seen gains in customer portfolio, be it matured or be it the younger ones who are coming to the market now.

So as I said in my earlier discussion, that we try to come out with such reserve recommendations in every product, so be it directional calls in our directional positions in cash or derivatives and as well as MTF kind of a product there, the portfolio is suggested for the positions. The effort is to keep customers in a very, very strict disciplined environment.

[Sahej Mittal, analyst]

So the anecdotal experience is that the customers make, on an average, are not losing money on the F&O side? Not on the cash side, but my concern is on the F&O side particularly?

[Vishal Gulecha, executive]

Yes. So I mean, the market also has to be supportive. In derivatives market, we see that maximum customers are on the buying side option. So they anyway limit their losses. So when they gain, of course, options is a great tool to deliver returns. And when they lose and being a buyer of options, I mean, we don't see much downside for those customers because of the inherent nature of the product.

[Sahej Mittal, analyst]

But we do see the trend that most of the customers are taking a long position, is that right?

[Vijay Chandok, executive]

Yes. So let me just give you 2 data points here. You have 2 types of customers, customers who follow tools or recommendations given by us. B, customers who do not follow rules and regulations but do their own thing; and C, who do a bunch of combination of both. There, what data is suggesting is that if you belong to the first basket where you -- you almost always follow the recommendations or tools given by us on ICICIdirect, we have a success strike rate of about 70% to 75%, right? And therefore, if you're following 100% of all of this, there is -- you will invariably land up in the positive side, making money. That's data point number one.

If you're doing this completely on your own, then it would be whatever your skill and trade has resulted in positive or negative outcome. And what is really happening, I'll tell you with another data point. And number three, if you are a mix, again, it will be very similar to the second one. Invariably, when people lose money, they lose interest in the markets and they drop out. So 1 way to look at it is that are you seeing a kind of a fluctuating or a declining trend of traders on your platform? That is, in a way, an indicator and an indirect way of people, whether they are making money or not.

We've been seeing continuously month-on-month an increasing trend of traders on our platform. So if you have too many people making too many losses, you will definitely see a decline in that number. At least so far, we have not seen. And as Vishal said, the [ nudges ] are, we call it through tools like [ i-alerts ] where we even alert customers from risky trades are happening. I would suspect people, if you are following that trade, they should be buying large, making money and feeling happy.

[Sahej Mittal, analyst]

Got it. And on the marketing spend?

[Harvinder Jaspal, executive]

Yes. So marketing spend for the quarter were of the order of about INR 30 crores. We are kind of spending on above-the-line marketing as well as digital marketing, et cetera. So all put together, it was about INR 30 crores. This expense, as we have called out, along with technology expense, are 2 things where we do expect growth next year as well.

[Sahej Mittal, analyst]

This INR 30 crore number for the full year would be?

[Harvinder Jaspal, executive]

Yes, about INR 100 crores, ballpark.

[Sahej Mittal, analyst]

And where do we see this number trending for the next, say, FY '23 and FY '24, maybe FY '23?

[Harvinder Jaspal, executive]

So difficult to kind of give exact number, but as I said, that.

Yes, it will be on a -- I mean, there will be growth in this ahead of expenses -- overall expense growth.

[Vijay Chandok, executive]

So we are looking to invest in brand building, both below and above the line in various properties, not necessarily television and press, et cetera. We are also quite heavily investing in below-the-line, digital investments, digital properties, digital sort of marketing spend. That is therefore an area of investment that we have taken a call to go ahead and make.

[Sahej Mittal, analyst]

Got it. And lastly, on the tech spend, so what would be the hit on the P&L of the tech spends in 4Q and FY '22? So Harvinder just called out that there were some INR 60 crores of CapEx in FY '22. So what would be the hit on the P&L in 4Q and FY '22, if you could give us that number?

[Harvinder Jaspal, executive]

Yes. So for P&L, which is the operating expense, it would be of the order of about INR 20 crores to INR 25 crores.

[Sahej Mittal, analyst]

This would be for the full year, right?

[Harvinder Jaspal, executive]

No, no. For the quarter you asked, right?

[Sahej Mittal, analyst]

Okay. And for the full year in the range of INR 100 crores?

[Harvinder Jaspal, executive]

About INR 80 crores.

[Sahej Mittal, analyst]

Got it, got it. And so where would you -- so this INR 30 crores of marketing expenses, do you consider as expenses a variable expense line item when you are classifying your fixed versus variable expense and you disclosed that in your investor presentation? So where do you take this expense line item?

[Harvinder Jaspal, executive]

Yes, a part of it is. Because a part of it is also on acquisition, the digital client acquisition and the marketing that we do on various properties. So that part does get classified as variable. But a part of that is fixed, which has to do with above-the-line or any marketing or brand-building spend. So the classification is anything which is for sales is variable for acquisition and anything which is for brand building, that's fixed broadly.

[Sahej Mittal, analyst]

Got it. And on the recurring expenses in the investment banking side, so 70% is -- close to about 70% is recurring in nature. Was that number right, 70% to 75%?

[Harvinder Jaspal, executive]

So 70% is a market share, Sahej. Market share in the ECM for our investment banking business.

[Operator]

[Operator Instructions] The next question is from Himanshu Taluja from Infina Finance.

[Unknown Analyst]

Just 1 question at my end. Sir, some of the new entrant players have actually come with a new way of pricing that are these trends launched by one of the players of INR 999 is a onetime payment where you get the unlimited trades in -- across all, whether it's cash or whether it's F&O or the commodity segment. So just wanted to know your -- the way the pricing dynamics changing in the industry from a volume base to a flat key model and now to a onetime probably. How do you see this specifically? What's your view around this?

[Vijay Chandok, executive]

Yes. So actually, competition on pricing has been there for now 5, 6 years so we continue to see 1 more player. We have a bunch of, I think 100 [indiscernible] who are now offering discount broking, there'll be 101 [indiscernible] so it will continue. I think competition intensity in our industry is going to be very, very high. Two characteristics we have observed, there is stickiness in this business. Number two, you also find that new market opportunities are sort of growing. You have newcomers coming so there is enough opportunity and space to grow.

And number three, it is -- pricing is important, but not the -- it's not going to give you growth. If you don't have an entire ecosystem created around it. And it's not easy. We've seen people struggle to create that whole ecosystem. You take our own example. You give a pricing and you've seen that derivatives unless you create an entire ecosystem, your ability to garner faster than market is going to be tough. So it's about ecosystem. We've been able to do that on equity because we started the investment journey in creating that ecosystem earlier. So it's about creating that whole ecosystem. You have to give the whole gamut so that you gets the whole thing in one place.

And that is not an easy game for everyone. You need deep understanding of the nuances of the market. So yes, competition will be there and we have to face that competition, I mean, in that sense. And as a business model, therefore, we are diversifying business model. Therefore, we are looking to also deflate our broking revenue and I talked a little bit about that earlier. So that we get more competitive than we are at this point in time with respect to even equities business.

One needs to understand that when you keep deflating one side of the business as you see other aspects of revenue and broking, which happens on the intraday side and F&O side, if you're able to create scale, you can create massive profits. And there are people who have been able to do that. But then that happens only if you have scale, not otherwise.

[Unknown Analyst]

Yes. Because the reason I'm asking because especially for the high-volume traders and all this kind of the pricing makes a lot of economic sense for the [indiscernible] and probably that could be the pricing that it can create a pricing pressure for the other players. So that's why I thought of.

[Vijay Chandok, executive]

I repeat what I said. In terms of pricing the offer, 0 pricing on future, then there is no INR 999 to join also, okay? The 0 pricing on future, there is INR 20 on intraday and INR 20 on options. Pricing alone is not enough. Pricing is table stakes today. You need to provide the entire ecosystem to it.

[Operator]

The next question is from Sanketh Godha from Spark Capital.

[Sanketh Godha, analyst]

Sir, when we see the income breakdown, the biggest driver of the growth in the current year was the interest income of -- on MTF book, which almost doubled in the current year. So given now the interest rates are going to move up the volatility in the market and we are much at a higher leverage compared to what we are in the past, sir, just from the diversification strategy, what you said, but the incrementally to grow this and probably add to the top line and meaningfully the way it added in '22 or even in '21, do you see a clear story of moderation in this particular line item going ahead? And probably, I wanted to understand how people are sensitive to the interest rates when they take ETF call -- sorry, NTF calls, I mean to say. So sir, given the we were one of the -- it was one of the lowest [indiscernible], what was offered during the last 4 quarters or 6 quarters kind of.

[Vijay Chandok, executive]

Yes. So can actually we have the ability to absorb a slightly higher pricing? The answer is, yes, it is possible to absorb a slightly higher pricing than where we are. Would we be increasing pricing? We are not considering increasing pricing, but one is also seeing the movements that are happening in the interest rate in the market. So it is dependent on market. So if markets are actually going to bump up rates on the cost side, then yes, we will be responsive and we will do something on the cost side.

Is that going to impact market? I would say that the interest rate is not a singular determinant. You're supposing I would have made it even 4% just theoretically. Would we have grown? The answer is not because of 4%. It would have grown if there is an opportunity that the investors find to invest. When do they see this opportunity? They see this opportunity when there is volatility in the market, and they have a conviction on a certain sort of trade and that is sort of giving him a low entry opportunity. So volatility actually gives opportunities for investors to take positions on MTF.

It need not be 1 year, it can even take for a matter of a few days. So yes. So volatile situation is helping us grow. The growth that we spoke when you remember, Sanketh, last time we spoke, you were quite apprehensive about the growth. And you yourself just said that we've seen a good growth from there on. Why is this growth coming? Today, if you look at our MTF book, with whatever book that you are seeing on the table, we have only 60,000 customers using MTF. And the total number of customers, traders are more than 1 million.

So will this grow 100%? That's going to be our effort, not by growing the book with 1 customer or 2 customers or 60,000 customers. I need to grow the book with 2 lakh customers, 1.5 lakh customers, keep increasing that base. And there is a lot of scope to penetrate beyond 60,000. And that's how we will grow, not by increasing the risk of an individual customer. It's just 60,000 customers that have got. And this number sometime back was less than half.

[Sanketh Godha, analyst]

Yes. So month-on-month, I mean, from 35,000.

[Vijay Chandok, executive]

Yes, it used to be less than 4 months back, 5 months back, it was half -- nearly half that number, slightly more than half that number.

[Sanketh Godha, analyst]

Got it, got you, sir. And finally, I just wanted to understand that if I look at the prime customer base, -- as a percentage of the total NSE active clients is coming off, which means that incremental traction in the prime compared to what we are adding in the total base is relatively lower. So should we see that because assuming the Prime will be the most ARPU-heavy customer. So this lower traction in the Prime is somewhere is having an impact on the broking income or market share gain, which we are missing a bit with respect to derivative market or maybe in that sense, even low despite launching for more than 1.5 years, the number of people who are using [indiscernible] total, which honestly is a little lower compared to what we anticipated when the plan was launched, given the pricing it had. Sir, I just wanted to understand this part a little better from ARPU point and your point how it would play out.

[Vishal Gulecha, executive]

Yes. See, as far as Prime, month on subscription is concerned, I will say that we had the best quarter. I mean, Q4 was the best ever quarter in terms of getting Prime subscription. Yes, there are customers who will try out with a small value plan like INR 299 and perhaps considering the volume they may not even renew it again or they may also take a plan like prepaid or the new. But as we are creating new attractiveness in time, we see that more and more high-value customers are coming. Where we are not looking at per customer ARPU here because as we discussed earlier also that it's not just about broking, it's about the total system revenue, which is like broking and other incomes.

Yes, because of the lower rate offering, the yield goes down. But at the same time, we are looking at the total revenues rather than looking at yield. I mean within equity, you see or the capital markets, you see different products have different kind of yield. So it's actually not a yield business. As far as new and adoption is concerned, see, the Prime and new, we have created in such a way that both the plans have their own attractiveness. Now many derivatives customers, thousands of them, despite the opening new for them, they continue to be in Prime because of the package which we offer.

So simple thing. Like today, if you take time, you don't have to move money to [indiscernible] I mean say they continue to enjoy liquidity they have that comfort of having money in their hands. They can use their shares as margin and still they will not be charged any interest rates. So it's a very, very fine kind of a package which Prime customers are getting. And at the same time, they are loving of features like eATM or the MTF interest rate of 7.9%. So we have to see, and we have seen some impact post launching of our lifetime Prime plans, we have seen that many customers who otherwise would have gone for actually have gone for a lifetime Prime and paying 0.1% brokerage in cash and also a very, very minimalistic [indiscernible] in just INR 7 per kind of a lot. So I mean, that is how we are trying to package these 2 plans, 2 separate customers, 2 different needs, and both are liking the propositions we offer in each and every plan.

[Sanketh Godha, analyst]

Got it, got it. if I look into Prime income per customer in the fourth quarter, it has substantially increased from INR 770-odd to INR 1,060-odd. Sir, this is largely because people have shifted from a INR 299 plan to a superior plan. That's the way you are seeing it as the trend going up?

[Vishal Gulecha, executive]

Yes. So both the things have happened. We have acquired more number of high-value customers from market. We have activated more number of customers from our government base on non-traders. Fully acquired early, but for some reason, they did not trade. And the second thing also, customers who earlier were INR 299 doing less volume with us did not explore all our products on ICICIdirect. They are also willing, having experienced this in a couple of years. They are willing now to pay bigger amount take lifetime benefit and increase volume with us. So it's -- I mean, it's both in adoption of the new plan by existing customers as well as getting new customers from market and activation of the old non-traders and stock [ traders ].

[Operator]

Ladies and gentlemen, we take the last question from the line of Aditya Jain from Citigroup.

[Aditya Jain, analyst]

Just wanted to check on the plans which you -- guidance you gave on tech spend and marketing spend. It's -- so what led to the development of this view? So is it capacity addition for, let's say, a long time to come? Or is it just a different approach to that higher spending is required given the synergy? Just what was the thought process there? And what will be the success defining points that you will look for that the tech and marketing spend has been successful? So what kind of goals you would look for? And then secondly, the -- in one of the slides, the cash market share, not the retail one but total, is going from [ 8.3 to 10.2 ] quarter-over-quarter. So you talked about retail strength but that is 30 basis points. So this is reflecting very strong institutional cash market share? And what is that being driven by?

[Vijay Chandok, executive]

Yes. So just to clarify, this -- for the first time, we have given you market share of retail, right? Earlier, you were getting a combined market share between retail and institutional combined. So this number that -- the trend that I showed you -- we showed you of 9.8 going to 10.1 is a 30 basis point retail market share. There's nothing to do there, this doesn't include institutions. So just to clarify that data, right?

[Aditya Jain, analyst]

So I was referring to the data on Slide 41, which is blended equity market share, 8.3 to 10.2 Q-o-Q. So given that retail estimated, as you put in the slide, it's 30 basis points Q-o-Q. This 190 basis point Q-o-Q should be reflecting institutional market share. That's why I was looking at it.

[Harvinder Jaspal, executive]

Yes. Aditya, I think just kindly ignore that Slide 41. There seems to be a typo over there.

[Vijay Chandok, executive]

Yes. Coming to the.

[Harvinder Jaspal, executive]

Sorry, Aditya, you should refer to that disclosure file where I'll just read out the number on the blended equity market share, which was the earlier one, not the retail one, as you rightly asked, is 8.9 for this particular quarter for the [indiscernible] and 10.1 is the equivalent number for retail, which is excluding any institutional equity.

[Aditya Jain, analyst]

Got it, understood. Yes.

[Harvinder Jaspal, executive]

Yes. On technology and marketing spend, I think your question was where are we going to incur these spends, right?

[Aditya Jain, analyst]

So essentially, so if I may clarify, so what led to the -- what made you feel that, that sort of step-up is required? And what are the goals that you would look for in saying that those spends have been successful, so better quality client acquisition or in whatever way you find it best to define those set of factors.

[Vijay Chandok, executive]

So the question is why are we doing this? We are doing this because 2 reasons -- 3 reasons, I would say. Number one, it gives us capacity enhancement, right? So there is capacity enhancement and ability to handle more number of clients than we are able to handle. Secondly, today, our entire architecture, tech architecture is on-prem. We are moving into a hybrid model, right? The advantage of moving into a hybrid model is that it variabilizes our costs based on market conditions.

Today, it is not that part of the cost -- the technology cost is not variable. It is -- it can variabilize. And the fact that it is now moving to cloud environment, it gives us a lot more agility in new developments, partnerships, all of those. So it gives us greater agility. It gives -- so launch to market, product to market today, which takes sometimes, months for us to hit the market. You could have probably seen how much time it has taken for us to come out with various propositions on the derivative side as an example. These would have been much faster had we been on a cloud kind of an environment than what it is today. So that's the sort of advantage.

The whole platform and tech architecture, therefore, becomes -- we are taking this opportunity to leap into a cutting-edge modern kind of an architecture, which has variable cost structure, greater capacity and greater agility. And the reliability and availability is another angle that is being -- is guiding us, that the reliability of -- and the availability of a modern data center, it would add to this.

So all these 4 would be the, I would say, advantage. How does it benefit? I think it will benefit us in clearly providing a much superior customer experience. And we have seen that when we get much superior customer experience, it eventually translates into, A, improvement in Net Promoter Score; B, improvement in cross-sell and therefore, revenues that arise out of nonequity side and C, greater loyalty. And I would add D, a greater attraction for more number of clients. It adds to it. All these are additive. It's very difficult to attribute it on a one-to-one basis, but these are elements which help all these 4 outcomes to happen.

So what would we expect out of this? I think we would eventually expect all these 4 outcomes, improved cross-sell, improved NPS, improved -- reduced downtime on the site, improved, I would say, revenue and improved customer acquisition rates. So all of this is what we would expect as an outcome.

Marketing, as we said, there are 2 types of marketing that we do: one is what is direct for client acquisition. And the second is the marketing -- which is digital marketing. And the second is the marketing spend that we do above the line, which is for brand building awareness, product promotion and so on and so forth. We have very recently started doing the second. For several years, we have not invested in that space at all. Why are we doing this? We are doing this because we are seeing a lot of action happening in this space in the market. And we have not sort of done anything in this space for a long time.

Why did we not do this? We did not do this because we were busy modernizing a lot of features, basically modernizing a lot of stuff at our platform. And we felt that it would -- it should be done at a point in time when we are ready to receive customers with a promise that gets communicated and that promise has to be delivered on the platform. We have reached that kind of a stage where we feel confident to stand up and talk to the customer about features, talk about some of the things that we are talking to him, and he gets a great experience out of it. That's why you would have seen propositions getting sort of communicated on television above the line I'm talking about on products like eATM. You would have seen a lot of ads on CNBC in case you watched it, then Paylater, which is basically MTF, our brand of MTF that we've launched.

And we are adding more such. One-click baskets is another very powerful brand, which probably people know it like small case. We have our own small case equivalent. So we have created compelling propositions now to talk about. So we feel this is the right time to communicate in above-the-line fashion as well. So that's why we are doing this.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Chandok for closing comments.

[Vijay Chandok, executive]

So thank you very much. I think a very, very intense and enjoyable conversation and very insightful questions from your side. Really appreciate all the time that you've spent on this. I'm sure there could be after-thoughts and questions to follow. We're always available. Just ping in, you know all of us. Reach out me, Harvinder, any of our IR guys and we'd be happy to set up time and do a more detailed dive in as many of you require. Thank you very, very much, once again, and thanks for all the support that you guys have been giving us. Really appreciate it. Good night.

[Operator]

Thank you very much, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.