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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 FY21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. P.S. Reddy, Managing Director and Chief Executive Officer. Thank you and over to you, sir.
Yes. Thank you so much. Good evening, everybody. Thank you for attending the investor conference call. .This quarter, as we have already said in our guidance note, on account of COVID-19, things were very bad in the month of April. But thanks to the markets, how they record, and the member brokers and the clients, the May turnover has improved. And in the month of May, we had about -- [indiscernible]. In the month of May, we had about INR 23,700 crores ADT. In the month of June, we had INR 28,633 crores. The April was very bad because till 22nd of April, the market trading time has -- were reduced from 9 to 5:00. And subsequently, they got extended till late into the night in compliance -- rather, in consonance with the world markets because mostly, our crude and gold, these 2 are driving our business. And subsequently, toward the end of the month, so we got May -- and our agri commodities also weren't allowed to be traded until 9:00 in the night. The July month is even still better. And so far, we clocked an average daily turnover of INR 34,500 crores, and that's the way the road map was, the -- so far we have done. Yes, we reached the average daily turnover of the last financial year, almost all -- we have touched a little more than that. Last year, we had INR 32,550 crores. But in the month of July, we have about INR 34,000 crores. As [indiscernible], yes, Q4, that was about Jan to March '20, INR 36,600 crores is there, and that is -- had to be touched probably. And I'm sure we will make every effort to reach that as well. But ADT for Q1 FY '19 -- 2021 is the -- is INR 23,149 crores. That's the way it is so far. Now that -- from today onwards, we have released the negative price from software Phase I into live, and almost all market interface-related things are already in place. Now we have also applied, I mean, sought permission from SEBI to reduce the margins, and certain clarifications have been sought and we have already provided them. So with the release, we have gone live, so absolutely no problem. And I'm sure we will do well as we go along. This is with regard to the current performance. In the case of crude oil, of course it's the energy product basket. Crude oil is almost, well, about INR 3,000 crores, and then natural gas is another INR 3,000 crores. And we have reached just off what we have clocked in the last financial year, around -- a little lower -- I mean, a little -- around -- a little less than last year's total ADT. Last year, we had about, crude, 14,779 crores average diluted turnover in the energy basket. And now currently, we have about -- in the month of July, of course, I'm talking about, we have INR 6,126 crores. Another thing is in the case of base metals, yes, we have seen a good improvement in the month of May. It is -- in April, of course, it's fallen because of the closure of these warehouses and other things. Now they're all open and trading is taking place and the deliveries are taking place as if nothing has happened. And currently, the ADT in the month of July, of course, is about INR 6,600 crores. And in the first quarter, if you're talking about quarter numbers, INR 3,898 crores is the base metals. Of course, agri commodities -- again, in agri, we have a major cotton that has -- because of the COVID again, international markets are not doing so well. That's where some kind of beating was taken, and in the month of July, it is around INR 316 crores. But ADT, I'm talking about in the first quarter, about INR 232 crores against for the entire financial year INR 391 crores last year. Now in terms of unique client codes, not much change is there. In fact, it's doing well, healthy as compared to last year. We were on the track. There's hardly any fall in this one. And in terms of new clients who are adding ADT, over 10% of the ADTs in this current quarter is added by the new clients. So that's a good development even in this kind of a bad phase of our growth. Then coming back to the addition that is taken in the Board. We have signed an MOU -- or rather, we'll be signing an MOU with Mjunction. And I'm sure most of you know that Mjunction is a joint venture, 50-50 joint venture between Steel Authority of India and Tata Steel, which has been into various e-auction platforms. And you name it, most of the segments, they are there. They have a coal junction, which undertakes the coal auctions. So we have signed up an MOU to diversify our business into spot exchanges. So to begin with, of course we will jointly conduct a feasibility study in all this, subject to regulatory approvals. And we will also form a JV with Mjunction and -- which will undertake the activity, as we announced in the MOU, and primarily to start the coal exchange as the government is keen that most of the coal blocks will be auctioned. And whether the bidder had any uses of coal or not and capital uses of the coal or not, they are eligible to it so that they can -- a lot of trading, buying and selling can take place through an exchange platform. So this is the -- these are the developments at this point in time. And we have also what we call -- given the materials, Mr. Bolar will speak because of -- what helped us this quarter definitely is the other income, especially the interest income or the income from investments, I would say. And so Mr. Bolar will brief the details on financials. He's our CFO.
Thank you, Mr. Reddy. During this quarter, thanks to the other income, which are mainly -- we have delivered because of the interest rates, liquidity in the system -- and all of you have been following our stock would know that we have invested in tax-free bonds as well as in mutual funds -- so we have been able to earn substantial gains. Part of it is notional. Part of it is what we've booked in our group. So thanks to the other income as well as the cost-cutting measures that the management has taken, we have been able to improve our EPS as compared to the June quarter. And our expenses under Mr. Reddy's leadership has been kept under strict control. And as we mentioned in the earlier con call, that we'll be keeping a strict control on the costs. So we have been able to do that. Mainly, as we're aware, this quarter was a washout for traveling, advertisement. So we've been able to manage that. And I think in the subsequent quarter also, we'll be able to keep our advertising as well as traveling costs, seminar costs under control. And also, as -- earlier, we had mentioned that the senior staff had taken a 10% cut for month of -- which was effective for the month of June. So in our financials, this counts for just for 1 month for the June quarter. We have also made some payments for -- as an incentive for employees who stayed in the premises on account of the COVID-19 situation. So we have made a -- we have paid out as incentives to employees who stayed in our premises. So net-net, thanks to the increase in turnover in May and June, treasury income as well as cost cutting measures, we have been able to maintain our position. Thank you.
And as Mr. Bolar has touched upon and in fact some of you are aware, we had kept some of the employees in our premises to manage during the COVID situation. Now all those arrangements have been dismantled. Everybody is healthy. And whatever news that appeared that some employees were not well and other things, that is all -- I mean, all those employees are well, and they are now working from home and some of them are attending office on a daily basis. And it's really now back to normal for us. Of course, we continue to encourage work from home. And most of the employees, maybe 90 -- more than 90% of the employees are working from home. So -- and now I will leave it to open for the question and answers. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] We have our first question from the line of [ Rishiki ] from India Capital.
Sir, many congrats on a great set up numbers, first of all, and the team efforts to live the exchange during the [indiscernible] solution, first of all. Secondly, sir, you just mentioned that you are going to cut costs from advertisement and promotion activities. So see, India as a market for the hedging and for the commodity exchange has just been started. It has not reached the peak. So I just wanted to learn, I mean what's your view on the -- of a long-term vision that -- where our numbers can go in 3, 4 years period. How many new kind of traders or new kind of hedging situations can come? And what are the new contracts we can offer to the potential clients? And secondly, sir, there is no representative from Kotak Mahindra Bank in our booth right now, what I believe. This from Mr. Rakesh Jhunjhunwala. He's a very marquee investor. He's already got Amit Goela as a Board of Director here. So you were taking Board of Directors as per the investments or as per the, I mean, the decision by the government?
Well, let me clarify that Mr. C Jayaram represents Kotak Mahindra Bank in the Board, and he has been there not today or yesterday or -- for a few years, he has been there. .
Yes. I noticed.
And so he is representing Kotak Mahindra Bank, and there are many others also who are representing. But we must understand one thing. They are not just representing the investments that -- I mean, who -- I mean, Kotak Mahindra Bank or Mr. Rakesh Jhunjhunwal or [indiscernible]. And well, ODR as well as under SEBI exchange regulations, they're responsible for their -- they have a responsibility towards all investors in respect to whether they're Kotak Mahindra or anybody, and all directors have all responsibilities. That's one part of it. The second thing is on the control -- cost control and other things. The way that Mr. Bolar has explained is currently, we are able to control costs because the print media expenses, advertisement expenses, we have cut, okay, because hardly anybody is purchasing newspapers because of this COVID situation and other things. The traveling costs have come down because the travel is not there, be that business development travel or the direct -- the Board of Directors travel or anybody for that matter, okay? Now I'm not saying that going forward, we will not be advertising it and we will not be incurring those expenses. But for the time being, those costs were under control or the overall costs are under control because these are also having a substantial impact in controlling the costs. So -- but as long as we see value in any of these, especially the advertisement and other things, we will continue to do that. There's no -- absolutely no restriction that. And coming back to the numbers, how do you look forward 4 years down the line and other things? I think I'm afraid that those are not something that I can talk about. Although we have internal ambition and internal numbers, which challenges our -- challenges us, but I will not be able to give any of those, so.
Just your vision point of view, if you can give that in 2, 3 years, just how much commodity markets can mature in India just like you see what kind of thing LME is doing or we see what's happening in the U.S.
Okay. I'll say, for example, LME -- in the case of -- there, well, LME brands currently, we're accepting this. Now we propose to have our [ BEMCX ] brands also. This is one step in that direction where we want to establish ourselves. Now our vision, as I said in the past, also is to make in India, price in India, trade in India, okay? Now to trade in India, you need some kind of costs are there which have to be reduced. You want to be competitive. I understand that. Similarly, price in India, the quantity or the quantum of trade that is taking place, the liquidity that is available on the exchange, must be vibrant enough for those contracts to establish as international benchmarks or, if not international, at least domestic benchmarks. So that is the vision that we have, and we want to make that happen. That is what we are all working towards that. So we are -- so we propose to start with the lead metal brand and the 6 brands. So the domestic producers or refiners will be -- their brands will be -- if they meet the set criteria, they will be admitted as a deliverable quantity -- deliverable brands on the exchange platform. We are also in the process of empowering our domestic refiners. So this kind of fusion between the domestic industry and the exchange platform will bring in more and more hedges to come into the platform and make the price set on the exchange platform as India benchmark or India standard. Now, I mean, that's what the road map is, and we are pretty clear that this -- we want to do it and without any -- without looking back.
Okay. And sir, our warehousing prices, do you feel they are competitive with the whole world? It's INR 35 of hedging in some of the cases, plus -- what kind of regulations with -- your internal staff is putting an eye on them just like what so -- happened in 2016, something that should not repeat. What kind of precautions you guys are doing just from a layman's perspective you can explain? .
I'm not too sure what happened in 2016, '17. But yes, we are keeping -- the rates have to be competitive, wherever it is feasible with at least vendors or 2 warehouse service providers are kept, and we will make them competitive. That's what our interest. We are not keen on any of the -- we are not keen on making any money out of it. But our interest is, they should have a robust risk management system, they should have an international standard, what should I say, warehouses, and it should reinforce trust in the ecosystem so that more and more participation will come into that. But we have a product advisory committee and other committees also. And the Clearing Corporation has also got committees, which keeps reviewing it from time to time. So there's absolutely no what do you call out-of-place charges. They're somewhat high because it cannot be the same -- on par with anybody else who doesn't take any regulatory responsibility. But these guys have some regulatory responsibilities. So to that extent, cost of compliance will be there. And to that extent, the charges will be a little high. But obviously, it will not be far from what others are charging.
[Operator Instructions] We have next question from the line of Subramanian Iyer from Morgan Stanley. .
And congrats on a good set of numbers. So I have a few questions on the numbers. So one is basically your average realization for the quarter was INR 2.13. So it's just a marginal improvement over the last quarter or that is the fourth quarter, whereas basically the volumes are down quite significantly to the fourth quarter. And if I were to actually flash back to FY '18, when you saw a similar level of volumes as this quarter, your average realization used to be about INR 2.22. So just wanted to understand that better. Why is the average realization much lower this time? And then a corollary to that is that your other operating revenues were quite good during the quarter, about close to INR 13 crores versus, say, on an average, INR 0.7 crores. So if you could throw some light on that. And then last question is on the tax rate. I mean if you could just mention what is the sustainable tax rate that we should build because there's been a lot of volatility in that line, and this quarter it was around 21%. How should we forecast it going forward?
Yes. I'll take the last question first. Basically, the tax rate this quarter and when I look at the standalone was 23%, okay? This was as compared to the 19.69% in June. And in March, we didn't have any. And for the whole year, it was 14.65%, right? So as we discussed, during this year -- this quarter, there's a substantial amount of notional gains that we have booked, and that will come under the deferred tax, right? So we had to provide under the deferred tax. Now also, the good part is that we've been able to utilize some of our MAT credit. We could utilize about INR 2 crores from our MAT credit, right? So we have still around -- I think, as we mentioned in March, we had around INR 22 crores, which has now -- we utilized INR 2 crores. So once we utilize the MAT credit, we'll be then be able to go back -- go to the new tax rate because now presently, our corporate is 29.12%. But once we use the MAT credit, we'll be able to go to the new corporate rate of 25.63%. So I think the tax rate would be in the range of 20%, yes. The second point, the average realization rate is, I mean, as you rightly said, has been on that rate of INR 2.12 or INR 2.13. I think going forward, as more and more members trade and the volumes of those -- contribution of those members increase, obviously the ARRs will show a slight dip. So that is the main reason. I mean, it's -- so that's it. And the other income, as I told you, was basically because we have, in -- over a period of time, invested in tax-free as well as mutual funds, and we've been able to book substantial notional gains on this. But the good part is that we also booked actual returns on this also. So around 32% of our other income has actually been booked. We actually received the money in our bank account. Yes? No. Thank you.
Sorry. Actually, just a clarification on the last 2 questions. So one is on -- your operating revenues, I mean -- basically, the operating revenues outside the transaction revenues, so -- which had -- which was about 13 crores for the quarter. So if you could throw some light on that. And also, with respect to the realization, I wanted to understand if at all there was a lot of consideration in the volumes this quarter because of which the improvement in realization, despite the fall in volumes, has not -- in turn, it should have happened. .
Yes. I mean you're talking of -- are they not operational -- you're talking about operational income? Yes.
So operational income, the transaction.
Yes. Correct. So in addition, your -- when you're looking at it from a consolidated basis, in addition to what you -- so like any other clearing corporation, MCXCCL also shows the income that it earns on its margin fund. It's showing it as operational income, as the industry practice. So from this quarter onwards, while consolidating, because we're consolidating on line to line, so the operational income of CCL is shown as operational income of -- in the consolidated financials. So that contributed around INR 6 crores to the other operational income in the consolidated financials.
On the average realization rate, Mr. Subramanian, the way that it works is if the number of members are now fixed and then if the concentration has moved towards few and others are contributing less anyway, that average -- those who are contributing heavily. Anyway, the average realization rate would have been -- fallen, but that's not the case. So more and more brokers are coming also. We have admitted some new members also. And so that is the one reason why we -- the average realization rate is improved apart from notwithstanding that they have fallen, the volumes.
We have next question from the line of Sumit Jain from ASK Investments.
So you were explaining of the INR 73 crores revenue, INR 60 crores transaction fees, INR 6 crores from consolidation of Clearing Corporation. What is the remaining INR 6 crores coming from? INR 6 crores to INR 7 crores?
Yes. So basically, I mean, like every other quarter, we have our membership income, the membership fees. We also have connectivity income, data feed income. So all this adds up to the remaining: connectivity, data feed as well as the membership fees.
Okay. And in the notes, you mentioned INR 18 crores paid to a software vendor. Mostly, I believe, that is capitalized and not -- that has not gone through P&L. There is a committee which is looking into it. The vendor has not met the time lines, so which means that you'll have to -- so what is the status there? Will you have to change your vendor to get the spot exchange software going? And then, therefore, to what extent the time lines are extended?
Oh, well, with respect to that, yes, this is about the spot exchange platform. And in fact, we thought that it will come in the gold spot exchange. And in the domestic market, it is not there. It was announced in the International -- GIFT City. And of course, the other -- natural gas pricing is also there in that particular piece, that we were to get it. So there's a lot of delays in that, in the delivery. We have not paid anything and that this -- whatever the payments were made in the last financial year. And we are not willing to increase the -- I mean, give anything additional for this. We want them to deliver. And if they don't deliver, then the [ import ] committee will take less [ radiation ] what to do. But that will happen in the current quarter. We will definitely take a final view. That's what my desire also. Okay.
INR 18 crores has been paid, right, so far?
Yes. Only -- it will not -- not INR 18 crores. It will -- oh, yes, INR 18 crores expenditure has been incurred. But then a part of it, maybe INR 1 crores or INR 2 crores is the amount of project management, so where we engage some employees for testing that software, whatever there's little developed, and all that stuff. That is one. That's one part of it. But yes, you can take it as INR 18 crores on this project, yes.
Okay. And now what is the progress with bank brokerages, such as [ Access Capital ], where I think they have life tested their platform, but there is no client onboarding that is happening?
Well, this COVID has really spoiled everybody's business plans, I would say that. So if you specifically ask me what they are doing it, my -- I will not be able to discuss specific to each of these member brokers. And we are constantly engaging with them. And obviously, the clients are easy to board on to the equity platform than the commodities. And so it is taking time. And one more thing we must also remember. One is the trading part of it and another thing is to bring hedges. And that is where we are majorly engaged. The hedges is very important. And we are telling the banks to -- these bank subsidiaries to look into their corporate clients and advise them to trade through them in hedging their commodities risk. That is something -- it is -- it will take a little more time because of one-to-one -- it has -- so engagement has to happen. And once that happens, that will come through. And there is -- an ODR requirement is also there for those corporates to disclose whether they were hedged or not hedged, another thing. And as we go along, probably that may get tightened also. So obviously, they'll need to really take a serious look at these corporates and then come on board to hedge their risks. So is it a retail product? My answer is maybe no. But yes, if the retail clients come and then trade, that's fine. But now it's not so much of a retail in that sense. It's a business to business.
And the software issue, what is Phase II? How long it is going to take to introduce negative pricing and then, therefore, reduce margins?
Look, as you -- as we are speaking, those constraints have gone as far as the trading interface is concerned. What is pending Phase II is only the reports related, some of them internal requirements, okay? As far as market is concerned, it's done kind of thing. So there's no [ hardening ]. That's why we have already requested the regulator to relook into the margins.
We have next question from the line of Kunal Thanvi from Banyan Tree Advisors.
Sorry, sir, I joined late. Maybe I may repeat some questions. So basically, I wanted to understand some kind of on new products, basically both from the indices that we've been talking and the energy exchange that we've been talking about. Any update on both of them? .
Yes. Sure. We propose to launch -- we have got the permission for both gold -- I mean, bullion indices as well as the metal indices launch from the regulator. And we propose to launch bullion indices from 14th of August. That's what our 10-K date is. And maybe -- soon thereafter, maybe we will see the performance and work on it. So then we'll do it, and then we launch the base metal kind of indices also. As regards to electricity futures contract, hello, that is -- the power ministry has come out with a -- what you call a circular or a note or whatever it is you call it, saying that these are the activities that CERC is responsible for, these are the contracts where SEBI is responsible for. In the case of electricity products, both of them will work together to put the framework in place. Once the framework is in place, then they can start doing that. By that time, and it's all set that it is going -- it is subject to the approval of the Supreme Court, where the judgment is pending. And once that is done, probably we are good to go. And on our part, we are in advanced stage of discussions with IEX for using their prices and launching -- or for designing out products.
And in terms of Supreme Court approval itself, it was supposed to be done somewhere in June, right?
Yes. But then the -- you know the COVID situation and then not all urgent matters are being heard. I mean that's not in our hands. And some scheduling is taking place in terms of hearing, but then that's the way it is.
Okay. And then this indices product, so can you give me a flavor on how would -- or how we are looking at in terms of pricing? Would it be -- will we follow the same strategy that we followed in auctions like going -- or launching and trying to scale up the volumes and then sort of...
Yes. Probably, we may not go for a 1-year kind of thing. We will just maybe at best look at only 3 months. That's the way it is. A maximum of 3 months. That's what we are looking at this point in time.
Sure. Last question on -- if I can squeeze one 1, is on cost reduction. Can you throw some light on how we are looking at the cost structure? What are the things that we can look up to in terms of improvement since there would be a lot of things that -- most of the companies are talking about post COVID, that most companies will become leaner. So how we are looking at them? And how -- what should we expect out of it? .
Well, we do not have someone -- unlike other companies where they have a workflows or feet-on-street kind of thing. We have a few business development people, but then our engagement is not through physical meetings, it is happening through the what you call -- through the VCs.And I myself is having meetings with the -- many of the member brokers on a one-to-one basis almost 3, 4 meetings in a week, okay? So that engagement will continue. But we do -- I don't think we will be able to do, let's say, to what other companies have done, is to cut down the cost by removing the people or retrenching it. I don't think there's any scope out there for me. And -- but other costs have substantially come down. As I said, the travel costs have come down. Work from home. There's a lot of utilization of the space and office, and all that is gone. In fact, it's also very significant. This is -- I can tell you a part of our GIFT City office has been leased out, okay? Now -- because now that GIFT City -- in GIFT City SEBI -- not SEBI, the government has said that the stamp duty is 0 if you participate from that. So many of the proprietary trades can take place from GIFT City so that they don't pay any same duty. So some brokers have asked for it, and we have apportioned it and then rented it out. So these are -- some of them are revenue -- cost cutting measures. These are all -- not only cost cutting, but then it's also generating some revenue.
We have next question from the line of Amit Chandra from HDFC Securities.
Sir, my question is related to the INR 6 crore income from the Clearing Corporation that we have included in this quarter. So this number might be included for the last quarter also in terms of consolidation that is happening. Look, can I have the financial number for that, that -- what it was last quarter and Y-o-Y? And this number is basically because of the higher-margin collection that we are doing for the crude contract. So maybe you can throw some light there, that what margins we are collecting there? And maybe when the normal trading is like resumed there, then maybe this margin collection can just come down and this can be like a one-off item? .
Well, Mr. Bolar will give some of these numbers. But it's not true to say that because of the crude oil, the margin collections are more. Because in the crude oil, even the -- actually, volumes have come down substantially. So obviously, the collection will not be so much. And there are a lot of bank guarantees that we have it. And so it is that bank guarantee also can be what you call -- adjusted the margin requirements. Anyway, Mr. Bolar will give the...
I'll just give you a context to it. See, around -- in the month of -- in the March quarter, 13% of our collateral was collected in the form of cash, while when we came to June, it's come down to 10%, yes? So there's been no marginal fall but a fall in the cash component. But -- so even in March, our -- it would have been around INR 8 crores, yes, income from -- the treasury income on the margin front. So the -- but this is an industry phenomena. And...
What is the first 1 in quarter 1?
Yes. So I mentioned INR 8 crores in the -- so this has been an industry phenomena, and it will keep continuing. So if members are comfortable in giving cash, they'll give cash. If they're comfortable in giving collateral, they'll give collaterals. So, I mean, this is part and parcel of the industry, isn't it? That's how we operate in the Indian market, right?
Okay. So you're saying on a sequential basis, equal INR 8 crores?
Yes. And again, this is all invested -- that's right. And again, this is all invested as per the SEBI guidelines. So SEBI is very strict on investments made by the Clearing Corporation. So they can invest only in liquid schemes or in online schemes and, again, only fixed deposits or in government securities unlike other corporates. So the investment pattern is also very compact.
Okay. No, sir, I understood that. But the INR 6 crore number like we have -- what we have this quarter, what was this last quarter? So you mentioned INR 8 crores. So it's not reflecting in the other operating income. So are we including it from this quarter? Or we are doing it...
So when we are -- we have regrouped. When I'm talking of March, we have regrouped it.
Okay. Okay. And sir, on the institutional participation, what has been the progress and also with the indices launch? So what has been the talks with the various institutional participants? So can we see increased institutional participation after this indices part is launched? So what is your sense on that? .
Well, my sense is that, yes, there will be indices. Once indices are launched, some good amount of participation is expected. That's what my expectation is. But what is more important is, we have asked for the cross-margin benefit in these indices. And that is when you take some position in the -- that index futures. But then underlying also, you hedge it and -- or whatever position you take, a contraposition maybe. Then you need to get a cross-margin benefit. That is not there as yet for the what we call this commodity indices, and that is there for all other trades, all other indices. So we have requested them, and then they are looking into it. That's the way it is. And that is very important for us, for the success of this product. And it is there in other products, other indices.
Okay, sir. And sir, my last question would be, so on the half period, I think, around INR 18 crores for the development of the foreign exchange matching, so that -- you had given the contract 2 years back. And now after 2 years also, the matching engine has not been developed up to the mark. So what was the name of the company? If -- I actually forgot the name? So if you can mention that. And what we are doing for the -- our existing platform? So the contract that we have for fixed [indiscernible]. So maybe that is also coming to an end maybe in the next 2 years. And so because the development of the platform takes a lot of time and a lot of complexity is involved, so what steps we are taking there? If you can throw some light?
Sure. The name is the PSP, that earlier one, what you were talking about, first one. But these 2 are unrelated. That was meant for a spot platform and may not be a high, what you call -- may not be a low-latency engine, et cetera, there. It's just a matching order, matching -- continuous auto-matching system. And then coming to the 63 Moons, current existing vendor for this one, and yes, we have a September '22 time limit. And the [ SET ] and the Board [indiscernible] on this matter, and we will take in the call maybe before -- by December, I would say.
Okay. By December...
Currently, by December.
Yes. From October -- as per the agreement, from October onwards, we can start thinking about in terms -- you have...
In terms of that. So you have a 3-month window to do whatever you want to do it. So that -- we will give the opportunity for everybody and then do whatever it needs to be done. And we have to be fair and transparent to everybody also.
So the final decision has to be submitted to 63 Moons by what time line? So...
Oh, no, no, no. There is no decision to be submitted to 63 Moons. There's nothing like it. If we -- they, too, can participate. Let us say, if we call for a bridge, I'm just giving an example, they, too, can participate as per the RFP document. They can say that this is -- my product is like this, and it will do that. This is the technology, latest technology, and it will -- all that kind of thing. Everybody and anybody can participate in that.
Okay. So it will be an RFP-based contract. So you will show in RFP for that?
That's what I'm saying. If we choose to do that, then we have to take that decision. And anyway, we will freeze this issue by December. That's what my expectation is. .
We have next question from the line of [ V. Karthik ] from Investec India.
My question is also on similar lines to what the earlier participant asked. If you were to adopt a route which IEX has adopted to fully purchase the technology from 63 Moons, have you tried to estimate the potential cash outflow?
Well, as I said, I would not like to throw -- I would not like to answer any hypothetical questions. It's not fair to do that. And let there be a transparent way of arriving at it. Whether IEX has done is the right or wrong, I'm not getting at it. I do not know what they did also, what kind of price they have paid. That's -- what I'm only saying is whatever we pay, that must be fair and arrived at via a competitive process. Now how that will be arrived that -- or will there be a fair evaluation or valuation done by somebody? I do not know all those. [indiscernible] it, we have a live city, standing company and technology and which has got a lot of experts from other -- outside also. So we will be taking a collective view of it, and then we'll be deciding it.
And sir, the INR 18 crores that was mentioned in the...[Audio Gap]
The number. Sir, one question on the energy exchanges. Sir, are you looking to -- I'm talking about the spot gas exchange. So are there any plans to launch the gas spot exchange? Have you been in talks with the regulator? And I believe the revisions are out for the comment.
Yes. You are right to point out that PNGRB has put up for public comments their regulations, and those regulations are much the same where SEBI is -- currently is asking the exchanges to operate. And maybe here and there, a few numbers like the capital requirement or the capital requirement or net worth or the contribution to [ EGF ], et cetera. Here and there, a few numbers will be changed. We will definitely evaluate it. It is on the top of our mind. .But definitely, we will go with IEX. That's what we desire is. Once the discussions on the contract are closed, not on contract agreement is closed, then we would like to launch the electricity futures. On the gas, we'll work, and we will see how it is panning out. But yes, IGX, yes, India gas exchange is already -- is working, and let us see how those baby steps will grow. So accordingly, we'll take a call on that.
Yes. So one clarification. Will we have to -- I think I understand with PNGRB regulation you have to launch a separate gas -- separate company, right? So is it...
Yes. Yes, yes. That's right. That's right. That's right.
Okay. Okay. Sir, secondly, sir, on the -- when do you expect the group to be in a normal for you guys? When will we come back?
Well, good question, and I am also eager to get back that volume. But the margins have to come down, and -- for which we have requested the regulator to take a relook at it. And obviously, only today, we have launched that -- I mean, released that Phase 1 of the software interfacing the member brokers and trading system. So I think it is behind us in that sense. And I'm sure it will -- sooner than later, it will come back. That's what my ambition and desire is. .
We have next question from the line of Kajal Gandhi from ICICIdirect.
Congratulations on a good set of numbers. Just to understand, yes, just to understand on the yield rise which has happened in this quarter in spite of lower volumes. So what we have to read in that?
On the realization, so, I mean, we have got -- our pricing is up there. It's on -- based on a slab. So up to a certain amount, members pay X amount. And if they go beyond that, then they get a discount. So that is the pricing. That's the pricing mechanism for the transaction charges.
So that's why the yields are looking higher, because volumes are on the lower side of it?
Not really. I mean as Reddy said, that in spite of low volumes, we've been able to get better traction from members as compared to the March volumes. So this is an India flamer, so if the -- who contributes the contribution towards our transaction charges.
I would put it this way. Even in 2%, 3% going down is no problem, but if our volumes double, okay? That's the way I look at it. And I prefer that kind of growth, and that's going to happen as we go along.
And what is the growth trends that we are seeing on the silver side? Because it has just picked up now. So as you say, well, as the volatility rises, then it can contribute to higher volumes. So what is the trend that you're picking there?
Well, in May, for example, we had about INR 6,000 crores. In June ADT, we have INR 8,000 crores. In July, we have INR 12,000 crores. Okay. So these numbers syndicate a trend, and that's the way it is at this point in time. But I'm not going to give you any guidance on how silver is, the product.
Okay. And last thing, just on the delivery side, also you are seeing more volume, more delivery happening?
One minute. On the deliveries, by and large, the deliveries remain the same because most of these gold and silver where the high volume is there, they are what you call bimonthly contracts, okay? And in those big contracts -- yes, one moment. For example, in the month -- in June, you have delivery in kilos. It's about 700,000 kg is gold, and Gold Guinea is about 1 kilo. That is 8 grams. And Gold Mini, which is 100 gram, is 119 kgs, okay? And gold Petal, 1 kg, that's 1,000 1-1-gram gold coins got released. In the case of silver, in the month of June, we have 5,603 kilos. That means 5 tonnes -- 5.5 -- yes, 5,603 kilos. And gold silver -- I'm sorry, Silver Micro -- I said that silver is the main contract, where it is about 52,500 kgs. And in the case of Silver Mini, 3,600, which just got recently launched. So this is -- the Silver Mini is 100-gram [indiscernible].
[indiscernible]. That's right.
Okay. Okay. Sir, you get any advantage if the deliveries are on the higher side?
Not a great advantage as such. And yes, there's a little bit of income for the deliveries that are -- but then not much.
But also here also, ma'am, that the -- actually, there's physical delivery happening on our platform.
There's a threat for delivery so that prices reflect really the true value of that particular [indiscernible].
We have next question from the line of [ Rajesh Chaudhary ] from Zenith.
My question is what is the status on gas exchange and gold spot exchange at the moment?
Well, gold spot exchange for international financial center, I think some kind of the guidelines have to come from the regulator, and nothing has come as of now. And in terms of gas exchange, again, as I said, within -- the PNGRB has released the guidelines for discussion, regulations for discussion. And we don't want to get into -- generally speaking, into any kind of business which is not as yet regulated by any regulator. That's the way it is.
Okay. Once the regulations are in place, then we can launch -- we will be launching the gas spot exchange?
No. No, spot exchange, again, you need a separate company. You need to take the reprove of the regulators. Also, SEBI is to give you permission to invest -- other than the treasury investments, you need permit of SEBI, if you want to do anything with that money. So again, you need to go to the regulator, take their approvals, then only we can do all that. So it will take time. It's not just we have good cash on books and so we can go ahead and then venture into anything, no.
Okay. Okay. My next question is like what is the margin money to trade on the -- for [indiscernible] energy sector? Is it 200% at the moment?
Come again?
What is the margin money to trade on [indiscernible] energy sector? What is the margin...
It's a certain thing. In crude oil, it is substantially high. And there is a volatility margin which is almost 101%, 100% around that. And there is also additional margin which is imposed, and that is almost about 95,000 in the near-month contract and 50,000 in the far-month -- other contracts. So that's the way it is currently. And we have requested those additional margins be -- substantially be reduced. These were our requests. The volatility margin will continue to be there as per the formula that is span model or whatever is the volatility margin. So...
So the margins was the same before the negative pricing issues?
Hello?
Yes.
Your voice is not clear.
My question is like what was the margins before the negative pricing issues?
That was about 80% or so. Subsequently, the -- when the price of crude oil fell down, then we have introduced these additional margins. And they continue to be the same.
So they will continue to -- so then how would the price...
Until -- as I told you, I don't know whether you participate or whether you were there from the beginning or not. We have already represented to SEBI, and then SEBI has to give us the go-ahead to reduce the margins.
So we have next question from the line of Deepan Shankar from Trustline PMS.
And congratulations for a good set of numbers. Just want to understand, what is the status or progress on the participation of institutional investors like those mutual funds or PMS?
Well, it's about what -- I don't know the names, but 2 mutual funds are participating. Some PMS also have come here -- still come, okay? And earlier, there was a restriction for the PMS, especially the mutual funds. SEBI has relaxed that, especially for holding the gold. They are not to hold for more than 30 days. Now it has been increased to 180 days. And I believe one major fund is coming out with a multi-asset fund sometime next month, I suppose. So I mean whenever this kind of developments takes place, obviously we will be having their participation increase. Now because of the COVID, incomes are incomes are what you call -- investable surplus is, I would say, is not great. And obviously, these mutual funds will look further to those investable surpluses. Then only they will be able to do all that. So that impact is there on them. So it is also felt here. Whether it's a PMS or mutual funds, really it doesn't matter.
Okay. Okay, okay. Initially, during the call, you mentioned that 10% of the ADT was contributed by newer clients. So what is the kind of contribution we are expecting over 3 years or 5 years kind of time horizon?
No, I will not be able to give that. I will not give you any of those projections. I will not be able to, Okay?
Ladies and gentlemen, due to time constraint, that was the last question. I'd now like to hand the conference over to Mr. P.S. Reddy, Managing Director and Chief Executive Officer, for closing comments. Over to you, sir. .
Thanks to all of you for patiently listening to me and asking questions. And the more questions you ask, the more clarity emerges. And I'm sure as a company, we will ensure that all stakeholders' interests are protected as we go along. Thank you so much.
Thank you.
Thank you very much, sir. Thank you, gentlemen. Ladies and gentlemen, on behalf of Multi Commodity Exchange of India Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.