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Multi Commodity Exchange of India Ltd
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Ladies and gentlemen, good day, and welcome to Multi Commodity Exchange of India Limited Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the MD and CEO, Mr. P.S. Reddy. Thank you, and over to you, sir.
Good afternoon, everyone. Thank you for joining in the Q2 call. The results, as you've seen, are disappointing to myself and to my colleagues and to the Board as well. Thanks to the peak margin regulation that has kicked in, which went on increasing the peak margin from 25% to 100% on 1st September, which started with 25% in the month of December, then we went on to March and then June and September. And now that the players also got used to the peak model able to stay and now the model is going to change, and we are able to see some revival in the month of October, and it is almost all our [indiscernible] [ 29,900 ] so far. But in the month of -- in the quarter, it has come down to INR 25,797 crores [indiscernible] INR [ 28,000 ] crores in the previous Q1. Similarly, for the half year, from April to September this year, it was INR 26,896 or INR 6,900 crores as admitted 31,000 almost 31,000 in the corresponding period last year. But 1 important thing that has happened, as you all know, our options volume is picking up. And the options has a revenue potential in the sense that 1/3 of the futures -- rather one of the auctions 100 by 30 is equivalent to maybe 1/3 of the futures -- [indiscernible] futures revenue. So we had about INR 9,000 crores ADT in auctions in the current month, which brings in equivalent to INR 3,000 crores of futures ADT. So when I said that in the month of October, we are almost on 29,000, you can take a additional INR 3,000 crores at ADT, but that it will be almost INR 32,000 crores in the month of October. Again, the October figure I am seeing, but I'm not taking the September figure, which is implement about -- yes, it will be in the number of -- quarter 2, it was INR 6000 crores, but it is not yielding any revenue because we started imposing the tariffs and options only from 1st of October. So this is what redeeming feature that we have. In terms of number of traded clients, that is the unit client cut, it more or less remains the same. It's about so far traded over 3,13,000 -- adding this 3,14,400 or so in the last corresponding period performance period last time. So that is the main interest. In terms of ADT, you all know that the bullion was contributing -- contributed dollar, almost all INR 10,000 crores. And then followed by LNG, it's about -- this is about for half year, I'm talking about INR 9,000 crores. And It's -- agri also started doing relatively better. with about INR 500 crores as it was INR [ 268 ] crores corresponding period last year, that is April to September. So these are the numbers that I have. In terms of new contracts, we have introduced probably [indiscernible]. Our index futures contracts are really doing well without any support. We have won to so INR 500 crores turnover in the month of October, and we expect to do still better because we recently launched energy index futures contract. This is one part of it. The second thing is we are also planning to introduce more new products, subject to regulatory approvals of course. We proposed energy options contract, which is with Citi, and FT futures, you all know, the dispute has been resolved by Supreme Court now that we expect to consider our purpose. And then the third one is the steel TMT bar contract that is also we are looking forward to. Again, we have filed our contact [indiscernible]. Hopefully, these new products also start as and when we launch, they will also start adding to our ADT. Again, as I said, that not that management is satisfied with the performance whatever rate we have done in this quarter coupled with, obviously, the tragedy income is come down partly because we moved out of the tax rebounds and the profits and then -- but that profit was booked obviously in an MPL basis in whichever quarter that was INR [ 20 ] crore. The second is due with low interest rates, obviously. So these are the 2 ones, which are -- which have impacted. But now I will give it to Mr. Bolar to explain some of this.
Thank you Mr. Reddy. A very good afternoon to all of you. As Reddy said, our revenue from operations on a consolidated basis stood at INR 83 crores, other incomes were INR 16 crores is totaling at INR 99 crores. So there is a 5% drop in revenue from operations and a 25% drop in other income, mainly as we explained in our previous call in July that we'd be moving out from tax rebound. So the first tax rebounds has been sold, and we have made to [indiscernible]. And we'll continue exiting from tax rebounds in this balance in this quarter. And as interest rates increase maybe in the fourth quarter, we'll be able to market an appropriate [ standard ] to take advantage of the increase in interest rates going forward. But revenue and -- if you have seen our costs, we've been able to control our costs. The cost has been kept under control. There's been more balanced in the cost. So that is a positive fallout that we have been able to keep costs under control, which we've seen the fixed cost has been kept under control. There is no third or no extraordinary items in the cost. The costs have been under control. I'll be glad to take any further queries questions during the conference.
And 1 more important source of income, especially in the subsidiary, which has taken a hit in the store is -- our warehouse stores or wall income. Earlier, there were huge amounts of silver, which was kept, again, because of the opportunities were accordingly there provided. Maybe the -- giving better returns than the spot market. So there's a huge metal line in our warehouses. So we earned certain amount of percentage of warehouse charges or all charges. That has not gradually depleted because these opportunities managed and the traders have removed those assets from the -- from the [ vault ]. So that is one major reason why the subsidiary income has gone down in this. Now I'll leave it open for the question and answers. Thank you.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Two questions, sir. First, sir, on the dual products. I think you mentioned 3 products. The first one, I could not get the name. I think it was future, steel TMT bar contract and the third one can you please describe the name?
[ NG ] option Natural Gas.
Okay. Okay. Understood. Secondly, is it possible for you to lay out the potential value of the electricity futures and steel TMT bar contract and [ NG ] option? And what are the time lines we are looking at launching these 3 products? But can you...?
Yes, we will be subject to the regulatory pools, we will launch in this financial year, no doubt about it. But potential are you able to pull out any kind of numbers we want to indicate.
Okay. Just on the -- given that the peak margins are behind us now, and we have seen some improvement, what are the key things one should look forward to in the near future apart from the new products? Is there any change that the margins will go down? What is the current margin for the crude, as of now?
Yes. The crude oil margins were, in fact, reduced. Earlier, we had 20%, 21%, and it was reduced to 10%. Again, the momentum there. So we increased it to 15%. So how do we deal with this? This is, as I explained in the past also, if the margins are less and if opening interest increases, there is a need to increase the [ HTF ] cover. That is a satin guarantee fund cover. So there is a working group consisting of exchanges. We have submitted to some [ working group report ]. How dynamically we can contribute and withdraw also. Currently, is the only 1 [ way to ]. You can only contribute but then can't take [indiscernible]. So something of that kind of proposal that is being nation to many other sites and who else can contribute all that kind of things, and there a lot of unanimity among exchanges on these issues. So we have submitted our report to SEBI, which is actively considering it. So once that basically taken on those working recommendations, probably, we can keep on contributing to GF and again take it back once the open interest goes down. I know that kind of thing can happen. At that kind of -- in that risk management scenario, we'll be able to reduce the margin to the initial margin levels whatever the SEBI have described as per the business [ rules ]. So that's what the way we look forward to. So the second thing that we are looking at is the index futures contracts and options contract are something which we would like to aggressively pursue it. And hopefully, we will be successful there as well.
The next question is from the line of Devesh Agarwal from IIFL Securities.
Firstly, sir. Hello?
Yes, we can hear you.
Sir, firstly, the traction that we are seeing on the options side is we are largely in the core oil compacts almost 85% to 90% of the volumes are in crude oil. So is it you believe the margin requirements that we have on the future side, that is kind of pushing volumes on the options? Or this is a new market that is giving business.
I would say it's the new market that is getting developed that is 1 [indiscernible] because of very high margins even from the trading, I mean, some of the investors sales have withdrawn from trading in the crude contract, main features contract. Now the brokers are handholding them to bring in via the [options way]. So that is how it is helping. The peak margin in another regulatory change, which impacted. And I think in this option, we just pay the premium, that is at the end of it. That's [ '18 ].
Okay. And on the power deleting side, sir, now the power exchanges that we intend to start, any broad time line that you can share?
I don't think I said that power exchange will start. It a futures contract we wanted to launch. It will be picking on the IEX prices. We have an exclusive agreement with IEX for about 3 years at least. And so we will be working on that. As soon as the regulatory approvals are received, we will start launching on it. But meanwhile, the [indiscernible] marketing is rebound, and we are developing the and ecosystem, creating awareness in the ecosystem.
And this would be purely financially settle contracts, right sir?
We don't know. We see that's what we -- our submission is the [ subsidy ] contract to Citi, because there's a vibrant spot market is there. So it is for the regulator to decide how do you like to go forward.
Understood. And any updates on the gold spot exchange?
Yes. The international mean exchange, we have already started participating in the sense that it is internationally] launched. But otherwise, all the 3 exchanges and 2 depositors together set up and [ MOS ] trading is going on. That's 1 part of it. It's yet to be inaugurated. And I'm sure that will also be a successful venture, subject to government grant in certain [indiscernible]. It may happen, it is likely to happen, okay. That's 1 quarter. In the domestic side, just recently saying as announced sometime in September, the regulations are actively made, but then in the press release that we understand that there is a -- then we can start as a segment within the exchange or you can start a separate exchange. I think we are evaluating those options. And I think it is concentrate -- work in progress.
Okay. And in terms of technology sale for the spot exchange, do we have something ready, or are we still evaluating options?
As I said, when we are awaiting options, whether it should be a segment or a separate exchange, that is the component also, important component also that the committee will be taking.
Okay. And the contract that we had from the U.K. entity, the U.K. software developer that case -- any update on that? And have you written off any money on that account?
We have not written off any money as of now. We have already signed the settlement agreement. And I think we are pending that under the settlement agreement settle deliveries are expected, we get the software, and we will release whatever the payments that we have withheld, okay? We have withheld certain invoices, more extra payment. But for what our voices that the way some of them we have withheld. And these 2 have to be settling, then obviously, it will be been from the international -- Singapore International Agitation Center. But currently, it is under past and the agreement has been signed between 2 of us. The execution of the agreement is in progress.
Okay. And the last one, sir, from my side. The update on the TCS migration technology? And how much have you spent so far on that?
[indiscernible]
Yes. I'll just give you an update on what they're saying. -- it's presently they've shown it on the capital working progress in tangent it's around INR 50 crores is what we have spent.
The next question is from the line of Sanketh Godha from Spark Capital.
Sir, my question is again on the [indiscernible]. Just wanted to understand because IEX prices, the based on the units, unlike most of the exchanges work in India based on the value rupees, crores. So I just wanted to understand whether, whenever we launch the electric derivative will be based on the units traded or all it will be based on the rupees [ cost on ] value traded basically? That's the first question. And looking at Electric, there just wanted to understand global, if you have done some study what is past the financial debt your market size? And finally, I wanted to understand the revenue sharing model or MoU you have with whatever transaction income we have, are we [indiscernible] or not?
Okay. I think first question, I did not fully understand. Because we have a value, the turnover is there and then the trading loss will be obviously in units, whether it is a megawatt unit whatever that be, that is the contract specifications. And the charging mechanics [indiscernible] per megawatt hour, ours will be based on the ADT. Now the transaction -- the IEX, what is the international side, it is almost a 7 to 8x the spot market in terms of ADT or turnover if you look at it. So the spot exchange is 100, that will be [ 700 ] , -- That's one. And the second -- the other cost release which related to the direction you're seeing, If there is a revenue sharing. It's about a modest 10% in the initial phases.
Okay. Okay. Okay, sir. And the second question was basically on the gold -- domestic gold spot exchange and not the [indiscernible] one. I just wanted to know the upgrade sales because the that come out with the final regulation. So just wanted to understand how are we placed in participating in the gold spot exchange?
Just before you stepped in somebody else has asked and I answered that. What I said is that the SEBI has said that you can launch it as a separate segment within the exchange as a separate exchange. And we have already done what is the segment is, what does that exchange means. And there are many commonalities in terms of hardware software -- as this separate -- separate segment means, it is the same thing as starting a separate exchange. And probably you don't need to have a big governance structure like an exchange. So segment also follows the same principles in terms of separate hardwares and people and separate membership for the segment, et cetera, et cetera. So we are evaluating with both the options, and we'll be taking before our committee investor company end of us. And accordingly [ give me ] a call on it.
Sir, my question is basically, if we even be able to launch the gold spot or if you so decide to potentially can launch a gold spot exchange in the country business? Are we the final company? Or we are among the final companies? Or it seems the [indiscernible] to be open?
No, no. It is 1 among the exchanges.
[indiscernible].
We have 1 among the exchanges. That's the way please.
And 1 another we can potentially launch, right? -- or you will launch basically.
No, no. No, no. We see there's no limit in there. There's no restriction. [ VAC ] can start, [ MSC ] can start, MCX can start. Or [VAC], [ MSC ], MCX can come together if it is a separate exchange also or it's the segment, which one of us can not. I mean which model we choose is left to us.
And most likely, when thing implemented, so as per the regulatory process?
No, regulations are not out yet. Still the [ vault ] regulations have to be made and what has to be exited and the deposits, regulations have to be amended. HCCRA to be amended because this gold receipts have to be declared as a security. As of now, it's not done as yet. So the intent is there and then road map is getting created.
Okay, sir. And finally 1 more thing on electricity data. Just you see that this product can be potentially launched by end of the fiscal year, right? That's the way I understand sir?
That's right. That's right.
Okay. And finally, on NSG Energy Index, we are starting like METLDEX and BULLDEX or the...?
Same tariff, same tariff, no change.
[Operator Instructions] The next question is from the line of [ Abhimanyu ] from Protex Capital.
I have 2 questions. SP07 Firstly, is there any guidance on what can be the turnover of electricity futures on the exchange? And secondly, you said that there is an exclusive agreement with IEX which is for at least 2 years. So would this agreement would be -- would it be extended in the near future? And could you share some more specifics about this agreement as to what role each of you will be playing in this? And in case of any disputes happening in the futures contracts, who would have the authority to regulate this?
SEBI, CD and the CERC are the 2 regulators where CERC is responsible for the spot and the forward contracts and SEBI responsible for futures contract. And that has been decided by the Supreme Court [indiscernible] terms. So that's close. The second, I will not be able to tell you as we say that 1 will be the turnover, et cetera. But someone else has [indiscernible] internationally what is the kind of relationship or kind of volume in spot and in future. It is [indiscernible]. And that is most [indiscernible], and it's almost a 1:27 ratio. For every INR 100 crores, some other [ 70 ] post. But that's highly rate market in that sense. It is. And in terms of agreement, yes, it's an agreement which we signed almost on a year ago, and which we have notified to the markets also with BSE. And is the -- like we are settling the trades using the CME prices at the end of -- on the expiry of the contract, we will review prices of IEX for settling the trades on the exchange platform.
The next question is from the line of Lokesh Manik from Vallum Capital Advisors.
My question is on electricity derivatives, and, again, most of it has been answered by you. Just one small clarification. You mentioned that the revenue that you will earn is basically on the ADT. So will this be as a percentage of ADT or will it be fixed price per lot, which would be in megawatt hours?
See, we will not change only for this contract our revenue -- our tariff model. Currently, we have for every INR 1 crore, almost INR 200, INR 210 is something [ earning]. To keep precise, yes, that's the way it should be better.
So our revenue margin will not change?
It will not change.
[Operator Instructions] The next question is from the line of Girish Shetty from Banyan Tree Advisors.
Sir, I just wanted some clarification. On the previous participant, you said 10% will be the revenue share. So 10% of what exactly is my question?
So 10% of whatever revenue that we earn out of the self-pay futures contract. So let us say, we earn say INR 10 crores, okay? So INR 1 crore will be given. That's the way it is.
So INR 1 crore will go to IEX yes?
That's right.
The next question is from the line of Lavanya Padala from UBS.
So I just want to understand that the cross-margin win, which was started for index futures, do you think that it has been helpful for index volumes? Or why is it taking time for index volumes to pick up, any light there?
See, if you see in the recent past, the index volumes did pick up, okay? The only cross-margin benefit is one of the, what you call, variables, which helped in picking up the volumes. But then on tent in metals, for example, has significantly helped us to ramp up these volumes also. So if you see our METLDEX is doing better than the BULLDEX, which traditionally BULLDEX supposed to be doing better because the bullions are always the darling of the market. But yet, the metrics are doing well. And the second important thing is the margin these are lower than the actual underlying commodities. For example, the energy index just recently launched, the -- although 75% is crude oil and then 25% weightage for natural gas and the initial margin is 10%. But individually, if you see their margins are -- could be higher. So people will go from energy index contract rather than the underlying visits. So there are many dynamics which decide from time to time depending on the business opportunities that traders see.
Got it, sir. And the other 1 is any update on bank brokers, the -- I think ICICI access have already started. Any update there, sir?
Well, all that I can say is ICICI is really doing very well, okay? And the month come, we are able to see a very good production in this -- very good traction. And the others are still slow in China, that's the way it is. And yes, many of them are fighting their IT development being slow in the [indiscernible].
The next question is from the line of Sri Karthik from Investec.
In terms of the electricity derivatives, when we refer spot to futures ratio, would that be the entire day-ahead market? Or should that only be on the real-time market because when you price your derivatives on the [ exchange ], there will it be based on the real-time market on [indiscernible]?
I'd say it is all, both the day-ahead and real-time..
Not necessarily only the realtime market?
Yes. No. No.
Sir, the other things I am struggling to understand is the options to future ratio across our 3 key products, belie energy metals is like extremely higher than. Bullion is about 10%, energy is almost 50%, base metals is like 1% or 2%. Why such a huge divergence this ratio, sir?
See in fact, options contracts did not pick up at all on in recently. And I think only after a peak margin thing as kicked in and with the high margins prevalent in crude oil contract, this auction contract has found [indiscernible], okay? So it is -- I would say, it is developing initially. So for that very reason, because the turnover of INR 1,000 crores ADTRAN INR 2,000 crores at ADT, we did not even dare to start charging those contracts. Later-time some of you are asking why are we not charging although it is almost like 3 years, 4 years. But then we had reluctance to charge because the volume is too low, maybe we are nipping them in the bud. That should not happen. Now that we have gradually acquired it, and I think every contract will get its own pace to grow, and I think that will correct it as we go along the market.
And you indicated INR 100 per INR 1 crore national bullion that the revenue number?
No. It is what we can say is, for -- I think INR 1 lakh, INR 45 is the -- this one, which means INR 4,500 for INR 1 crore . Premium -- for every yes, INR 1 crore premium, INR 4,500 charge. Yes. Average is INR 44.
But you were equating that on the notional value, which is why I asked?
No, no. What we have said is, which generally translate if I have a INR 9,000 crores options come over I get that is equaling to INR 3,000 crores of futures turnover, which gives me INR 1 crore INR 200.
Okay 1/3 is the transition.
1/3 is the transition.
And so I'd like to indicate the 7x derivative foreign electricity, any indication globally on options to futures on commodity price?
It's not -- into many places options have not been great, but of being the retail market, that's where we are looking at a greater trust all on this product.
The next question is from the line of Aditya Yadav from Transient Capital.
Sir, firstly, if you could elaborate the reasons for us the future turnover has taken, especially in the bullion segment, have taken almost a 50% hit year-on-year. If you could elaborate the reasons for us. One of them, you've discussed about is the deep margin requirements and you please share your thoughts?
I'm seeing this, but I'm not able to see that there is a 60%...
The data you've shared in the presentation on the Slide 6, the bullion turnover last year same quarter was 20 -- around 24,000 and this year it is around INR 9,400 crores.
Quarter-on-quarter.
For the same quarter year-on-year.
Yes. I've seen that I see. Okay. So if you -- last year, if you are seeing our APT in the ADT almost INR 38,000, INR 40,000 crores, notwithstanding the complete lockdown in the market because the physical markets were also buying lots close. And the only opportunity to that people were essentially to use the exchange as a platform. That's one part of it. Another thing is, there is a huge volatility internationally in this bullion products at this point in time. So primarily, the underlying commodities have a high volatility, obviously, that will translate into much you to pay on the exchange platform. And third, which is maybe more important. At the time, probably the Board -- the bullion was considered as a safe investment this one -- investment avenue. So obviously, because of the rising COVID, et cetera, et cetera, people are looking at this as one of the product where they could for their investments. So price wise is because of the COVID and the lockdowns, et cetera, et cetera, and not lack of having a better economic growth. And the other 1 is [indiscernible]?
Sir, if I understand correctly, so you shared that volatility is a big part and agreed that last year, we had a lot of volatility in the [ Brazilian ] metals especially after the breakout of COVID. But in the -- I mean, this is the quantum of fluctuations, we can usually see the volatility that the volumes are shrinking in the range of [ 40:3 ]?
Yes, we have -- we have seen in the case of billion as compared to last year, we have seen this we have seen this kind of volatility. Otherwise, if you see the number of participants trading, in fact, it has increased. If you see the number of players, it has increase -- one minute -- in the case of bullion, the April to September Q2, July, September, 2,31,000 is the 2,31,970 people have participated in the April to September this year.
Okay. Okay. And sir, what do you see would be the normalized volume on the billing segment in the finance the effect of these peak margin requirements and everything brains out? And what do you feel is the normalized volume we would see in the business segment because we've not had those kind of difficulties like we had with the crude of suddenly escalating margins? So what is the normalized volumes you see? Has the current customer base -- you discuss that the base is also increasing?
We see around 15,000 to 20,000...
Should revert in the coming time in this year.
It should. It should.
Okay, okay. And secondly, sir, second of my question is a bit of an extension on the electricity derivatives for -- So tech wise, are we ready? Are we ready for that because it will be an onboarding of entirely new set of customers with the discoms and generators coming in, will be an entirely new set of customers. So are we ready to detect for that?
No, there's no separate take. On the same platform, we launched those ones, okay? The same electricity, the futures contract remains the same, of specifications and the predator business the same the brokers remain the same. The obviously, the part is would be in -- the ecosystem we are being, as I said, not transplanting this idea of hedging, et cetera., and we are able to get a good response at this point in time -- very good response, I would say.
Okay. But that onboarding process has to begin. Once the regulatory approvals come in, this onboarding process has to begin for the discounts and every...
Yes, we have already started.
Lovely, you've already started the onboarding process.
Yes.
[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.
Two questions. First is, sir, on the IEX on the David contract, you said that to begin with, you'll have 10% revenue share. Do you see revenue share like to decline over time? And secondly, in the PPT, you have mentioned about spot trading platforms for coal. Is there something happening there right now? Is it something we can expect over the next 12 months?
Yes. You see -- taking the second question first, on the coal, as I said, we are working on it. and a vendor has to give a presentation to joint presentation has to make and the report has to be supplicate. And once that is done, I think we will take it forward. That's the way it is. And coming back to the revenue sharing with IEX. I said the first 2 years is 10%, and then we will see how it moves.
The next question is from the line of Sanketh Godha from Spark Capital.
Sir, just 1 more extension on TCS contract. So you said that you have spent almost INR 50 crores to date. So by effectively how much we are likely to spend on TCS when it gets fully implemented so that we can determine what will be the amortization cost over 5 or 6 years, whatever we will do it?
You see, we have not disclosed the cost as yet, I mean, the contractual obligations are there. It's not just TCS. What he mentioned, if I'm not mistaken, on the commodity derivatives platform. So partly the cost of the software vendor, partly the hardware that we have to acquire it. So on the CDP project, you get a complete, what we call, visibility, not the breakup. Maybe at the end of -- I mean, sometime by September next year, you will get the visibility in the reserves -- in the accounts.
The next question is from the line of Amit Chandra from HDFC Securities.
So the algo volumes, the percentage has been coming upwards. So is it now spread across the contracts? Or is around -- specific to some contracts? And also in the drop in the bullion volume that we have seen. So is -- was there a concentration in terms of 1 member contributing enough of the volumes that has come off, or whether not the [indiscernible] drop has been broad-based? Because as we're saying that the retail clients or the CC number still continues to be very strong and the additions there are very strong. But still we are seeing drop in volume. So this might have to do with a larger number rent system. So I explain that?
Yes. In fact, the margin numbers have not gone out of it. You saw members of trading, maybe they are trading less. -- given the margin in collateral that we have kept off the clients kept the collateral. So yes, algo players are increasing. And it will go on increasing it because recently, recently maybe about 2 months ago, we have introduced 1 algo player. I mean our 20 IDs can be attached to 1 algo strategy, something of that kind, exaction -- this one before me. So as a result of it, others have also started coming in, some of the international players. I don't want to take their names. Now one more has become a direct number of the exchange and 2 more are expected to become numbers shortly. So more and more, all to players will come. Now where are they active? Yes, there are active options. They are actually almost on futures contract, except maybe Agri. Agri also, maybe they are not in -- maybe they are there in the CPO, but, yes, I think CPO is the one. But otherwise, they are there almost a halo contracts. Options, definitely in options -- crude oil options that we could bear under gold.
Okay. And in any of the contracts, do you see any specific concentration of the top 10 numbers? Or is it like not equally...?
No. No. I don't see -- we don't do see concentration.
Okay. Okay. And, sir, on the technology acquisition that we are doing. So is the things as per plan, so what [indiscernible] has said earlier? and what are the challenges we are facing in terms of the aberration. So everything is on track or there is some deals on that front? And also, if you can throw some light on the cost savings, kind of what were planned earlier and what exactly you're going to achieve?
I think the program is on track. I think by the end of December, we should be able to see the system to be in the UAT -- under UAT, User Acceptance Test. And there are will be doing the parallel runs, etc, etc. And then we will onboard also member brokers to start testing the system, all that kind of things. So yes, it is a very, very tight program, but at the same time, we are able to manage and monitor effectively. The cost savings, yes, many initial you will be -- sometimes you need to write off the existing servers and hardware and under the 2 because you are getting the new hardware. And both may be there for some time. And the next 5 years, we will be writing off the new software also, what are the expenses we are incurring. And thereafter, the AMC is a single digit. That is something which I have said earlier also, and it will be very marginal. That is the way it is.
And sir, is there any kind of correlation within the volume pickup and the completion of the [ shift ] because is there any correlation to that?
There may be a correlation, but there is no cause and effect relationship. That's all I can say. If it goes up, then it goes up. There's no relation to build up...
And why I am asking that is there any hesitance from the larger number that the technology upgradation is done and it's up and running then maybe?
No, there's nothing on the trend. As I told you, some of the Algo players have already started joining. That's what I'm saying. New players have started.
[Operator Instructions] The next question is from the line of Arjun from Spark Capital.
Sir, it's a broad question with respect to my observations with electricity prices and how the spot market is behaving, we see that spot market delivery usually, it happens in a day-ahead market and there is no contracts or delivery that is for more than 7 days or 10 days. So the maximum is for a 10-day period. So basically, there is no debt in the market. And #2, electricities are highly volatile, 5x to 10x of what crude is -- crude price is, that's what the volatility of electricity prices are. And the entire volatility or price atlas very high. So the relative to futures market is both proven venue for hedges also to participate to provide a long-term contract and also for the retail participants to benefit from the volatility. What is your view? Who's coming into this electricity futures market? Is the government organizations or distribution companies that would stay for 1 month future contracts? Or will it be more of retailers who would want to benefit from this price volatility? Who do you think would be contributing or participating in this contract?
See, you need all the players. You need speculators who are intraday also. You need hedges both the producers as well as consumers. And you will need financial participants who will do arbitrary opportunities between the contracts. And as you rightly pointed out, electricity -- IEXR, wherever it stated, you not only have on different times of the day the volatility because the peak is different and offpeak is different pricing, and that's why they have divided into every 15-minute of this 1 block for trading. So yes, you're right, there will be so much of volatility in this contract. But our focus is substantially for the peak period, and weekly average and monthly average prices is what we need to track it. And discounts and other generators, and there are many industries are there, which are buying it. And there are some industries where they have a cap to power plants, but they are also supplying it when they have a [indiscernible]. So they are also supplying it. So we are targeting everybody, I would say that so. We're targeting everybody who needs electricity as 1 of the key inputs for their business. That's the way it is.
The next question is from the line of Mohit Kumar from DAM Capital.
One question, sir, why do you -- sir, on the steel side, why don't we have the hotpot futures as a product? I believe the hot to HR will be a much, much larger product compared to the hot rolled compared to the TMT bars?
Yes. See, we have done some analysis -- market survey of surveys, as we call it a study, we can say that. And the 2 things, BULLDEX is 1 and it is hard to find for delivery because most of the manufacturers continue their own [ BULLDEX ] hardly market in a sense who are willing to sell it. The other 1 is the TMT bar. And so we are looking at the value chain. We are starting here because the number of players will be too many in this steel TMT contract so is the consumers. A lot of construction. When I say construction not the individuals who construct the house, we are looking at use to any of those kind of giants who are in the business of infrastructure construction, or housing construction companies, big companies, they all can look at this. At the same time, we are also not catering only to the integrated steel plants. There are many others who are smaller, but who have automated their processes, okay? With whatever is the technology that we needed for ensuring the quality is guaranteed. So we are looking at empowerment of those kind of investors, those kind of from doses also to deliver on the exchange platform. And we have already filed for 1 more contract, the aluminum alloy contract, which like in the previous meeting call I have mentioned it. We are waiting for that approval also. So we expect these contracts to be launched in this current financial year. We will continue to launch other in the landing otherwise plots not that we will stop with only steel. Yes.
Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. P.S. Reddy for closing comments.
I think 1 more intense Mr. Ayaz Motiwala is there?
Yes.
You can allow it, that may be the last question.
The next question is from the line of Ayaz Motiwala from Nivalis Partners.
I had actually pressed the number that I registered later maybe. So I have 2 quick questions. One is the question on TMT bars and steel related. So in terms of the exchange, what does the exchange facilitate the participants in terms of physical delivery, ensuring quality, et cetera? How does that mechanics work, sir? For a product which can have varying quality and other sort of physical features because of being sort of metal oriented? So if you could share some thoughts one that on how this would play out?
Yes. See, we have worked out -- we have a product advisory committee. They have given guidelines what should be the to be kind of a standard bar that we need to be looking at and what are the other bars. I think [indiscernible] what is considered as a standard bar. And then we have looked at, I think, beneath the place for delivery center, base delivery center. And then we are looking at a lot of integrated steel plants, which are there, about 7, 8 of them are there. They are very keen to [build in]. And a lot of players, a lot of players in the infrastructure construction, they are very keen to participate. And it's primarily to hedge their risks, okay? It's primarily to hedge their risk. And I think it will work well. And we assure quality guaranteed. Today also 5 base material contracts are doing well. We assure quality that is being delivered. But at the same time, the panel, the producers we can deliver on our [ Exchange ] platform. So we only accept those matters. So obviously, we have a technical [audit] done by something like an [indiscernible], et cetera, that kind of people go do the process audit and then confirmed to us thereafter. The testers are in panel, and they use the metal and then say that the of quality, then only we will do the impairment. So I think it's an elaborate process. Flyby net operators can't come on to the extent command delivery can wash out their hands, no. So we are being pretty addition job out there.
That's very assuring, sir, just a sort of side question on that would be that there are online discovery portals, which also deal on a B2B basis, especially with the steel side of the business. So you said the purpose is -- core purpose of participants here would be to hedge the risk or keep the spreads intact in the sense if it got expensive are not a industry call running away, that's the purpose. Okay. Just a last question from my side. So we talked a lot about the electricity futures, as you said, a regulated 1 by CERC and the other by SEBI and the case is settled. As we note, sir, that IEX also has a product called the real-time market or RTM as they call it. And you are potentially going to launch a future product very soon. So from a point of view of participants, as you said, sir, that we need both suppliers and buyers as well as the necessary sort of participants such as financial investors and sectors. How would we differentiate between this may asking this from a land perspective on RT and versus the futures market, sir?
Yes. See, the way that I look at this and I said again, it's only for hedging purposes. And if somebody wants it, they have to go through the physical market like IEX platform. And then there is also a national, what you call, grid center -- national grid center, which tells you how much free capacity is available yield the power to the location where you want it. So we are not getting into that area any way, okay? This is primarily to help somebody's requirement is x megawatt hours over 1 month. So they look at it and accordingly, hedge it. So the beginning of the month, they may hedge for 100-megawatt hours and gradually we keep on reducing it. Then and whenever they reduce it, they immediately go on, bite on the -- for the day on the IEX platform. But they should get the complete what should I say, cover -- financial cover. So whatever that they have got expedition on any, they will be able to cover it, that's all. National Load Dispatch center that's called.
Ladies and gentlemen as there are no further questions, I would now like to hand the conference over to Mr. P.S. Reddy for closing comments.
SP02 Yes. Thanks to all of you for reposing faith in the management and the Board and the company. and we will do our best. We will not miss any opportunity to ensure that the sales shareholders and the stakeholders value is always enhanced -- And yes, some of -- sometimes the market conditions are not conclusive enough. I'm sure everybody understands that business is not risk free, but we will take all steps to mitigate risk and promote business. Thank you. Thanks to all of you.
Ladies and gentlemen, on behalf of Multi Commodity Exchange of India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.