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Multi Commodity Exchange of India Ltd
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Ladies and gentlemen, good day, and welcome to the Multi Commodity Exchange of India Limited Q1 FY '19 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mrugank Paranjape, Managing Director and Chief Executive Officer. Thank you and over to you, sir.
Thank you, and good evening to everyone, and welcome to our quarterly investor call. Let me begin with giving you a brief overview on how the quarter has been in terms of the business. Some of the key regulatory developments. We'll talk about highlights on our numbers and then, as usual, I will spend all of the time on the Q&A. In the quarter, our ADT grew an increase of about 2.25% over the previous quarter, and on a year-on-year basis it was a very healthy 30% increase if I compare with last financial year. In the month of June, we witnessed an ADT of INR 23,745 crores, and that was almost the same as what we had in the previous month of May as well. So generally speaking, volumes are very close to that INR 23,750 crores number, and inching towards the INR 24,000 as we speak, given the volumes that we have seen in July as well. A big development for us over the last quarter was the fact that the much-awaited approvals for the options contracts that we had asked SEBI came through. So from 1 approval we had 5 approvals, and we launched our 4 subsequent options contracts. We believe it's been a very, very healthy launch in terms of those options contracts. Of course, the traction that we see varies from product to product. I think it is quite obvious that with the volatility that we've seen in the crude oil markets, the traction in that product is extremely good. We've already had quite a few days, and we've seen more than 1,000 retail investors trade on that contract, and volumes in excess of INR 200 crores in some of those days as well. So from an exchange perspective, our strategy on the product side remains to be focused on building out the options. As we have maintained, we think the next -- this quarter is the time which we will take to build it, and really build it in the next couple of months to a volume where we can then make it meaningful for us to probably charge on those contracts. The second strategy for the exchange will continue to remain to build deliverable contracts as all of you are aware, the regulators are very keen to promote and build more deliverable contracts in the derivative segment, and this was not only something which has happened in the commodities market, as we see this is happening even in the vital securities market. With that intent, we have launched a brass contract. We've seen 2 months in which deliveries have steadily increased. We have now crossed 5 tons of brass in our warehouse, and again we made some minor modifications, which when we go through with them in this month, we expect that to tweak and really increase the turnover EBITDA that we see, especially in terms of deliveries coming through, to a significantly higher number. So building deliverable contracts will be the next part of our strategy. Obviously, we continue to work with the regulators in terms of the path we had all set up, and just to recap like we do every quarter, on the 3 pillars of our growth, here is where we stand. I think on a product side, it's an absolutely great tick mark with having large options as was expected. The discussions with the regulators on now looking at index-based trading in commodities is already on its way. So it's a discussion which has started like it has happened in the past. We expect this financial year to be the time when we will launch trading on options in commodities -- sorry, on index-based products in commodities. The second pillar of our growth, distribution, again, great progress. So 2 things to report here. We have onboarded 4 of the 5 largest bank distributors, which was one of our biggest initiatives in the last 6 months. We believe that will continue to be the pillar of our growth in terms of driving retail participation and penetration in terms of distribution. On our second initiative, which was in terms of combining the markets, again roughly 70% of the market will be on our trading platform, which is combined for equities and commodities segments. Meaning, thereby, that the brokers and client will see everything on one screen, will have the fungibility across asset classes, and therefore, will already be seeing a unified exchange in front of them. So great progress there. I think where we have been slightly slower in terms of our progress is in getting institutional participation in the commodities segment. That is something which has been slower than expected. As we speak and today, you might have read as well, the issue is around getting the correct regulatory framework to enable custodial participation in the commodities segment. That not having happened, we haven't seen any traction in the growth from the AIF segment, and it has also prevented SEBI from coming out with the next guidelines for allowing mutual funds and PMS. So work to be done, and I think that is one segment where it may be slightly slower than what was being expected till now. In terms of hedging, I think one big change which happened was that the Reserve Bank of India, which has allowed Indian entities to hedge their commodities prices overseas, had also disallowed that to be done in gold, gems and precious stones. I think we have seen a positive impact of that with the open interest in gold taking a decently big jump, starting from July 1. We believe that over the long run this should give us a 30% to 40% increase in our open interest. Cotton stocks in our designated warehouses have reached an all-time high -- we are about to touch our all-time high, which is somewhere near the range of 160,000 bales. As we have said we stand committed to making this a absolutely true national benchmark, and reach at least 3,00,000 bales in the next session. Realizing that we also have a wider commitment to the society, we signed an MOU with the government of Maharashtra, which will enable us to offer this cotton contract in a meaningful way to farmers in the Maharashtra region so that they can hedge their risk, and cotton being a very sensitive commodity in Maharashtra for the farmers, we expect this to actually make sure that people realize the value that we bring to the society as a whole in terms of our business. In terms of the business update, I think that would be it. Key highlight numbers you already have, but just to reiterate, on the operating income, we registered a growth of 23% in terms of the growth versus the corresponding quarter in the previous financial years. The EBITDA decreased to INR 37.47 crores. I think, and Sanjay is with me on the call as well, we will give you a bit more highlights in terms of the reason why we have taken a onetime fair value of loss of INR 23 crores on our tax free bonds, but also the reason why we had lower earnings on our other income, which are the only 2 probably not so good numbers in this quarter. So over to you Sanjay, before we take more questions.
Yes, so overall, our other income, which primarily comprises of treasury income was INR 12.56 crores, which was much lower than the previous quarters, primarily because of the rise in the bond yields. So the 10-year G-sec yield has moved from 7.40 at the beginning of this quarter to end at 7.90 at the end of the quarter. So that resulted in MTM losses in our mutual fund portfolio as well as in our long-term tax-free bonds that we have. Apart from that what we did was we changed the approach for valuing our tax-free bonds. So earlier we used to use the guidelines prescribed by FIMMDA for valuing the portfolio. Now we have migrated to a Security Level Valuation. Now this valuation is carried out by these rating agencies ICRA and CRISIL, and basically the reason for us to move to this level of -- or rather this methodology was because we were observing a lot of quarterly fluctuations in the values as arrived at by using the FIMMDA guidelines. And on top of it, we found that the SLV evaluation was much closer to the market rates. So we have been taking this valuation over the last 4 quarters of the last financial year, and we found these to be a much a better reflection of what's going around in the market. So the total impact of this change in approach was actually INR 30.24 crores, but out of that, INR 6.4 crores pertained to the movements within the quarter, which has been taken into the P&L under the other income headline, which includes -- or rather which is included in the INR 12.56 crore other income that you are seeing, and the balance INR 23.8 crores, which pertained primarily to prior period, that has been reflected as an exceptional item.
I think that sort of gives you a summary in terms of what we have seen over the last quarter. I think at this point of time, like we always do, we'll pause to get the questions coming in. And then we'll be absolutely happy to take more questions. So over to you.
[Operator Instructions] We have the first question from the line of Nimit Shah from ICICI securities.
So I just wanted to know what are the yields which were there in the last 4 quarters. And the amount of portfolio that isn't mutual fund and tax-free bonds in this 4 quarters.
So you're talking about the yields on our overall portfolio I believe? So I have the...
No, no, the movement of the yields which you are taking into consideration. So you take 10-year yields while valuing this portfolio?
No, so the present approach of SLV, there it's basically a script level yield curve, which is maintained by these rating agencies. Wherein the key...
So that is under the new method, right?
Yes, under the new method. Under the old method, again, there was a yield considering 2 things. One is, if at all a script has got traded in the last 15 days that gets reported as the value for the year-end or the quarter end purpose. And if the script has not got traded, then the future cash flows would be discounted at a coupon rate, which will be crossed up for the tax purpose.
Yes, just again, Nimit to give you the context is that, as you know, we move to in there from April 1, 2016. This particular change in valuation only pertains to our government bonds that we had bought, tax-free bonds which were there in our portfolio. From 1st April, we've been doing the valuation based on the FIMMDA evaluations, that's the methodology applied by FIMMDA. In the financial services sectors, generally FIMMDA was used predominantly by banks whereas the new methodology, which we have described is something that is generally used by mutual funds, insurance companies, FIs and corporates, which is the SLV approach. Now we had served -- taken FIMMDA because that's how it was done traditionally, but over the last 8 quarters, we saw FIMMDA actually having too much of fluctuations which didn't reflect true market value, and therefore, we decided to move to the SLV approach.
Yes, I got that point regarding the change in the valuation methodology, but if you see the last 4 quarters, that income trend has been quite volatile from Q2. In Q3, again it slipped almost by half. Again, Q4 it rebounded by -- it's almost double and again in this quarter it's almost half. So I just wanted to know it's -- is it entirely because of the 10-year yield movement? Because -- so I just wanted to know what are the yields that you are factoring in, in Q1, Q2 [Foreign Language] -- Q2, Q3, Q4 and Q1 of this year? For last 4 quarters, what are the yields which you are taking into consideration while valuing this portfolio?
So Nimit, we are not factoring any yields. So these FIMMDA guidelines -- I mean, the yield -- so this valuation comes from our bankers as far as SLV is done -- SLV is concerned, that comes from the rating agencies. So it's not that we are maintaining a yield curve and using that for the purpose of valuation.
Okay, yes. So they don't publish also that yield which is there at the end of the quarter? And on what investment that is mutual funds and tax-free this is applicable as compared to a total investment?
So Nimit, just to clarify, mutual funds would be valued basis the NAV that we get. So it's absolutely in the public domain and there's nothing -- no valuation done by anybody else. It's based on that. It's only for the government...
It's only on the tax-free bonds?
Only on the tax-free bonds where the valuation methodology was FIMMDA that valuation methodology is changed to SLV. And because of that there's a onetime charge, but that anyways is also similar, I think. Had we continued on FIMMDA as well, the valuation number would have been same, but it's just that because of the fact that we're making a change in methodology we're also disclosing it. And in terms of recognizing that change in value, there's a INR 6.44 crores, which is a loss which we have taken within this quarter's income and INR 23.8 crores, which has been taken as an exceptional item.
Okay, okay. So this is applicable on the tax-free bonds which is roughly INR 350 crores or INR 330 crores in value.
But the cost base is INR 308 crores.
The next question is from [ Pritesh Shida ] from Lucky Investment Managers.
Sir, what will drive the volume of contracts in the business because there I see that there's hardly any movement, a lot of the average daily turnover rises on account of energy and metals where the prices have gone up. So what will drive this because it's been about 3, 4 years that this particular number has been flat? So that's my question one. Sir, question 2 is on the option side, now in this ADT of INR 24,000 crore how much is options? And what is the update on -- in terms of acceptance amongst the market participants?
So I'll take the options questions first. The number that we are publishing is purely the futures number. We haven't given the options number, but it's available as a public figure anyways, but we can add that into our investor presentation as well. In terms of the acceptability, like I said, options contracts is starting with the crude where you see the highest acceptance. If I have to rank it, I think, it's crude, gold, copper, zinc, silver, something like that in terms of how we see the success today. To your first question, I think we believe that the longer-term growth in this platform is going to come predominantly through distribution, for which the enablement has happened only within the last 1 year. So while we have all been trying to get more participants, participants really come from expanding your distribution network and for that, the 2 biggest drivers are going to be, one, the bank distributors becoming available to us, that is something which has got structurally enabled in the last financial year, actually onboarded this year. We will be in a position to announce in the next 1 month or so, trading starting by one of the bank's subsidiaries as well where they will go live with their trading on our platform. So I think the one big driver we are seeing for the retail growth is going to be the bank subsidiaries. And the second one is going to be the combination of the commodity and equity participants because that again will integrate the platforms and automatically give you a much larger user base, which you will see this happening. So those are the 2 bigger drivers that we see expanding this market and expanding the volumes as you said.
Okay, I do not have the options volume number off hand, but for the last quarter, how it was? So it was expected to be eventually be equal to the futures market, right? As a potential opportunity. So I don't know how it has panned out of the last 2, 3 quarters since it's been launched. So what it would be last quarter?
Okay, so let me just give you the history there. Options -- in terms of all the 5 options, this is the first quarter. In fact if I count zinc, zinc traded only for about 8 days in this quarter. Now in terms of the overall daily number that we see of the notional, it is currently in the range of 5% to 7% across the entire spectrum. On good days, we probably are hitting maybe 10% of the notional -- in terms of the notional value, we are at about 10% of the futures. We have said that the definition of success for us is to cross 60% off the underlying futures, and that's a number which we think we should target. We are targeting that number in a period of 2 to 3 years. So I think in the next 8 quarters, you should see this number go up in terms of the notional. And valid point, the reason we didn't publish that number, of course, is that there is no revenue coming out of it anyways as of now, but we will add that number as well to our presentation when we disclose the numbers.
Okay, lastly you gave the number for mutual funds and tax-free bonds in the balance sheet. How much is it?
You're talking of the total portfolio value?
Yes, total. Yes, yes, yes.
So like Sanjay mentioned, the tax-free bonds at cost is INR 308 crores. Mutual funds, what's our portfolio?
INR 700 crores.
It's about INR 700 crores in the mutual funds.
Okay. And any -- so you would be taking membership money deposit. So any liability corresponding to this?
Total INR 250 crores.
So about INR 250 crores is what we have the money from members for margin, which adds to our revenues.
So INR 750 crores would be net surplus for you guys?
No, the net -- so the -- our own surplus, I mean, the accumulated results that we have, that is roughly INR 1,050 crores, additional INR 250 crores is mutual funds -- sorry, member's margins.
Okay, so that you're considering any case separately because it's a liability as well?
So just in case, we are trying to make up the total for that INR 1,050 crores and this INR 250 crores. Essentially it's INR 700-plus crores in mutual funds, INR 310 crores or so at cost in the governments bonds and INR 200-plus crores in FDs.
Next question is from Prakash Kapadia from Anived Portfolio Management.
Given whatever volatility we have seen in India in the equity markets, and as the previous participant was hinting at the higher prices of commodity is seen. Are we seeing a lower impact on our ADT? Shouldn't our ADT been higher than what we have done?
I mean, aspirationally, obviously, we want to be at a much better number, but if I look at the operational highlights between Q1 FY '18 and Q1 FY 2019, if I look at just the number of traded contracts, we've gone up by about 14.6%. So from 48 million contracts to about 55 million contracts. In terms of the change in turnover on a y-o-y basis, of course that's 30%. So clearly you can attribute an equal growth to number of contracts and an equal growth to the price in it.
Understood. On the other income side, this is a onetime impact, what happens if G-sec yields again go lower? Does this extraordinary get to a positive or it doesn't?
So this extra -- the extraordinary item remains as it is because it's just a impact pertaining to prior to April 1, 2018. Whatever benefits comes, if at all the yields are to fall from here, that is straight go into other income under the gross revenue.
Okay. So the mark-to-market from year on for interest rate changes will be captured in other income is what you are saying?
Absolutely.
Okay, I understood. And lastly on the commodity repository we've taken a stake in CDSL's venture. So if could you give us some sense, potential operations, where are we in that and the outlook for that business?
So I think on a very, very big picture, I personally look at the CCRL or this whole repository, not just because it sounds like the depository but it's really what the depositories did for the equities market in India. So in that sense, where we are today is where we were in 1996, when NSDL and CDSL used to go on their roadshows telling people why it is important to be in a depository. And therefore, in a very long term, big picture, I think somewhere in the mid of 2000, I don't think anybody was asking why you need depositories and what they do for the markets. So long-term I think that is the outcome that is expected. What everybody is expecting is that as the market starts appreciating the value an electronic warehouse receipt adds to the overall infrastructure and to the ecosystem in commodities, more and more people will adapt to this system, and therefore, it will be a mix of making it mandatory from regulation to making it voluntary because people see the benefit. That is the long-term picture of what the repository will achieve for us. In the very short term what is happening is that for the commodities which are traded both on our exchange and on the other exchange in terms of commodity derivatives, the 2 repositories have already started creating electronic warehouse receipts for this, and therefore, we expect that probably by the end of this year, you should see most of the contract being settled through electronic warehouse receipts, which are issued under the overall regulatory regime of WDRA. Already, as you may be aware, both the exchanges have their own electronic systems, and we issue an electronic receipt for the warehouse receipts that you have for goods deposited under MCX. But that is a system that we have on our own, but by the end of the year, we will all move to this eNWRs, and that timeline is a bit uncertain because here you have a different regulator, and they're working on a different sort of thing in terms of their priorities. But I think you should see by the end of the year most of the commodities which are traded on exchanges being settled if they are physically settled through eNWRs of the WDRA.
Okay. As you mentioned the regulatory, which is one part, but how has your interaction been in terms of participants, especially banks from a risk mitigation perspective. Historically, there have been lot of cases of fraud, issues with the inventory. So what are the participants saying?
So I think there are 2 parts. Obviously, for everybody who sees this as if corollary in terms of what the depositories see, they are absolutely excited about this development. However, the challenge comes that today the biggest push is really coming because the mandate, where we are saying it is absolutely mandatory for you to be in an electronic warehouse receipt, is really coming mainly from the futures market where SEBI is also working with WDRA to push participants to make it mandatory to settle their trades. But unless the larger market, which is sometimes not covered by commodity derivative products, and again even in terms of what is settled in our products is really a fraction of the total physical market. So till the physical market starts appreciating the value of this instrument, it is going to be a very slow rise in terms of the participation in that business.
The next question is from Sagar Lele from Motilal Oswal Securities.
Mrugank, sir, a couple of questions. One being when do you expect to start monetizing options. Are you looking at a certain level where you'd be comfortable to start doing that? And secondly, on that how would you -- would you start with one commodity or do you plan to uniformly roll it out for other commodities?
So I think the second one is easier to answer. We will -- when we do it, we will do it across the basket that we have. I -- it will be too difficult for the market to start adjusting in terms of their business dynamics to start looking at a very, very deferential rates here and there. On the first one, and again, this is not a hard and fast number, but something where we said aspirationally again, we want to see the premium to cross INR 100 crores. And again, if you say that the benchmark of premium to notional is anywhere around 1% generally in this market, we're talking of the notional hitting at least INR 10,000 crores before we start charging.
And secondly, did you spend any money on liquidity enhancement in the quarter? And if yes, could you probably quantify that?
Yes, so on liquidity enhancement, we have -- the way we have got the scheme is that it is -- it comes as a rebate on your fees payable on the -- to the exchange across all your products. So whatever the market makers earn is not in the form of any cash payout. We give it as a rebate on their fees. That amount for the previous quarter is INR 72,00,000. So the revenue number that you're seeing is after factoring in that INR 72,00,000. So today what I'm showing is my revenue of INR 72.87 crores, it -- the actual revenue is another INR 72,00,000 added to it.
Understood. So that also sort of partly explains why the realizations have gone down on a quarter-on-quarter basis?
Yes, so if you factor that in the realizations have really not gone down, and that's something which should give you -- so you are right, yes.
The next question is from Salil Desai from Premji Invest.
So can you give the number of the total futures volume for the quarter? Not the average daily, but the total that you have? Would that have the...
I'm very honest, I don't think we keep a track of that number. But I think it's -- anyway it's public because we have a daily number there. But, Salil, happy to send you bilaterally.
Sure. And secondly when you explain the whole -- how the outlook on delivery volumes would be and the electronic warehouses which would kind of try and drive that. What is -- currently do you have any -- is there any proportion that you track of what are actually physically delivered volumes or there's nothing at all and only -- now the regulators permitted you will be able to do it?
So in terms of the volumes, we actively track this, and what I can tell you is that we compare absolutely favorably if we compare ourselves on 2 parameters. So generally when you're trying to track deliverable or when you're trying to track how much is open interest, those are the 2 indicators of how much is really pure intraday volume and how much is volume coming from people who are trying to hedge prices. So in terms of the OI to volume ratios and in terms of delivery to volume ratios, we compare almost similar to CME and LME across all our contracts, and that's a number which we track on all of our contracts as well.
Sure. Any numbers you would like to give in there?
So it varies commodity by commodity, but, Salil, if there are any specific ones that you want to know, otherwise we'll send that to you separately.
[Operator Instructions] The next question is from Amit Chandra from HDFC Securities.
So sir, first question would be on the employee expenses. So now we are seeing a rise, a sharp rise like on a quarter-on-quarter basis in the employee expenses. So if you can explain that? And also on the other expenses. So it has gone down. So another explanation on that. And also like if you could clarify that we have seen a lot of technological -- and this and glitches are happening in the last 1 month. So if you would explain what is causing that and what steps you are taking to actually rectify that. So can we expect then a rise in the computer and tech expenses because of that?
Sorry, so Amit, just so that I get, you had asked 3 questions if I'm not mistaken. Let me take the employee benefit expense first. So if you see our last quarter expense was INR 15.75 crores. The expense of this quarter is INR 18.55 crores. As we've mentioned for the last 2 years now, what we have been doing is that we accrue for a variable pay that we may possibly pay at the end of the year. This accrual we do based on the budgets that we have, and this accrual is done uniformly across the 4 quarters. What we, of course, do is that as we come closer to the year end, we have a better idea of our full year numbers, that gives us a better idea of what may be the incentives that we will pay out, and based upon that we may or may not accrue that number in certain quarters. So if you look at the last 2 financial years, in the previous one, which is FY '16, '17 we accrued across the 4 quarters, but in FY '17, '18, since our numbers were coming lower to what our internal budgets were, we decided not to accrue for variable salaries or bonuses that we will have to pay. So that was an accrual, which was not done in Q3 and Q4. So that number is about INR 2 crores per quarter. So if I compare on a like-to-like basis, out of the INR 18.55 crores, actually INR 2 crores is just that. And then the balance increment is only about 8.84%, which is the nominal increase that we have done on account of salary increments that we've given to the entire organization. So on a full year basis, we expect the variance on this number as compared to the last financial year, to be in the range of 8.5% to 9%. Your next question was is there anything specific on why other expenses have come down in a big way. So I think except for the fact that on legal and professional expenses, where there is a bunching based on incidences and not really a truly recurring number, a big decrease is that last quarter we had certain legal cases where we had the outcomes or we were having the particular cases we tackled in that quarter. So which is why you see a big decrease there. But other than that, there's no particular specific big chunk which has gone down. Coming to your question on technology. Let me just give a very specific answer in terms of what happened, what we did, and why we think this is a good solution and at this point of time, why we don't think it may really have any implication in terms of cost as far as we are concerned. So for those who know -- and I'm not a technology expert, but the transmission control protocol, TCP, as we all know, that's the layer at which machines communicate to each other. We had a glitch in which a data packet at the TCP layer was not communicated between 2 of our servers. On further investigation, we have narrowed this down to a particular component of the hardware. So as a solution what we have put in place is that it was eminently feasible for us to isolate that particular hardware and just run our systems without using it. So therefore, the solution we have in place is we believe fairly robust. This was a clarification which even the regulators wanted, which we have given to them and this is -- that is why you see that we did not really go out into the media till at least 2 days after the last incident before we said that we have a genuine fix. And having described to you what we did, as you can see this is a more analytical and then a solution based on certain things that we have to change within our systems. It's not something where we believe it will lead to any significant investments to be done for us to really take care of any future requirements.
Okay. Sir, another clarification. So are you investing in building your own tech platform? So the kind of contract we have with FD. So that is till FY '22. So now if you start building tech platform from now then maybe in FY '22, you can shift to that. So any kind of progress that you are -- any kind of investment that you are doing there?
So I think 2 parts to the answer. One, clearly in terms of our contractual agreement with 63 Moons. We are -- we have a time till which we need to use this software, and we also have a time bound period till when we cannot explore any other options for using alternate software as well. So therefore, in terms of any efforts to do anything in the commodity derivative space does not arise. Of course, there are opportunities outside that space, which keep coming up as we have mentioned earlier, the government is very keen to look at the possibility of a spot platform and there's discussions around energy, there's discussions around bullion. And we will -- we are investing at this point of time to build a spot platform, which will take care of these. So that's really what we are doing in terms of building platforms. But for commodity derivatives, there is a timeline till which we cannot do anything else.
The next question is from the line of [ Anil Desai ] from Turtle Capital.
One question is I think you've mentioned that your progress on the regulators [indiscernible] in terms of [indiscernible] the participation is [indiscernible] and the primary reason being [indiscernible] the rolled out regulation is something that's not being cleared. So can you give a bit more [indiscernible]...
[ Anil ], if you're calling from a mobile phone, we just can't hear you. So can you try and come to a landline or do something? I didn't get anything.
Is it better now?
Slightly, yes.
Yes, so I'm trying to understand Mrugank, with respect to -- I think you said that the progress on the institutional participation on the commodity platform side is slower than what you expected. And the primary reason being the regulations are on custodian things, how it will work it's not very clear. So I think you mentioned the same thing I think a couple of quarters ago or so. So any progress on that front and whether the participation from the MF side is kind of contingent upon this being worked out. If you can throw a bit more of a color on that?
So I think the answer to your second part is absolutely a straight yes. You cannot expect mutual funds to be there unless their custodians are enabled or feel enabled or are confident to participate. Now have we made enough ground? Yes, we've progressed a lot. SEBI has been pushing all of us extensively on this to come up with a solution which is acceptable across the market. But I think we still have work to be done before we reach there.
Okay. So in your estimate it will be like this year-end, we should be able to work out things as in terms of putting everything in place or anything beyond FY '19?
So, I mean -- thank you I mean, FY '19, I think we all rather get it done. So I don't think FY '19 is something which I'm so concerned about. For me, I think we should all be working towards a 3- to 6-month timeline. That is what SEBI has also told all of us to work towards. So I think we will make sure that, that happens.
The next question is from Rohit Balakrishnan from Vrddhi Capital.
Yes. Mrugank, so I had 2 questions and 1 one was answered on the institutional side. The second question was I think in your last call, you had mentioned about -- you had given some broad outlines on the costs and employee cost and as well as other expenses. So if I remember correctly, the employee cost at that point of time that you gave, the growth in employee cost was much lower than what you had outlined this quarter to about 8% to 9%. So I just wanted to reconcile the 2 things.
So I think just so that we can clarify this. One, in terms of the employee cost, what it was and the growth. If you see we were at INR 64.5 crores roughly, and we grew to somewhere around INR 71.5 crores, and we are saying that this year we expect to come somewhere around the number of INR 75 crores, INR 76 crores in terms of employee costs. So that's the number we are talking of. And in terms of the cost numbers, what we have said and we stay committed to is as follows. There are elements of our costs, which are what we pay to 63 Moons, what we pay for licensing fees to LME, CME and what we pay as regulatory fees including the fee payment to IPF and ISF, which is linked to our revenues. It is a direct derivative of our revenues, and therefore, it will grow at the same pace that our revenues grow. Everything else which essentially includes employee benefits expense, advertisement, legal professional charges, all other computer, technology and communication costs and any other expenses, that's the one where we have committed that we will keep this at a number, which is within the 3% range. And if you look at that number, we have definitely actually kept it almost flat for -- it's just the 2% that we had -- sorry, it's actually gone down by 2% for this quarter.
That was the last question in queue. I would now like to hand the conference back to management for any closing comments.
No, again, thanks everyone. As we said in the beginning of this call, we remain absolutely confident in terms of the buoyancy we've been seeing in terms of we ADT, and in terms of the growth coming from the key drivers that we've mentioned in terms of the options, in terms of deliverable contracts as well as in terms of the distribution side. Yes, this quarter -- and again, if there any more questions which you think you need to get better clarity on this one-off event in terms of the other income and the overall other income, you may please get in touch with me or Sanjay. But thank you for being on the call and all the best.
Thank you very much. On behalf of Multi Commodity Exchange of India Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.