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Multi Commodity Exchange of India Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '20 Earnings Conference Call of Multi Commodity Exchange of India Limited. We have with us today from the management, Mr. P.S. Reddy, Managing Director and Chief Executive Officer; Mr. Satyajeet Bolar, VP, Finance and Accounts; and Mr. Praveen DG, Head, Corporate Office and Projects, Risk Officer. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectation of the company as on date of this call. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. P.S. Reddy. Thank you, and over to you, sir.
Thank you. Thank you, ladies and gentlemen, for attending this conference call. Welcome you all for the '19, '20 investor conference call. I will -- you'll -- you have seen all these results in the presentations. I will touch upon some of the points, which may be of interest to you, which really shows where we are moving towards.It's right that thanks to COVID, the whole business plan is disrupted, in terms of March turnover, if you've looked at it. The ADT in the month of March was INR 41,657 crores, that was the kind of growth we were looking for in the month of April and May, and all of a sudden it got disrupted. And we have -- of course, on a quarter-to-quarter basis, the fourth quarter was better than the third quarter. And -- but nonetheless, the ADT for the entire year was about INR 32,000-odd crores as against the ADT of the last year, that is the corresponding year, '19, '20 -- '18, '19. The unique client scores, which is very -- of significant importance for us is that in '18, '19, we had about 308,000 unit client codes traded and about this year, that is '19, '20, we have 4 lakh plus unit client codes traded, of which almost all, say, 50% got added in -- 55%, I would say, got added in the financial year. They contributed about 18%, 20%. But earlier, if I -- if you see the last, again, call, I was saying almost like 23% to 25% they were contributing, but that got reduced on an average. Of course, this is for the entire year.So again, if you look at it in bullion and energy, it is substantial. Even in base metals, we had a good UCC numbers that was trading. For example, the metals is one area where we want to focus. In '18, '19, the UCCs traded were 221,000 and in '19,'20, 215,000 UCCs have traded. So that's the one area. And another important area which we need to focus on in the agri market. And in agri, just about 10,000-odd, 10,800 -- 10,700, 10,800 was traded and that remained by and large the same. But that is one area which we are looking for in the coming year to increase in the number of UCC.What is important, again, is that although in the current financial year, we have not been able to reach the INR 32,000-plus crores turnover, we have already garnered almost 70% of the lost ground. If you see the -- in the month of May, the average ADT is about INR 23,000-odd crores -- INR 23,765 crores. So in that sense, we are looking back to normalcy, but I'm not able to predict at this point in time because if it's such an uncertain variable, COVID, we are not able to give any shape to it, which way it will travel. So that's why in the guidance note also, we have very clearly said, we are not too sure how we are going to do and maybe it is difficult to repeat the performance of [indiscernible] in '20.Now coming back to the business, once again, the focus has always been on these non-agri commodities for all these years, but now we need to move towards some of the agri commodities and index futures. These are the 2 major -- 2 areas which we wanted to focus.On the index, we have -- we need to -- we are yet to get the approvals but we are likely to get this month, but that is what our reading is. And hope that once we get it, we would like to launch, look at the timing of it. But definitely, we will launch in the -- I mean, before September, that's what our target is. We will launch and try to add some business to the lost business because of the COVID. Coming back to the other industry-specific issues. In the case of base metals and cotton, a lot of warehouses because they are delivery-based ones, a lot of warehouses were shut during the month of April, they are all gradually opened up. Now deliveries are taking place, except barring a few -- very few centers in cotton. But otherwise, for all base metals and others, trading is -- deliveries are taking place, and people are happy about the way that it is being done smoothly, the transition is happening. But still, we are looking for opportunities in these trying times. And one opportunity or one area where we have found some of the member brokers or some of the, what we call bullion traders, okay, they are, again, getting the old gold, which they are collecting because the prices have gone up substantially, and people are selling it. So they're recycling that gold, getting it refined by an LBMA-approved refiner, and those deliveries are coming into the market. That's one good area, which I thought that's going to increase our turnovers. And I'm able to see that because the gold -- the bullion deliveries have increased in this -- trading bullion hedges have increased substantially. Coming back to the CPO, which again is good growth in the recent past because of the -- whatever that has happened in the -- in Malaysia and war between -- trade wars. So our average daily turnover is INR 4,399 crores in the -- no, I'm sorry, Crude Palm Oil -- no, no, not unique client codes. Unique client codes are weekly and every day that the turnover is about INR 203 crores. And we are -- but toward the end of the -- this one. In the Q4, it has increased to INR 363 crores. When there was time, it has further gone up to almost INR 400 crores to INR 500 crores. So these are the areas that we have seen.The Gold Petal contract has done exceedingly well. It started out with INR 3.9 crore turnover in '19,'20. But today, it is still May, I would say, almost INR 16 crores turnover. So if you remember last time, I was saying that Gold Petal is one good contract where retail investors can participate and do SIP kind of investments. So this is something which is being seen as a very good opportunity for investors to take delivery business to take deliveries to this platform. And Silver Micro is another -- which is a 1 kilobar. And some of the major producers, domestic producers especially, they have looked at this platform, and they have done deliveries on our platform. So the producers themselves are coming and delivering means, that's a very, very good positive development for our growth in this area. On the energy contracts, of course, crude oil contract has -- definitely has dented a kind of -- dented some -- dented in our volumes. As a result of which, a, the margins have gone up because of the risk in the system; b, the negative pricing has adversely impacted the sentiment. And we hope that gradually, people will start coming back to the -- traders will come back to this counter. And although initially, some brokers have stopped investors taking positions, even they too have opened up. So that is really helping us in seeing the volumes inching back, I would say, inching back. And of course, you all know that a few court cases have been filed, and it's all sub judice, so I don't want to harp too much on this. All that I can say is, on merits, we have a good case, and we have also filed an appeal in Supreme Court to consolidate all the petitions that are filed across the country. And because as per the contract specifications and as for the bylaws, the Mumbai High Court is the jurisdiction court. So is having jurisdiction. We want all of them to be shifted to Mumbai High Court, so that our legal expenses can also be reduced. Not that they're shot through the roof at this point in time. But yes, as compared to what we otherwise incurring it, it did increase but still under control. And so we want that one area, which we wanted to control. That's why we wanted all the cost to -- all these cases to be shifted to Mumbai High Court. Then with respect to the institutional participation, some of the clients like ICICI Securities and others are any time to launch, start the operations. And that is for sure that I can tell you with this confidence because of activities happening. And in terms of custodians, the Stockholding Corporation, Orbis and Deutsche Bank custodian has already been -- has been admitted to deal with the commodities markets. Similarly, Category III AIFs and few PMS have already started trading on the platform. And I am not satisfied with the kind of this one, just they started. But this year, I will focus aggressively on these areas of development growth.When it comes to the one area, which we have -- we are looking at -- or it will rather come back is the base metals, that is something which has a huge potential. The whole last year, it went into in redesigning the contract and readjusting the contract specifications to delivery specifications. And we had what we call a mini contracts and a main contract, they got -- one of them has been retained. And there also, some kind of experimentation took place although mini contracts, more participation is there, but then some of the traders and some big hedges wanted main contracts to be there. So this kind -- all these kind of combinations we have tried, and we have now settled with whatever the contract specifications that packs are finally as suggested.So we hope to see lost ground, whatever is the ground recovered in the current financial year. The -- we are also actively participating with -- actively engaging with the major hedges and major consumers, rather, I would say, to use this platform to take delivery and to meet their product request -- product requirements.Then on the COVID, all that I can say is the -- again, the top line is not in our hands, but definitely, the cost can be controlled. So we have substantially reduced our expenses. Although I can't speak about our budget, but we have initiated lot of cost cutting measures, including the increments are not given beyond a certain level. And that, again, is there on the website. And I don't -- it's only a token, I would say, that has been given to whosoever it has been given. Obviously, there is also, salary detections have been proposed and approved by the Board. And even the fees to the Board of Directors have been reduced and even the other expenses of the Board, that's also going to be reduced by about [ 45% ]. With all these measures, I'm sure we will be able to sail through this situation. And we will take a look at it post maybe September, how we have fared vis-à-vis our budget estimates as well as the current -- the '19, '20 performance. If we're able to do well, and there's no need to cut any of these employees, especially, the remunerations and other things, we will give it back. But if there are -- still the situation remains, then we will continue with the solution that we have at this point in time adopted. But definitely, the management and the Board are committed to ensure the belt-tightening rather at -- in all areas, and we have told everybody, including vendors that you take it or leave it kind of situation for you. And you must understand our situation today at this point in time. So kindly help us to reduce the expenses for the exchange, which some of them -- or many of them, I would say, agreed for the -- with our request. So these are the measures that we have taken.And some of you have also got some doubts as to the financials, whether some costs that have gone up, is it a onetime cost and other things. Mr. Bolar will give you some presentation on the financials. And thereafter, he will also answer some of those questions and doubts as to the cost are onetime or permanent. By the way, Mr. Bolar has been appointed as the CFO by the Board in this Board meeting. And I congratulate him and seek all your help in managing your company better.
Thank you, Mr. Reddy, and good evening. I'd like to -- as you have seen our results, thanks to a 27% increase in our average daily turnover, our -- we touched INR 482 crores top line in a stand-alone. And if I'm not mistaken, for the first time, we have crossed INR 500 crores turnover -- top line on a consolidated basis.Our profit before tax was INR 238 crores. And after the tax it's INR 208 crores, which is substantially much higher than last year. Last year, of course, we had an existential loss because of the mark-to-market valuation. And as Mr. Reddy said, there were a few expenses that we incurred in this quarter. There was a -- the NRC had given additional variable pay for employees. So that is why the staff cost for the quarter vis-à-vis earlier quarters and for the year, there is an increase. Also if you recollect, we had -- we have made a contribution to the Settlement Guarantee Fund during the quarter. We also made a contribution to the PM CARES. So that's why these expenses have come in during the quarter. We also had certain professional as well as advertisement expenses that we incurred during the quarter, vis-à-vis earlier quarter. So these are all onetime expenses. I don't think we'll be -- with the present margining system -- and so I don't think we would have any additional contribution to Settlement Guarantee Fund. And depending on how things pan out, thanks to COVID-19, probably, then we'll take a call, as Mr. Reddy said in October on the salary front. But as of now, for the last year, especially for the last quarter, these are 3 major -- or 4 major expenses that we incurred. One was for the variable cost for our employees, which was approved by the NRC. The second one was we made a contribution to the Settlement Guarantee Fund, which is a statutory requirement. The third was we also contributed to the PM CARES. And we also had some additional expenses for advertisement.
Well, I just want to add one thing on the employee performance-linked bonus, that depends on the performance of the company to begin with. So if next year, if the company -- if god forbid, it is not going to do well, then obviously, that expense will be -- to that extent will be substantially reduced or it may not be there at all. So it all depends on that. So it is linked to the performance. So not to worry that is whether it will repeat or not on that call.
Yes, we also had an additional…
And on the Settlement Guarantee Fund contribution, again, because of high volatility and concentration about our various scenario analysis, this required contribution. And if you see the recent past, we have not contributed at all and probably now the -- now we contributed about -- how much?
INR 3 crores.
INR 3 crores has been contributed. And now we have about INR 409 crores Settlement Guarantee Fund, it may not be required going forward, hopefully. Because the margins are increased, that itself will take care of requirements in that scale.
And there was also, I think, some -- if you see a quarter-to-quarter, the depreciation amount had increased. This is basically because, of course, we have put some assets into use in the quarter. And also when we were evaluating and understanding our intangible assets that we had with 63 Moons, so then we aligned it with the agreement with 63 Moons, and we took a -- we made an additional amortization of around INR 1 crore, a bit less than INR 1.5 crore for the…
Assets.
Assets with -- that we have taken with -- from 63 Moons.
Yes. Anything else, Satya? Yes. I think now we will keep it open for the people to ask questions.
[Operator Instructions] The first question is from the line of Nikhil Upadhyay -- sorry, the first question is from the line of Sudheer Guntupalli from Motilal Oswal Financial Services.
I just want to know what are the margin requirements currently in crude contracts? And by when can we probably reach the pre-COVID-19 level of volumes in crude?
Yes. See, the margin requirements are almost on 2 lakh in the near-month contract and 1.5 lakh in the far-month contracts. And this was -- because if you see value at risk kind of VaR model, it takes a value, a certain percentage of the crude price. And that is not covering when the volatility is very high. And when the prices are, let us say, INR 100, even if it is 100% margins via margins is INR 100. Now that is something which we thought is very risky at this point in to leave it open. So that's why a minimum margin has been imposed. So minimum or percentage-wise, whichever is higher, the system will keep taking up. And if you see the VaR margins are about 100% and odd, 101% -- whatever that kind of percentage that is there in the crude. Now I can't give you a guarantee when it will be reduced. And it is all -- the Clearing corporation with -- in terms of the issue, the MCX will keep doing it. But definitely, it will be reduced once the volatility is controlled -- or not controlled, I would say, once volatility comes into manageable level.
Sure. Sure. And coming to the outlook on base metals. So in terms of the warehousing capacity, do we have company warehouse capacity to kind of support the delivery of the volumes at the current levels? And where do you -- what do you see the outlook of this [ 2 ] segment?
See, this base metals is something very promising, I would say, the segment, and we will definitely increase the capacity depending on the utilization. And -- so there's no limitation. In fact, I would say we have already told all the base metal contract -- base metal warehouse service providers to enhance whenever they are expecting it to touch maybe 80%, 90%. And they will be able to do that. That, they are anyway promising us. So going forward, as I said, that although the number of -- although the turnover has come down, if you see the participation wise in terms of UCC, last year, '18, '19, we had 221,000, in '19, '20, we had 215,000 participation. So there's about 7,000 -- 6,000, 7,000 participation has come down. So -- but compared to that, the volumes have come down by almost -- we lost about 30%, 35% ADT eroded. So that is where our focus is. We will definitely recover that lost ground. That's what we are currently doing it. All the attempts are being made.
Sure, sir. So what can we do probably here to kind of regain the lost ground? As you said, the number of client codes has only dropped marginally, but overall volumes have come down 35%, 40%. So what can be done from our end to kind of go back to our normalized levels?
Well, as the contracts got converted from LME-linked to the physical market -- I mean, delivery-based contracts, there are some kind of hesitation, and people are examining how this contract is going to perform. If you see the last conversion taking place in the month of December, okay? And -- so different participants are looking at this contract in different ways. So what we are looking at is -- in fact, had it not been for COVID, we would have got some kind of analysis done as to how many participants. So earlier, one participant is doing it in 2, 3 contracts. But now that has come down to -- they say they confine themselves to 1 contract or 2 contracts. So we are already calling up some of the clients -- not clients, the member brokers where the clients have the -- have stopped trading, trying to find out what is that they want in this contract to be done. And we have also sent almost about 2,000 letters to various industry consumers -- industrial consumers of these metals. And we got a good response. Let me tell you this, we got a really, very good response from those people. And that's it. All of a sudden, these breaks have come in the form of COVID, and people are not able to take a call on this. So we will -- as of now, COVID is not lifted -- the lockdown is not lifted across all places, and people are still trying to figure out what they should do, what they should not do. So give us a month. Maybe by next quarter, we will be able to come with some kind of understanding of the business on this.
[Operator Instructions] The question is from the line of Ravin Kurwa from ICICI Securities.
Sir, just wanted to know what would be the quantum of one-off that we took in the -- in Q4 FY '20? And with…
Hello? I'm not able to hear you. What is the quantum?
What was the quantum of one-off that we took in Q4 FY '20? And secondly, sir, to make up systems to trade in the negative prices, was there any significant technology costs involved?
Yes. I'll brief. See, the onetime…
One time, I'll just mention again, one was the variable pay of -- one was a variable pay. The other one was a contribution to the settlement guarantee fund and the contribution to the PM CARES.
PM CARES. Because although we need to spend about 2% of our net profit. And only in the year when we spend it, that is taken into consideration, okay? So that's what we have spent, nothing else.
Sir, what was the total amount which was spent? In all the [ 4 ] spends, the total volume.
That's around INR 8 crores, INR 8 crores.
INR 8 crores -- across 4 -- these 4 categories, 4 line items.
3 categories.
The other question is? Hello?
Yes, sir, in making the system ready for taking the negative prices, was there any significant technological costs involved?
It's not significant in terms of, what would you say -- in terms of materiality concept what we have defined and -- but it is less than 1% of our top line. You can say.
The next question is from the line of Nikhil Upadhyay from Securities Investment Management.
2 questions, sir. One was on the new initiatives on bullion spot and gas spot update. If you can update where we are? And how is our [indiscernible] different from what IEX has been launched -- has launched in terms of the gas exchange platform or our own natural gas as a product? And secondly, on the electricity futures product, any update? Because recently, we had seen that ICEX announced that futures would be settled with IEX. So is there some change of understanding? Or if you can just update on that?
See, what we -- they may have announced it. But at this point in time, the Supreme Court has to bless the consent petition filed between CERC and SEBI and MCX and IEX, all of us are part of it. So that has not happened. Until that happens, we will not be able to take a further step is what our understanding between IEX and MCX, okay? So yes, what we are looking at is we have -- we will go with IEX is the understanding that we have it, and we have confirmation in that sense, okay? And when it comes to the spot exchange, gold and NG, again, NG, nothing on -- nothing has come so far by PNGRB in terms of regulations, notification or anything. They're all just lying there. And we will definitely want to be there. That's what our desire is. And whether to go with somebody or to do it as a stand-alone is something which we are looking at. It's going to be an options platform. So that is something which we are keen to develop it. And we have already done it. If you see that when -- as an interim solution until negative pricing application is ready, we have already come out with an options platform. So we can also further build on it in terms of settlement system, et cetera. And it will be ready. That's not an issue for me at this point in time, but we need to look at the regulations, what are the regulations upcoming.When it comes to the bullion exchange and spot exchange, we have -- for all the years, we have been thinking that will come in in the domestic market, but it has not been announced in the GIFT IFSC. So sometime in the month of May -- not in the month of May, March, we had a meeting in GIFT with the GIFT authorities. Now GIFT IFSC has got a different regulator for the financial sector regulation. Now they need to come out with the guidelines. So once those guidelines are there, they -- that also we will be taking further steps to do either alone or with other partners.
So nothing in the interim over like in FY '21, do you think any of this rectifying or is still outer in the future?
It is -- no, if the regulations come, definitely, we will do it. The regulations don't come, that is something which we are not able to predict. It's timing.
The next question is from the line of Kunal Thanvi from Banyan Tree Advisors.
So my first question was in relation to when we started FY '20, we saw this change in the contract details for the base metals, right, and which led to a sharp fall in the base metal volumes. And then what happened because of that was the dependence on the crude and bullion increased in terms of the total volumes. And now with the negative pricing episode for the crude, the crude volumes have also come up and now around 60% to 65% of today's volumes are coming from bullion. So in that sense, the concentration risk for the exchange has gone up towards bullion. So how do we think about it? And what we think about this, how this would come down going ahead? That is the first question. The second question is on increasing margin on both -- on the exchange platform and the brokers or the broker members increasing for their customers. So one of the constraints that commodity exchange historically had was the normal contracts attracted higher margins, which led to introduction of mini contracts with lower margins. So you can attract more and more speculators on the exchange. But now with this margins going like substantially higher, both on the exchange and on the member brokers, how do we look at the -- how would this crude contract would come to the sustainable pre-COVID levels unless volatility loan goes to the manageable level as you indicated earlier?
Yes. See, yes, concentration risk is increasing because the gold is the -- at this point in time, is leading the pack. And -- but this keeps happening. Earlier, it was gold and then crude was playing second fiddle, now it is the gold winning it back, ruling the roost. But if you look at the crude by contract episode, it is the sentiment, which has been damaged substantially. That is the reason why people have withdrawn from this contract to some extent and brokers are imposed. And once the sentiment settles down, and if COVID impact on the economy as a whole, not just here, elsewhere as well, is manageable in the sense of the term, we -- the outlook is good, and people are coming to terms with it and getting back business as usual -- to business as usual. Probably, the volatility will come down, and it will definitely see a better opportunity of trading. So my view is that it will -- it's only a matter of time. And I'm sure within this year itself, it should recover from whatever stage it was there.Coming back to the metals, you're right that because of the -- these kind of combinations we have lost, we had a main contract and then a mini contract. All this is introduced to meet the requirements of different segments in the trading and -- as well as hedges requirements. But as SEBI said that there should be only 1 contract because liquidity is getting fragmented, we had to do what we did. Probably, going forward, we need more players from the hedges point of view to sustain this contract and take it back to its past glory. My strong view is that because of this COVID, et cetera, and if producers want to sell the contract or sell their metal, they should simply sell a contract here and then deliver the metal. That's the way going forward will happen. And I'm sure that will -- that is happening, I would say, because we have seen some deliveries coming from some of the producers. So I'm hopeful that this will get -- this will recover soon. And so that even the distribution of contribution from each of these packs -- pack of products will get balanced.
Next question is from the line of Amit Chandra from HDFC Securities.
Sir, my question is related to the increase as you have mentioned that the margins in the crude contract have increased from 10% to 50%, now to 100%. So what are the factors apart from the volatility which MCX is using to actually determine the margin? And by when you see this margin normalizing to the original levels because this 100% margin is actually impacting the volumes to a larger extent. And also, in terms of the member concentration in this contract, especially the crude contract, how the concentration has changed post the event that happened in terms of negative pricing? And have you seen any larger member who you should trade has gone bankrupt or something like that happens?
Okay. Okay. Let me reassure you or let me tell you, not even a single member on the exchange is defaulted. There are 1 or 2 members that delayed paying out of maybe 2 days, 3 days, may be maximum 1 week. I'm sure clearing corporation will watch for it. But there is -- absolutely not even a single rupee has gone out from the exchange up from clearing corporation. This is something which you all should be proud about. The exchange managing that is, okay? This is -- so such a volatile period it was, and we have been able to exclude the markets to that exchange. Whether there is any concentration? Yes, we have what is called a concentration margin also. At the clearing number level also, there is more concentration, so additional margin getting sold. Now there is volatility margin purely based on volatility and CME span model, which is what we have been using it, the volatility gets triggered. So that is why the margin got triggered 100%. We also run the VaR margins 10 -- VaR margins for 10x a day. And in addition to that, whenever we find volatility little disturbing, then additional VaR margins also are allowed to run. So that keeps blocking the funds of the -- or the margins of the members from their deposits or collaterals whatever they have given at. So that's how we have been securing it. This particular margin that has some special margins or additional margin, obviously, they are adhoc margins. This minimum margin also is an adhoc margin, okay? And as I already explained that it will have its life as long as the market remain highly volatile and where the value of the stock is -- the prices are traded at a very low level, maybe $10, $5, $6. This kind of thing is not something which we can really manage without any minimum margin. And so that is where we are dealing with this at this point in time. So definitely, we'll fix this. And it's not going to be a long-term affair. We do understand this part of it.
Sir, have you seen significant drop in speculation margin or hedging margin, if you can give some color there?
There's nothing called a speculation margin or hedging margin. Everybody gets hit by these margins anyway.
And are any -- like in terms of volumes, speculation volumes margin, hedging volumes and in terms of the SGF requirements, are we through for the SGF or we have to contribute more for FY '21?
As I said, the requirement is x and ours is x plus. Our SGF account is…
At this point in time.
As we are speaking.
The next question is from the line of Subramanian Iyer from Morgan Stanley.
Sir, a couple of questions. So one was on the -- one is the housekeeping question on the tax rate. So this quarter did see a significant utilization of the MAT credit. So how should we think about the tax rate for the next year from an effective tax rate perspective? That was the first question. And the second question was on the margin on crude again. Does it have something to do with your ability to, say, operationalize negative pricing, in the sense that if the negative pricing gets operationalized sooner, do you see a reduction in the margin in crude contracts?
Yes. I will just first answer the second question. Negative pricing, handling the negative pricing will be done not -- it will be done very soon. That's the way I will put it. Exact date, I will not be able to give you. But definitely, it is -- work is in progress, it will be done. But not withstanding that, because the margins are affected once in 1 hour or 2 hour or 1/2 hour, depending on the situation, it will be handled. I really do not know whether CCL would like to expose the -- clearing corporation would like to take that kind of risk. But we will consult them, and then we will also consult other participants in the ecosystem. And of course, the regulators are important, and we must take feedback from them. Accordingly, we will be acting on it. But your question is as soon as we fix the negative pricing, this one will go away, my answer is no.
On the tax front, I mean, as they are all aware, the MAT credit can be utilized under normal tax, the difference between the normal tax amount and the MAT figure. So I mean, if we are doing well, I mean, in this year, we could utilize part of it. So if we do well, if we continue to -- if tax payable under the normal rate is more than the MAT rate, then we'll be able to utilize it. So it depends. I mean, it would be too early for me to say now how much we'll utilize. But I hope we are -- we'd like to utilize it. The earlier we utilize it, the better it is for us because then we can go to the new rate announced by the ministry in August 2019, right? So we would like to move forward and utilize it as soon as we can. But it's a bit too early for me to say at this point of time for 2021, how much we'll be able to utilize.
How much is the…
We have got 14 years more to go to utilize it, 14 assessment years. So I mean, we're on safe ground. But we have utilized a part of it.
Yes. Just a follow-up to that. So what is the quantum of the MAT credit that is left? And also, I mean, last time, you had indicated that we could work with an effective tax rate of something like 17%. So does that number hold good even now?
See, that number, again, I think the effective tax rate may be even lower than that. But we still have around INR 22 crores more to go. So we still have to utilize INR 22 crores of our MAT credit.
Effective tax for this year is around 12.62% for March '20.
Next question is from the line of Lokesh Manik from Vallum Capital.
My question was more on the agri front. With the reforms being announced by the minister, we may be indirect beneficiaries of these reforms, specifically to the subsidy provided for storage and warehousing. I just wanted your view on the same. And how are you looking at it going forward?
See, we did discuss about these reforms and note has been put up. But then we need to reach piece of it, we have to pick up and then prepare what it costs us and what kind of investment it contains. Whether we should be getting into this kind of warehousing and other things or the warehouse services provider that's out there, we should continue to use them, is the way that we have looked at it. Historically, there was no WDRA. There was no warehousing regulatory authority, which ensures the responsibility and liability for the trades that are taking place on the exchange are settled by the WSPs, that is coming into place, isn't it? Now today, only agri commodities are covered. Going forward, even non-agri also should be regulated by WDRA is the road map that is laid out. And so once that comes in, then automatically, all these WSPs as -- are different entities. I don't need to cater -- I don't need to vertically integrate in that sense. Even if I integrate vertically, that warehouse has to be necessarily go on then with the WDRA. So we need to evaluate these VaR regulation. You need to -- you will be subject to 2 to 3 regulators. So it is too early for me to say whether there is a great opportunity or no opportunity. But definitely, we should hire them at this point in time and then pay for it. And in any case, investors are -- those who are actually taking deliveries and giving deliveries are the ones who are bearing that particular cost. And we are ensuring those costs are kept under control so that all participants will be happy about it.
Understood. Understood. Sir, my second question was on the events that you mentioned on the negative price in crude event that took place in subsequent litigation in the court. I understand the matter is sub judice, but can you just give an idea in terms of what is the maximum exposure that we have? And have you made any provisions towards it?
Look, if somebody files a court case, so we shouldn't make any provisions. Somebody files a FIR, we shouldn't say that, that is -- that deems to be an order of freeze or something like that. They went to the court with so many imperium prayer, but none of the courts have granted any of the imperium prayer. That means there is no merit as of now in any of those prayers. So I don't think that we need to provide for any of those liabilities, okay? Second, this contract has been traded for the last 15 years and [ they ] have been settling at NYMEX prices, okay? And one fine morning, your guess has gone wrong, so that's it. And exchange cannot be held accountable for neither gain nor pain. We have never made any money out of it. Now you ask us, how can you ask me to pay for it? That's the way it is. Again, again, god forbid if things go wrong, we always can go to the Division Bench and the Supreme Court. And [indiscernible] is for us to predict any of those things, okay?
The next question is from the line of Rohit Balakrishnan from VRDDHI Capital.
Hello? Am I audible, sir?
Yes, yes, you are very much.
Okay. Sir, I have 3, 4 questions. So one, sir, I'll list them all and then you can answer it, sir. So one is, if you could talk a bit about institutional participation and you had spoken in the last call about AIF. Since you have already started trading, so if you can just talk a bit about that, how that activity is shaping up? Second question also, you mentioned around last call that you were working on introducing our own gold standard, if you can speak a bit about any progress on that? And third, sir, on the dividend, sir. So typically, we've been giving around 85%, 90% of our profits as dividend including the tax. And this time, tax has been moving. So just want to understand from that point of view, our payouts have come down. So just wanted to understand any -- if you can share any thought process? And finally, sir, on the option pricing, if you can maybe -- have you just started pricing for options, or what is the thought process there? Will you start in FY '21?
Yes. Coming back to the first question, that is institutional participation. In fact, thanks to SEBI permitting Tata Mutual Fund and [indiscernible] and some more. And they are active in the market. And I'm very happy that we are able to give them all the support. But it is at the initial stages of their participation. And so is the -- some of the PMS and AAFs who have participated. And we will be -- there are 1 or 2 issues that are coming in the way in the sense that if you look at the SEBI circulars, it says that mutual funds cannot hold the stock for more than 1 month, okay? But our gold contract is bimonthly. So if you buy something and then take cash-and-carry kind of arbitrage opportunities, then it will be there for 2 months. So certain clarifications have been sought from the -- from SEBI. And once those clarifications come, probably we will be able to push them more into doing business in this particular area. Institutional participation also in the form of the broking houses. As I said that ICICI Securities is starting very, very shortly, I would say. And others also will be doing it. And I don't want to take out every name, but then, yes, it is there on the -- it is there on my checklist. And I keep checking every week that who has come, what is the status, all that stuff. Then the second one is on the dividend distribution, why have you paid less? Probably, our policy is more than pay out in the rule, it is more of stable dividend policy, okay? And I need to keep you happy every year, okay? And if I pay out everything in 1 year, probably, next year, we will not be able to have anything. So to -- this year, I do not know how it's going to be as of now. And so we have to maintain in terms of percentage also, not just distribution, but in terms of percentage, we need to really keep shareholders happy. Probably, that's the reason why the dividend payout ratio is lower, but then the dividend is higher. That's the way it is. On the third question related to…
The gold standard, sir, that you had mentioned in the last call that…
Yes. The -- on the gold standard, in fact, we have already sent out letters to the refiners and asked them for the information, which they would give. So some of them have given in the month of March, that's it. Because thereafter, there is a lockdown and other things. So no progress could be made. Because auditors have to do physical audit, they have to visit their refiners and they have to see the processes and then certify. So that's the status as of now. But otherwise, we are keen to move in that direction, not only for gold, but also metals. We have shortlisted lead for that because recycled lead can be as good as the primary lead, and we are going to do that. So already the process is on. There's no stoppage out there because of this reason. Anything else? Anything else you want to…
And sir, option pricing. Option…
Option pricing, look, we have taken the Board's approval not to charge them for some more time. And -- because volumes are low, let us see because we have to start our index futures also. And once the index futures also pick up, maybe options will also become a little attractive, then we will see at that point in time. And -- but it's too early for me to price any of those products at this point in time. We have calculated, Rohit, what is the -- we have calculated also what kind of turnover or revenue we earn because it's supposed to be pricing on the premium that is earned. And that doesn't look to be a very attractive number, but it will only keep the players unhappy. So that's why we kept it.
And sir, just 1 follow-up quickly. On -- so index futures, are we still awaiting SEBI approval? So any -- I mean do you think in the next couple of quarters, you'll be able to launch? Or you got any timelines?
No, we are expecting -- we are expecting the order to -- I mean, regulatory close to come this month. That's what our view.
The next question is from the line of Ravi Naredi from Naredi Investments.[Foreign Language] [Operator Instructions] Sir, we do not have any reply from the current participant. Due to time constraint, I now hand the conference over to the management for closing comments.
Thank you. Thanks to all of you. And I hope that we will be able to sail through this COVID pandemic situation and regain our lost ground. And I wish you all the best and stay safe, stay home and take care. Thank you. Thanks to all of you. Thanks to the organizer also for organizing this conference call. Thank you so much.
Thank you. Ladies and gentlemen, on behalf of Multi Commodity Exchange of India Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.