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Multi Commodity Exchange of India Ltd
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Ladies and gentlemen, good day, and welcome to MCX Q3 FY'23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. P.S. Reddy, MD and CEO, MCX. Thank you, and over to you, sir.
Thanks. Good afternoon, everybody. Welcome to this [ earning ] call. The quarter -- along with me, my -- our COO, Chief Operating Officer; Mr. Manoj Jain; and CFO, Mr. Bolar; and Mr. Praveen DG, he is the Head of Investor Services, is there.
And I would start with my comments on the results. Yes, this quarter, in terms of revenue from operations has been exceedingly well, thanks to the options contracts and that have done really great and helped us to tide over the situation. But you all know that technology platform has let us down. We couldn't migrate [ whatever might ] the reasons.
And now that we have negotiated, once again. And then there is an offer kind of thing only -- I mean there's nothing called a 1 quarter offer or thing, but is a two quarters minimum. And that's the way we went ahead and taken an additional 2 quarters. So for each quarter, we will be paying INR 81 crores. That is, again, is going to dampen our future results.
But I think our focus at this point in time is something is inevitable, it is inevitable. And we, as an exchange, we, as an exchange, which have been charged with the responsibility of making the platform up and running 24/7. We have no choice. It's a responsibility that we have to discharge [indiscernible] with the SEC regulations otherwise. And I think that is the -- in one sense, we are feeling proud that we have been trusted and we have been given this responsibility of running the platform.
On the other hand, we are feeling that it is -- what should I say, it's a point of weakness for which region we had to pay without much negotiation whatever has been asked for. That is the way it happened. But anyway, our focus should be to make sure that our revenues increase going forward by introducing more commodities as well as deepening the existing lines of products.
And other than these expenses, whatever we are supposed to be incurring in the next two quarters, that is the current quarter and then quarter in the first quarter in the next year, all other expenses we will -- and make every effort to keep them under control. I think that is what the focus has been at this point in time. And we -- I mean, everybody is very supportive of this particular approach. And we will -- we are hopeful we should be able to make the platform live within this extended time that we have got.
With these words, I will leave it open to all of you for questions, if any on our results. Thank you.
[Operator Instructions] The first question comes from the line of Mohit Kumar from DAM Capital.
Congratulation on a very, very good set of revenue number for the quarter. My first question is, sir, what is the timeline we are looking for the implementation of new software? And do we have anything which we can get from TCS because of this huge delay?
Okay. As far as the timeline is concerned, I think, as I said, these 2 quarters are available, but we will not fully consuming -- that's not our intent. I think as early as possible, we should go ahead. And that's what the plan of action will be. We propose to launch mock as we did earlier. Again, we will release a full force mock to the member brokers in this month and members also will be given a very clear roadmap within this period when we will exactly go live. But we will be communicating it, but I can't specify the date, but this is the roadmap. Now as far as TCS is concerned, of course, it is also driven by the agreement and the agreement does provide for penalties we service the delay in implementation or delay in go live.
So when will we get the entire clarity on the timeline?
In the next 1 month to 1.5 months.
Okay. My second question is, sir, of course, the software implementation happening as of now. But do we have any plan to launch the new contracts, especially given that the SEBI has allowed, the stock exchange has launched multiple contracts of the commodity. Are you working on some long-term measures?
Yes. The mini contract is what SEBI has permitted. And I think we have already applied to SEBI. We are expecting any moment approval from SEBI for launch. And as soon as we get it, we will be able to launch.
Are you looking to reduce multiple contracts across multiple commodities? Or it's only restricted to some particular...
No. We have deployed for 3 of them at this point in time in metals, based metal contracts. We have also applied in energy products also -- I mean we will be applying, I'm sorry. We will be applying because the regulatory process within the internal MC -- within MCX is on. So once that is done, we will send to SEBI for their approval, the energy contracts.
Is there third one, metal, energy, anything else?
Come again?
You said metal, you said energy, sir. I thought you said there are three products which are looking to launch, right?
No, no. I'm saying in energy, you have two, the both -- [ products ].
Next question comes from the line of Avinash Singh. from Emkay Global.
On that software contract, so my question is like due to this adhoc rollover of this contract over 3 quarters perhaps you will end up being almost like INR 180 crores or so extra. Now you had expected a cost saving by shifting from one vendor to the other. Now what kind of a payback period if we were to sort of keep in mind this INR 180 crores cost. What kind of payback period will allow you to save this was a cost I can just provide some color? I mean to understand the difference between these two contracts.
No. I think in the case of the TCS contract, we said that the -- it will write off over a period of 6 months. There may not be much difference because of the depreciation being also high. I mean after 6 years or so -- not 6 months, I'm sorry, after 6 years or so, it will see that result. So this is whatever we have incurred now it's not a capital expenditure. It's a revenue expenditure. So obviously, it's kind of done and gone out of our -- this one. I don't think we can amortize any of this and then say that the payback is -- has changed. I'm not comparing it that way.
Okay. Okay. Yes. Okay. So forget, [indiscernible] intermittent quarter. So assuming that, okay, the second quarter of FY'24, you are onto a TCS contract. Will the software expenditure run rate is similar to where it was till Q2 of this year?
It should be. That is what I'm saying.
In addition, there will be additional amortization.
EBITDA will be better, but the [ depreciation ] will be added little more.
Next question comes from the line of Sujit Jain from ASK Investment Manager.
Sir, if you can give the transaction fee for options for this quarter?
INR 53 crores.
And so the other operating income then comes at INR 26 crores for the quarter, right?
You said options, isn't it? INR 53 crores was from onset.
Yes, INR 43 crores, minus INR 53 crores, minus INR 64 crores from future remains the INR 26 crores other operating income.
That's right.
So higher compared to quarter -- base quarter and as well as Q-o-Q, what leads to this higher number?
One is, we have been able to [indiscernible] vault charges because this is a consolidated figure, which also includes -- I mean, we're comparing the consolidated, which also includes the revenue that we have got from [ TCS ] that is the vault charges.
That won't be there in the base as well, right?
Yes, that's right. So mainly, it's the transaction charges on option. And also, as a clearing corporation, the -- gets a lot of -- some cash -- and the margins in cash, which has been deployed and which is forming part of our operational income.
Okay. And this charged that you've mentioned which gets paid to 63 Moons for the quarter INR 61 crores. So way to look at this is basically, you pay roughly INR 4.5 crores per quarter plus 10% of transaction fees. And then that works up to something like INR 16 crores, INR 17-odd crores. Amount to over and above that is actually the additional charge that is to be paid in this quarter, right? That's the way to look at it, right?
No, no, no. You see, usually, we pay INR 15 crores per quarter under the old agreement, okay? A little less depending on the volumes. Obviously, it is a turnover based fees, okay? And instead of paying INR 15 crores, we paid INR 15 crores plus INR 45 crores in the quarter ended December. And in the next two quarters is going to be [ INR 81 crores ], which means about [ INR 65 crores ] will be extra.
Yes. Perfect. And the other thing is that if you can just give the split. So for example, there will be some portion of quotations that are being paid to CME, which will be a part of the INR 67 crores software-supported product license expense for the quarter. How much that number would be?
That is a balance, INR 67 crores minus INR 60 crores.
Okay. And in terms of the mini contracts, just to understand this, and just correct me if I'm wrong anywhere, is that -- you already have many contracts in bullion, both silver and gold. -- it is in base metals and in energy, you'll be launching them, right?
Subject to approvals, yes.
Yes. So that is a -- that will lead to higher [ ADT ] eventually in auctions. And apart from that, in gold, you have bimonthly contract? Do you have a monthly contract in gold, in options?
Gold Mini.
Gold Mini is there.
Which is a monthly contract?
That's right.
Is there a further case of reducing the size of this going for a lesser maturity, and therefore, expecting higher volume even from there in any of the commodities from where we are currently in terms of the maturity of a contract.
No. These are all the combinations that we keep discussing and then working with the regulator. And we did look at the monthly [ fortnightly ] contracts, et cetera, and in options. I think as we go along, I think we will try to move and make an attempt to launch such contracts subject to the regulatory approvals.
Which are the commodities where you have fortnightly contracts? And which are the ones that eventually will be launching?
We don't have any so far.
But eventually, in future, there's a possibility?
That's right.
Right. And one last question is how much of your commodities, which are to be compulsorily converted into physical delivery end of the contract period gets actually converted into delivery. So you give some data from the inception till date, you also give every quarter how much got converted into in terms of tonnage, but in terms of percentages of the notional value, how much actually gets converted into physical deliveries?
See, as I said, we are a last resort for delivery and the commodity -- I mean, these derivative markets are not meant for delivery assets. Deliveries only a threat to the people to make sure that prices move in tandem with the spot prices. And so going by that, the percentage will be 1%, 2% of the total ADT or even less, okay? So it depends on that kind of situation. That's the way it is.
So you're saying at exchange level across, all commodities put together, it will be somewhere between 2% to 3%?
Commodity also comes to that only. Each commodity also comes to that only.
Next question comes from the line of Prayesh Jain from Motilal Oswal.
Just a few questions. Firstly, let me clarify this. You -- like for the past 3 quarters from the time the TCS contract has been getting delayed 3, 4 quarters. We have been saying that the impact on cost, which includes the software costs and adding depreciation or amortization, whatever it is, together, will not be any different from what we were paying pre say, pre volume -- pre the extension. But post that, our volumes have really surged. Do you still think that there will be no implications of -- even at the current volumes? And what volumes really that will make -- start making a difference?
See, the question that has been asked all along is the contract with 63 Moons, that is prior to September versus the TCS contract, would that yield any higher -- I mean, which is going to leave more margins on the table is what usually being asked. It is not vis-a-vis our [ ADT ] or the volumes. So it is in that context, we have been saying it, it doesn't make much difference because in one case, the fee itself is higher. In the other case, it's in the form of amortization, et cetera. At the end of the -- it will be high. So at the end of the day, the net profits will be more or less will have the same impact under both the contracts. But having said this, you've seen our fixed costs are, by and large, by and large, our fixed costs are by and large -- are under control.
The only difference marginally it would have been [indiscernible] is because of the increase in volumes, we would have also ended up paying more to 63 Moons. Our vendor had it been a revenue [indiscernible] contract vis-a-vis the TCS contract, but that would not have been so much of a difference. That's the way I look at it. You are right to that extent of variable payment to be paid to the vendor vis-a-vis TCS platform.
Okay. So even at current volumes, whatever we have today of in 3Q of options and futures, and let's assume that this was not at INR 60 crores in this quarter, let's assume it was INR 15 crores. But still, it wouldn't have been more profitable in case we were on TCS software. That is the right assumption to make?
That's right. And in fact, had we had the same trend continued with whatever the pre-September, probably our net profit would have been about INR 92 crores something of that kind.
Okay. Got that. The second part of the question is on the product launches. So earlier you had mentioned about the monthly options on gold contracts would be on the new software. Do you still stick by that? Or would you launch some monthly contracts on gold fee, monthly options on gold futures on 63 Moons software as well?
See, we don't have a problem in launching the current platform, okay? But if I launch it, when I migrate it, I must ensure that all existing products are seamlessly migrated to a new platform. So we need to see that first it's tested in the new platform. Once that is there, then I can launch even the current platform also so that we know it will significantly migrate. That's the issue.
Okay. And sir, could you just give me a step by step approach to this in the sense that what are the milestones that you would be looking at? So first, you see now you're doing the mock again, complete full mock again then whether you'll have parallel run so whether we'll have parallel run across commodities. So what will be the milestones of this transition?
Yes. One is the parallel -- mocks will be done. Mock is with the member brokers, et cetera, and that will be for a long period. And parallel runs are also done simultaneously, which is internal to us. We take the data from the existing system and pump in the data into the new one and see the outputs, whether they are coming promptly or not. So that is a parallel factor. So you can do it in a day 2, 3 parallel runs also. So 2, 3 days data you pump in each day, then you look at the results. So that is another part of it, which simultaneously we'll be looking at it. The third dimension is the performance optimization. So while we have targets achieved in the NFR to the current production requirements in the nonfunctional requirements, NFR means.
So it's already -- that's already achieved. But when you put all the security [ apparatus ] on the system and then see that how it behaves. So cybersecurity-related aspects are also already implemented. And so the audits also we have to do it afterwards software performance evaluation is done, performance setting is done. Post implementation of cybersecurity and other various security measures, then we will have to get it audited, both system auditor, VAPT, all the cybersecurity audits, then thereafter, we will go live. That's the process.
Great. And sir, one more question on the TCS contract. So do you -- sir, in case you are ready to move to TCS software, say earlier, say by 31st March itself, you are ready to shift by all these steps that you have mentioned are all done by 31st March. Can you still -- do you still have to pay for the 1Q?
It is a take it or leave it for 2 quarters kind of contract. That's the way it is. That's why we had to...
So in a way, 63 will be there for 2 quarters or whether we have to pay for it, either ways?
That's right.
Next question comes from the line of [ Parth ] Agarwal, an individual Investor.
I just wanted to know the cash balance on the books.
Yes. INR 918 crores as on 31st March -- 31st December.
Okay. And just a second question. Sir the platform that you're trying to develop versus the existing platform that we source from 63 Moons. Is there any [indiscernible] existing platform?
See, functionality, there will be some superior features will be there. But at this point in time, ever since we sensed the delay, we have given what you call a core functionalities, which are needed as is various bases end of [indiscernible] so we are going ahead with all these functionalities, which are needed for us to run the market as we have today. That's the way I see. And the other forward-looking features will be coming up in Phase II post go live.
Next question comes from the line of Nikhil Abhyankar from DAM Capital.
I wanted, sir, did you mention the quantum of liability clause for the [ TCS ] due to the delay in the contract?
I think these are specific to the contract. It's not good to disclose it, please.
And sir, also, about the product launches. So when are we looking to launch the electricity contracts?
That is a long pending wish of us. It's now almost all 2 years. I mean I think any -- only when it comes, I can say, yes, it has come. But till then, I do not want to make any promise. But then our efforts are there constantly, we are at it requesting the regulators to approve it.
Okay. And just a final question, sir. If we get the approval for the 3 contracts on SEBI for the mini contracts, before, say, June 31st, and you are still using the old -- the current system. So will we still launch these products on the old system?
Yes, yes. There's no problem on -- these are simple variants. That's all. There's no problem.
Next question comes from the line of Umakant Sharma from Safe Enterprises.
I have a few quick questions. Firstly, when do you intend to start the mock trading with a new technology partner? And how long would you need to run it parallelly to make sure that both the new platform runs effectively. I'm asking this question in light of the fact that BSE when they had to run it parallelly for nearly 2 years. So could you throw some color around that?
See, it all depends on how intensely we will be undertaking this activity. Maybe BSE have done it for 2 years, somebody else may have done it for 6 months and it all depends on, again, what is the preparedness of the exchange on this. As you know, on 7th November, we launched mock trading for a long time for 1.5 month, 2 months, it is continued. Then after picking up all the observations, et cetera, we have again refined the system, and we'll be launching in this month. So since we have the time, we will be able to do a little longer mocks. But it is important for us to ensure that all the members participate. So that is where we have been handholding them. And in fact, I would say 90-plus percentage of the business is covered by the members who have participated in this almost all [ 380, 390 ] members have participated unique members in that sense. Everybody may not participate every day, that's a different matter. But everyone has tested the systems.
And in the second run, what we are planning I'm sure maximum number of participation will come through. So coming back to your question, there's no standard reply for that our standard that is established. As long as we get the -- if we zero in on the defects and as long as the number is keep tapering off, I think that is -- we have done kind of thing. And as I was speaking internally every day, testing is taking place, every day. I mean, it's almost -- about 30 people are -- testers are doing it. So it's not necessarily a member themselves do it. In the name of members in the sense, some member IDs are created and our own people are testing it as if they are the members. So I'm sure that also makes it -- goes a long way in refining the system.
Absolutely, sir, absolutely. Sir, a few quick other questions. So we have paid nearly INR 60 crores to 63 Moons for September, December quarter and committed about another [ INR 152 crores ] for June -- until June, right? So wouldn't it be more prudent enough for us to buy off the entire IP asset from 63 Moons Technologies at a mutually agreeable price. Even, let's say, if it's a INR 1,000 crores and we can write it off and we can capitalize and write it off over the next 3 years. Would it be a much better prudent thing to do?
I think we have to keep the interest of all stakeholders in mind when we take any decision. That's how the board has approached it. And we are also a public institution so our -- whenever we get into any negotiations and et cetera, it has to be a very transparent approach. So that is why we have [indiscernible] RFP probably had 63 Moons chosen to participate at that time. We would have definitely evaluated -- and maybe they would have got -- they scored a few [indiscernible] points and a few points also to their credit, having been an existing vendor, but they didn't choose to participate. They chose not to participate. So that has caused some kind of this one. But yes, now it is behind us. I don't think we will be able to revisit this issue at this point in time.
Okay. And just one final quick question, sir. Sir, there has been too much of back and forth in terms of this whole migration from a technology standpoint, right? And we, investors, we see the numbers getting a hit on the profitability side for our company, right? So is there a possibility that you could evaluate -- the Board could evaluate rather in terms of terminating the relationship with TCS and retain 63 Moons, so that there is no [indiscernible] operate the entire -- continue the operations in status quo?
We will take your suggestions before the Board. That's all I can say. I have no comments.
The next question comes from the line of [ Harish Iyer ] an individual investor.
Again my question is more fundamental. So sir, in our meeting with various investors and specifically with [indiscernible] on 16 November, we have said that the overall cost and which even today, you mentioned it will be at the same level, which we are paying to 63 Moons. So in a nutshell, we are paying the same cost, and we don't own IP, right? And eventually, we -- again, after a few years at the mercy of TCS because, again, we have to buy out IP from that. So sir, again, this question is more fundamental. Technology is the heart of the business. And even sir, market feedbacks are not encouraging regarding the new technology. While we are putting this entire system at risk, and there is a clear cut existential risk for the MCX Stock Exchange. Because sir, time and again, the deadlines have been extended. And even today, we are not sure when this will go online. .
So this is -- these are really serious concerns. And obviously, you and Board is working in the interest of shareholders. But right now, it is completely going against us because even at the current volume, if we take this cost, next 2 quarters, we are going to make a loss. We have already spent 15% of the net worth in just last -- for this cost alone. So there is no rationale, sir, as such for us to go with the change in technology. You -- yourself have mentioned there is no difference between the two technologies. So I am really baffled to understanding what is the reason for all these changes? I mean we are just incurring heavy costs here and which is ultimately hitting a lot the net worth and bottom line, but really shareholder value, sir. And these are really critical questions that management and Board have to rethink.
Yes. I think I have never said that there's no change in the -- there's no difference between the two systems. See, these are -- there are technology issues. There may be differences. There are differences. When it comes to the financial [ profit ] impact of this 63 Moons platform versus the TCS platform. From that point of you said it doesn't make in the next 6 years, any great difference. I didn't say that technologically whether they are different or not different. I don't think that comment I have ever made. Having said that, I mean, as I said that this is the decision which we can't take at this point in time. And I'm sure Board is -- you are all aware that we are [ seized of ] this matter with a great, what we call, reluctance that this contract had to be extended. And in the beginning, I said we are responsible to make sure that the markets run.
And it is that regulatory obligation, which drove us to honor our discharge our responsibility. And maybe that is also our weakness in that sense that somebody or anybody can misuse.
Next question comes from the line of Lavanya Tottala from UBS Investment Banking. Ms. Lavanya, please go ahead with the question.
Am I audible?
Yes, you are.
So here on the new product launch, I just wanted to get clarity that once our [ coal ] monthly contract options are ready, we are fine launching it even on the existing platform. Is the understanding right, sir?
What we want is that once it is tested in the new trading platform, and then we will be launching in the existing. That is the way I said. So when actually we migrated all the existing contracts will be seamlessly migrated to a new trading platform.
This has to be ready in the new one first then?
New one first. That's right.
But this isn't the case for the mini contracts, but that...
No, no. Mini is not. Mini is -- it's a [ plain vanilla ] futures contract. Okay?
Got it, sir. So the other one is on the like timelines or the deadlines, which we have for TCS. So this is the second mock trading session, which we are doing. So is my understanding right that parallel run will start after the second mock trading, which we do? Or this parallel run is happening simultaneously?
Parallel run is simultaneous. In the parallel run, members will not participate. It is just that you take the data, all orders you take it pump in, into the system. Get the outputs. Match it with the -- whether the 63 Moons output as well as the TCS output is the same or not. These are the parallel runs, which are back end it happens. Mock is actually member brokers participate which runs whatever is the timeline and different orders are placed, all that kind of thing. So the mock is very critical. Parallel run is important. Anyway, we have to ensure data integrity. The outputs are the same, no doubt about it.
Okay. Got it. So now the parallel run is happening currently? Or is it yet to start?
Yes, yes. It is happening. Parallel runs are happening.
So sir, can you just help us understand what are the key issues that you are facing with TCS platform like any broad key issues that you want to highlight?
So the key issue, as we have phased out the TCS systems teams have faced the integration challenge. And I think now they have overcome and the seamless flow of data and between the [ T7 ] and the banks. And then again, back and forth, it happens while going through, it was the challenge -- that was a major challenge, it was a major challenge, as I said. So that has been addressed. I think we should be able to now fix other functionalities.
Okay. Got it. So -- and on the [indiscernible] one which you have highlighted are software charges and amortization. So the benefit of this on EPS wouldn't be there for 6 years or so you are highlighting? So we need to assume that at the current volumes, it is the same. But as the volumes increase, we should be seeing incremental thing, right?
Yes, that's right. That's right. You're right, madam. You're right.
So for the current volume, it is same. But as the volume increase, we should be seeing even at the EPS level because if it were our older contract, the variable costs would have increased along with the volume, but here incremental, there won't be any [indiscernible].
That's what I said. So that impact has come now also. But unfortunately, because of this lumpy payment of INR 60 crores plus INR 80 crores kind of thing -- INR 81 crores kind of thing, that is completely lost. But otherwise, you would have got -- you would have seen that kind of thing.
Okay. Sir, one last question, if I may ask. So this higher other income, which we are seeing this quarter and the previous quarter, this is largely driven by what, sir, I just missed in the earlier question.
By the transaction charges that we have earned on options, largely by options.
Other operating income is also high in the last 2 quarters.
That is basically on the margin money that we have received from members as part of our clearing and settlement operations, which is then deployed into short-term [ instrument ].
Okay. Okay. Got it. So is it because of we have higher margin requirements now that this increase [indiscernible].
Not margin requirements. Volumes have gone up means more margins will come. So more margins means, again, if it is a cash margin, then definitely, you earn more.
Next question comes from the line of Rajesh Mehta, an individual investor.
Mr. Rajesh, please go ahead with the question. The line of Mr. Rajesh has been disconnected. We'll go ahead with the next question and comes from the line of Pratik Dharamshi from SAFE Enterprise.
Just a couple of questions from my end. So in terms of payments to TCS. So can you quantify how much money we have already paid to TCS for software as well as hardware so far?
Yes, you're asking how much has been paid?
Yes. So how much have you paid to TCS? Can you quantify in terms of software charges and hardware charges so far?
No, I don't think -- see, as we have been saying that the contract is confidential. We can't be -- if I disclose it now every quarter how much we are paying incrementally then you will know that full price of the contract. I think it's not advisable to disclose it in this matter. But overall, whatever is the IT expenditure, it contains in that. That's the way it is.
It's all part of our CWIP.
Sorry. Part of?
Part of our CWIP.
That's a capital work in progress.
Yes, that's right.
Okay. And the second one, you mentioned by June, you should be through with the transition to TCS, right? Am I understood [ it well? ]
That's right.
So within that 2 quarters from now, we should transition to TCS. That's the timeline you are setting?
Yes.
Next question comes from the line of [indiscernible] asset.
Sir. I just have one question. Most of my other questions have been answered. How do we plan to diversify the product [indiscernible] options? Because as of now, I guess, mainly we are quite dependent on energy contracts, right?
Yes.
How do we plan to diversify this? Like are you planning to get in our products to [indiscernible].
Yes. If you see that some traction is seen in the gold options as well, you may have seen it. But then as it's a bimonthly contract and the volume, I mean, this is very big. And that's where the premium will be higher. We propose to launch the monthly contracts. I think once the system updates are done, then we would like to launch that also. We have received the permission as we have last time also told, but then that each holding is back.
Next question comes from the line of Amit Chandra from HDFC Securities.
Most of the questions around the technology transition has been answered, but just to understand how confident are we in terms of transition that has to happen in the next quarters? And also in terms of the total around [ 500 members ] that you have, how many of them have started mock trading? And is there any issues in shifting the smaller brokers to the platform or mostly some of the larger ones, the large members have already shifted [indiscernible] platform.
See, as I have said that almost all 380 plus have already participated who accounts for 90% of our business. So that's not an issue in that sense. And we need to say -- clear roadmap to them, telling them that by such and such a date, we will be moving and all of you prepare yourself is something which we need to declare. So that -- we will do it after the steps that I have already enumerated earlier have done. And that is what we are working now and maybe the performance fine-tuning and other issues will be addressed. And thereafter, we will be able to release the plan of action for rollout for going live. But it has to happen before the 30th June, no doubt about it. I think we paid through the [indiscernible], and I don't think -- I mean, anyone of us can justify anything going beyond this.
Okay. Sir, as per the regulatory requirements, is it required that all members would shift to the new platform then only you can start with the new platform? Or we can shift with some of the people being on the old platform and we can cancel their memberships? Or something of that sort as to the regulatory, what is the regulation in terms of the shift?
Look, I mean, irrespective of regulation, there's -- I don't think there's any specific regulation. You need to give adequate time to the participants. So from last year, May, June onwards, we have been telling them what will be the file formats and et cetera, et cetera. So adequate notice has been given. And some of the members, if they are left out, they are left out, we can't help it. But this is what the solution is. Maybe those ones who are thinking that the commodities business is marginally adding, whereas the shifting to a new platform will add to their additional costs, then they may choose not to join, but then it is up to them. we can't assess for them in that sense or we can delay for them.
Okay. And sir, on the options, so you mentioned the active participations around 3 lakh. I know 3 lakh people are trading on options, and that number has almost like tripled Y-o-Y. And there's a similar number for futures, right? So around 3 lakhs YTD for options and futures. So what is the overlap between these options and futures? So is it the unique option traders? Or there is an overlap between options and futures?
There will be some overlap, no doubt about it, but we don't have immediately those overlap numbers. But there will be overlap, no doubt about it.
And this still is like around 3% of the total UCCs that we have. So our -- is there a chance that this can go up? Because if I see the total volumes, the active trades per active participation comes around 2 locks -- roughly 2 locks. So -- which is small as compared to what is there in other exchanges. So can this increase? Or we can see this increase in the [indiscernible] from here also?
I think one is that cross market comparisons is not -- it's like comparing apples and oranges. The reason being that our fear, it's one lot contract. Buying one contract means one lot. One lot means it is few lakhs. Unlike in equities, you can buy 1 share and 2 shares of 10 shares, 50 shares. So there any number of participation can come, that cannot come here. The margins they have to pay for each lot. Even if it is a 10% margin on [ INR 3 lakhs or INR 5 lakhs ] minimum in this range, and it is INR 30,000 to INR 50,000 get stuck in just one contract. So let's not draw that comparison for the sake of proper analysis of what we are talking about.
The second thing is as explained in some of the previous calls also. The total number of UCCs uploaded is not the right benchmark agonist, which we should be doing it because member brokers now are unified member brokers. So when they are taking the clients consent, they are taking the client consents for across all products and then uploading the -- in all the databases. So who knows tomorrow, the client may choose to trade in commodities. So you need not call for additional set of data and information or [ papers ]. So that is the reason why the members are doing that. So my suggestion would be that we need to see what is the growth we are making. How much incrementally we can increase the growth is what we should be -- we are all focusing than setting our eyes on the total UCC base. That's the way I approach this up.
Next question comes from the line of [indiscernible] an individual investor.
And most of my questions have been answered. So it's just one relating to [indiscernible] is there any visibility you can provide us on the latest basis on RMRC decision on [ regulatory ] of [indiscernible].
[ HDFC ] is about INR 570 plus -- INR 75 crores or something like that. How much is exactly?
INR 580 crores.
INR 580 crores.
Sorry. Not about the decision on whether we can take money out of the HDFC [indiscernible] SEBI.
Yes. I think something of that kind -- I understand, something of this kind was discussed. That's what our clearing corporation people who attended the meeting of RMRC. But unless the [ meets ] come and final decision come in the form of a circular, we do not know what exactly the outcome is going to be.
So we should expect maybe in some time you'll hear something?
Hope so.
Next question comes from the line of Sanketh Godha from [ Avendus ] Spark.
Sir, on this mini contract, just wanted to understand that when you are applied for the SEBI approval, it is only for the future or you will launch them in the options too, especially in the base metals, which is not big today.
Well, at this point in time, we ask for the futures because for launching options, you need to have underlying futures [ had to ], and there should be a minimum turnover of so much then only you can ask for this one options.
Got it. Got it, sir. And sir, second thing, I think the question has been asked, INR 26 crores other operating revenue, can you tell me how much of the INR 26 crores is the money made on margin money -- float on margin money -- interest income on margin money?
INR 17 crores.
INR 17 crores. Perfect. And finally, just wanted to understand the SEBI has [ floated ] a white paper on block of margin money. So -- which is like an [indiscernible] for the secondary market. So if it gets implemented thoroughly, then do you see -- I mean for exchanges also the float income almost disappears or there is -- though it is optional, assume everything goes [indiscernible] in the secondary market too. The risk to the margin money which is INR 17 crores what you have in the current quarter is there?
See, the [indiscernible] model is for the -- not the margins, I understand, margins have to be deployed with the exchange anyway. I think it may be related to the pay-in and payout related. it's being worked out. It's being still discussed. And yes, if you really say in that sense, let each investor maintain an escrow account kind of thing, the banks and then put all the money there and then only exchange our clearing corporation will access it as and when there is a default. Otherwise, it will remain there only. Yes, you're right, it may happen, okay? But we need to look at the operationalization of it, how they were going to operationalize. Let's wait and see. Maybe it is too early for us to understand the model.
Got it. Got it, sir. And finally, again on 63 Moons, see we are paying almost [ 65 plus 45 ], which is like INR 180 crores extra. So to 63 Moons over 3 quarters. And I believe TCS cost might be best case [ 1.6 or 1.7 ] of the extra amount what we are paying to the 63 Moons. So in the hindsight, if you see then what potential savings, which we would have done seems to have not played out because of the delay in [indiscernible]. So I know this question has been asked in different ways to you. But honestly, we have not achieved ultimately the end of [indiscernible] we wanted to have a fixed kind of a cost model rather than linked to the turnover cost?
Well, see, we embarked on a good intention to implement it on time and then bring in savings to all stakeholders. But somehow we missed the target here. And -- but then it should be behind us is my firm belief and that should not pull us down. And as I said, I repeat also, our focus is not -- we are now paying to 63 Moons, it's gone for me. And what our focus should be to increase your top line and keep all of the costs under control. So these two are done, I think we have done, of course, a technology platform, we will implement. That's what it is.
Got it, sir. And last one, sir. See, if 63 Moons was a normal contract in third quarter as it was in 2Q then probably we would have made INR 84 crores, 85 crores of profit. But I think one of the questions you have answered that if you would have been at TCS contract, the profit, what we would have made would be INR 92 crores. So should I make an assumption that if you would have been on TCS contract today, in third quarter, the extra profit we would have made would be closer to INR 7 crores, INR 8 crores?
See. And I think this is subject to EBITDA to the depreciation. So what MD said before EBITDA, right? The old -- the amortization factor would also come in, right, for the new project. Just keep that in mind because the depreciation factor also has to come in.
Next question comes from the line of Sanjay Kumar, ithoughtPMS.
First is on the income from the margin money, if you could help us model these numbers going forward.
Sorry?
The INR 17 crores income from margin money, it's been going up for the last 2 quarters. Is there a way to [indiscernible].
Yes. earlier quarter, it was around INR 12 crores. So this quarter, it is around INR 17 crores. So the margin money is in the range of INR 1,000 crores in cash, right? So that as per the SEBI guidelines is then deployed in liquid overnight funds or in fixed deposits, right? Or -- yes, that is where it is deployed.
So this will track the options growth, is it?
It is essentially to fund the additional activity that is taking place, which is triggered by volatility not necessarily for options. It is just money is available for trading in any product, futures or options.
Second, IEX is talking about policy advocacy to create a framework [indiscernible] of coal exchange. So if you could help us understand what does it mean for us? Since we're also talking about coal exchange as a key growth driver going forward.
The directions of the Ministry of Coal are still awaited. They are also working. They have appointed a consultant and who will be giving the framework. And -- I mean in one of the conferences, it was mentioned by the Coal Ministry officials that the framework will be ready by the March. And thereafter, they can look at it. Meanwhile, we have requested SEBI to give us in-principle approval. So that's the status at this point in time.
But with both IEX and MCX be allowed to operate?
No, no. That we do not know. You see whether coal ministry wants only one exchange to run or anybody can compete, maybe anybody can compete, but MCX has what you call MoU with Mjunction. So that's the way at this point in time, the relation is defined -- relationship is defined.
Okay. Okay. Next, so there were news articles about MCX requesting support from [indiscernible] for using their platform. and allegations or possibilities of a reverse merger. So any comments on that we shareholders should know about? Any of these?
I mean, see, tying up a technology -- I mean, alternatives, we were all exploring, but then that's all behind us. There's no point in dwelling on these issues now, okay?
Okay. And any transaction fee hike post new platform from the current 2.1 lakhs for futures and 1 lakhs for options?
We are not looking at it. I think it is too early for us to give any kind of guidance on this.
Okay. Okay. And so if you get the electricity derivatives approval before June 2022, will we launch it in the current platform or that will be deferred?
I think we should be able to launch because in both the platform [ suite ] has been provided for.
Okay. Final question on currency, sir. So any plans of getting into currency derivatives since it complements -- kind of complements commodities?
We are yet to get hold of one trading platform first, then we can look at other platforms, so other what we call products later. But yes, your thought is good in that direction. And that's the way one should think through, yes.
Next question comes from the line of Ansuman Deb from ICIC Securities.
My question is regarding -- I remember we were discussing that the software cost, which comes above EBITDA, would be materially low compared to what was there earlier. So the depreciation would be that high to make the overall cost equal to what was there till September '22. That is my first question. In a way, I'm trying to understand that this was all the way our guidance that the PAT level, there will be no change for the next 10 years if we shift the technology?
Not for 10 years, as I said, for 5 to 6 years, that's what the agreement is for. And thereafter, it's only we pay a very AMC, which are very basic -- very, very single-digit AMC. If you pay, then you can use it on your own that's it, there's nothing else on that. But why this is so going to be high yield completely the entire hardware is getting replaced because the hardware, what we are having and one needed for the TCS platform is totally different. So that's the reason why it's going to [indiscernible] change.
This will also be amortized. I mean the hardware is generally amortized over a period of 5 to 6 years. But the software, maybe we can again for 6 to 7 years. So that's why it's the amortization, depreciation cost would be high.
Right. So I just wanted to verify that there has been no time during the last 6, 7 months that there is any change in the TCS terms and conditions, right?
No, no change in the terms and conditions.
The last question comes from the line of Subramaniam Iyer from Morgan Stanley.
Sir, actually just wanted a clarification on the question previous participant asked. Basically, why do you say that for the next 5, 6 years, we will be at the same level because the depreciation will be a fixed number, right? I mean once you decide the -- once the CapEx is known and the duration is known. And also the amount will also be fixed. So that part, I didn't follow.
No, no, I'm sorry. See, the way that I'm looking at is the cost component, cost attributed to technology will be, one, is variable. And here, the variable will not be there. But then in the form of huge depreciation, it will come. And AMC some maintenance surges will be there, which will be, again, is a fixed item. So these are the two items which will come. And irrespective of your top line, this one is going to be top line in terms of revenue from operations will be fixed, yes. But the only element, as earlier also we discussed it. The variable component will not be there. To that extent, the current charges whatever we are paying to the 63 Moons is what we are comparing with the TCS contract, but if the present volumes increase double, okay, today, you are having a INR 30,000 crores, INR 31,000 crores of options. If it goes to INR 60,000 crores had the previous platform continued, and we would have paid more of that one, that element will not be there. I'm talking about at this given volumes, they will be balancing out.
Okay. So basically, the 6 years you are saying is because you plan to amortize the CapEx over a 5-, 6-year period. So after that -- is that right?
In 5, 6 years, we'll be having a huge growth. So obviously, you will not -- I mean, you would not have had that -- maybe a part of it would have gone to the payment of fees to the vendor had it been linked to volumes. That's right.
Understood. And sir, given that in 2 quarters from now, you would anyway be on the TCS platform, what prevents you from giving a broad basically estimate of what's the ultimate CapEx going to be and the ultimate terms and conditions, I would just prevent so much confusion, right?
I think we will do maybe sometime in the first quarter of next year. We will do that definitely.
Okay. And one last clarification that I would like to take. So given that you have a liability clause with TCS as well, so if TCS delivers the platform on, say, in July, -- do they still have some liability? Or is it only if they delay beyond July that the liability comes into play?
No, no. Already liability has kicked in because we were to be delivered by July last year. So September also, they couldn't deliver it. So that has kicked in, okay? But we will see when to invoke, that's the way it is.
Understood. And would that be, I would say, reduced from the INR 160 crores that you're going to incur in the next 2 quarters? Or basically, you might just take it in the CapEx? I mean you will adjust it against CapEx.
You see how we recover, where do we exist and other thing is not a material point. But we need to maintain -- we can't burn the bridges with the new vendor also, okay? And we need to maintain good relations to ensure that this platform continues. We get that good service from the new vendor out. And we will see how to approach it.
Ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. P.S. Reddy for closing comments.
Yes. Again, I thank all of you for patiently following the analyst call and stay invested. And we would like to do our best whatever that we can do to ensure that the company does better quarter-after-quarter. Thanks to all of you. Thank you very much.
Thank you. On behalf of MCX, that concludes this conference. Thank you for joining us. You may now disconnect your lines.