IIFL Capital Services Ltd
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Q4-2023 Earnings Call
AI Summary
Earnings Call on Apr 25, 2023
Revenue Growth: Q4 consolidated revenue reached INR 405 crores, up 17% quarter-on-quarter and 12% year-on-year, driven by strong broking and distribution performance.
Broking & Distribution: Brokerage income rose 17% QoQ to INR 181 crores; distribution income saw a significant 78% sequential jump to INR 95 crores, mainly due to a product closure in life insurance.
Investment Banking Decline: Investment banking revenue dropped by 22% QoQ to INR 32 crores, reflecting muted primary market activity.
Cost Trends: Admin and technology costs increased, while employee costs remained flat QoQ and fell 4% YoY due to lower variable payouts.
Shifting Focus: The company is moving away from mass-market online retail, focusing on affluent and high-value customers for future growth.
Regulation & Outlook: Management highlighted upcoming regulatory changes impacting float income and commissions, and signaled likely industry-wide cost pressures and consolidation.
Q4 saw a strong overall revenue increase, with consolidated revenue up both sequentially and year-on-year. The main drivers were a solid rise in brokerage income led by institutional business and a sharp jump in distribution income, particularly from life insurance product closures. However, investment banking revenue saw a notable decline due to weak activity in the primary markets.
Administrative and technology costs rose significantly, reflecting increased tech investments and marketing spend. Employee costs were stable quarter-on-quarter and decreased compared to the previous year, largely because of lower variable payouts. Finance costs also inched up, tied to interest rate hikes. The company noted that cost pressures, especially compliance and technology, are expected to persist.
Management discussed significant regulatory changes affecting the industry, particularly SEBI's new guidelines on upstreaming client funds to clearing corporations, which will likely reduce float income for brokers. While the exact impact is not yet known, management acknowledged it would be material. Other discussed regulations include possible cuts to mutual fund commissions (TER) and the inclusion of broking in TER, both of which could reduce distribution and institutional income.
IIFL Securities is actively shifting its focus towards affluent clients and high-value segments, reducing spend on mass market online retail customer acquisition. The mix of customer acquisition now favors affluent and sub-broker channels. The company expects this focus to support faster breakeven and higher incremental margins.
Rising compliance and technology costs are making it harder for smaller, relationship-based brokers to compete, prompting ongoing consolidation in the industry. Management expects that the long-standing decline in retail brokerage rates will halt, and rates may even rise in 12–15 months due to mounting cost pressures, marking a notable shift in industry dynamics.
The company currently invests most float in fixed deposits, minimizing immediate impact from regulatory changes, but acknowledges that future rules could eliminate this income stream, especially if ASBA for secondary markets is implemented. Increased finance costs from higher interest rates are partially passed on to clients, but competitive pressures mean the company absorbs some of the increase.
IIFL Securities has about 7,000 franchisee and channel partners and expects this number to double over the next 3 to 4 years, indicating a continued push for partner-driven growth.
The firm owns 620,000 square feet of real estate, with a book value of INR 227 crores and a market value estimated at INR 670 crores. Management plans to sell about 200,000 square feet in the coming years, with advanced talks underway for certain properties like Ahmedabad.
Ladies and gentlemen, good day, and welcome to the IIFL Securities Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. R. Venkataraman, Managing Director. Thank you, and over to you, sir.
Thank you, and good afternoon, everyone, and welcome to the Q4 FY '23 Analyst Call of IIFL Securities. I'm R. Venkataraman, I'm the Managing Director of IIFL Securities, and accompanying me is Ronak Gandhi, our CFO.
In its latest bimonthly monetary policy, the RBI has pressed the pause button on rate hikes. This move has come as a relief for the market participants and corporates alike. RBI was quick to underline that the decision should not be construed at the end of the rate hike cycle, which seems to be a prudent approach. March CPI also came in at a 15-month flow at 5.6%, and core inflation, excluding food fuels were at about 5.8%, and all eyes will be on the inflation trends.
According to NSO's advanced projections, India's GDP predicted to grow at 7% in FY '23, it's actually retaining its position as one of the world's fastest-growing major economies. During the quarter, global regulators acted swiftly to rein in the crisis caused by the collapse of few banks in the U.S., which exposed the entire system to vulnerabilities, especially in a rising interest rate scenario. Going ahead, we believe that capital markets will move in sync with emerging economic news across the globe, coupled with geopolitical news, as well as global interest rate scenario.
During the quarter, we put up a good performance on the back of continued traction in the upfront broking and distribution businesses. Our investment banking division completed 8 deals across capital markets, debt and private equity. We are working towards sharpening our strategy and focus on affluent customers in line with the reorganization structure approved by the Board, which happened last quarter. The reorganization scheme is awaiting regulatory approval, sorry.
Coming to the results for March 31st, consolidated revenues for the quarter came at INR 405 crores, up 17% quarter-on-quarter, 12% year-on-year. For the quarter-on-quarter basis, brokerage income increased 17%, INR 181 crores versus INR 155 crores, mainly because of growth in our institutional booking business. Distribution income has grown up 78% on a quarter-on-quarter basis, INR 95 crores versus INR 54 crores, and that was primarily driven because of product closure in our life insurance business.
Investment banking has decreased 22% quarter-on-quarter, 32% in this quarter versus 42% in the previous quarter. On a year-on-year basis, brokerage income has increased 15%, INR 181 versus INR 157. FPD income has increased by 70%, 95% versus 56% in the last year, and investment banking has decreased significantly because last year, fourth quarter was a bumper quarter for our investment banking business, where we have dropped in revenues of INR 66 crores, which has fallen now to INR 32 crores, and primarily due to muted primary market activities.
Coming to other line items; other income was at about INR 3.29 crores, which has fallen INR 34 crores quarter-on-quarter, INR 78 crores year-on-year, basically due to MTM -- mark-to-market loss of investment and that too primarily in the BSE shares, which we have been [ holding ] it for decades. Then come to employee costs, employee costs was virtually flat quarter-on-quarter and down 4% on a year-on-year basis, and that is primarily to do with the variable payouts. Average finance cost was up 6% on a quarter-on-quarter basis, and that is primarily due to increase in the interest rates in line with the overall interest rate hike in the system. Admin costs was increased by 16% quarter-on-quarter and 27% year-on-year, mainly due to the technology cost increases, as well as some local -- and marketing costs.
Other line items, average assets under custody are about INR 124,000 crores, roughly INR 105,000 crores in custody assets and DEMAT and INR 20,000 crores in other products, such as mutual fund, [ AI ] fixed deposits, et cetera. Average turnover for the quarter about INR 195,604 crores, BSE-NSE combined, which was INR 1,600 crores in cash segment and INR 194,000 crores in derivative segment. The corresponding figures for the previous quarter was INR 156,756 crores, which was INR 1,569 crores in cash and INR 155,187 crores in the derivatives segment.
With this, I've come to the end of my opening remarks, and I'll be more than happy to take any questions.
[Operator Instructions] Our first question comes from the line of Prayesh Jain from Motilal Oswal.
Sir, you mentioned that your IE revenues have improved sequentially. Could you quantify that for me as to what was the quantum of IE revenue and how much have they gone up sequentially?
IE is institutional equities, right?
Yes, institutional equity.
So we don't share all those details, but roughly 50-50 is investment banking side and institutional equity has increased.
Out of the broker, how much will be IE, institutional equities?
I think it is roughly 50-50.
Between retail and...
Broadly speaking, 60-40 now.
Okay. 60-40. 60 is retail and 40 is...
40 is institutional.
Okay. Other than broking INR 180 crores that we raised?
Yes.
Okay. And sir, you mentioned about the interest costs going up, how has been the margin trade funding book for us?
Actually, margin trading book has fallen down. It was roughly about -- it was about INR 600 crores, right?
Right now it is INR 600 crores.
Roughly, now it is about INR 600 crores. It was -- I think it was at...
Okay.
And you know, we don't have a significant margin funding book, so that is an opportunity for us to grow.
Okay. How many of your customers would be using -- around 4 lakh customers you have out of that, how many would be using the margin trade funding facility right now?
Roughly about 25,000.
Large scope for growth there.
Yes.
And have you passed on the increase in interest to the customers, or you've retained the cost impact?
Actually, Prayesh, that's on a case-to-case basis. The business is very competitive and all brokers, including your own firm, are very aggressive in offering attractive rates. So some of the parts can be retained. That's the correct answer. To say that -- 100% is like a wrong statement.
Okay. Okay. And sir, on the upstreaming of funds to the clearing corporation, do you see any impact for you guys? I think one of the brokers mentioned that they have some INR 40 crore impact?
We have not worked on the mathematics of exactly how it will be impacted, but there will definitely be an impact on -- if the upstreaming guidelines comes. Because now the floating income will come down.
But as of now, they have allowed the fixed deposits, so there will be no impact as of now.
Okay. But how much of the deposit is with bank guarantees? Even bank guarantees is something which is not allowed right now?
No, bank guarantees are allowed. So now the new guidelines, which will kick in is that the client funds, you cannot make bank guarantees. So just to use your own funds to make fixed deposits, on which you will get bank guarantees.
Okay. Okay. So not material impact of any...
No, there will be an impact, because the impact has not been calculated. So obviously, everybody will kind of work around. So to say that there's no impact is off, there will be an impact. The exact quantum of that is not certain.
Okay. Got that. And sir, on your distribution kind of -- distribution business impact, once this AMC regulations kind of which are not yet out, but the way it's been spoken in the media, if the TER cuts are implemented, what kind of cuts you anticipate on your mutual fund commissions -- and last time because somewhere in 2019 in the first, when the TER cuts were implemented, that time distributors took a lot of hit. So even this time, would you think that the distributors will be the biggest...
I don't know. Actually if you believe that media, everybody is talking about 25, 35 basis points cut. So my opinion is that, I think -- so the AMC will pass it on, I don't think they will be taking it on their books. So I'm sure there'll be some impact.
Okay. And last question, sir, again, on these regulations only, another part is about broking being included in the TERs, and that would kind of impact the IE business. So again, that could be challenging, right, for the IE business?
So if this happens, then obviously, IE income will be affected. But the thing is, if you look at it, the industry has passed through all the challenges, but overall size of the pie keeps on increasing. So hope that the growth in the pie will offset some of it. But obviously, on a unit level, there will be no hit.
Our next question comes from the line of Ujvin Nevatia from Nevat Investments.
Sir, my first question is regarding the impact of interest rate hike on your finance costs. Actually, can you give a rough idea how much of the costs has been passed on to the clients?
No. Actually, the previous analyst also asked the same question. So basically, we would have [ passed ] some costs and some costs we have to take the hit, simply because this broking is very competitive and most of the brokers are offering very attractive rates. So to say that we have passed on 100% of the increase is wrong. So I think some of that we have to take it, because something customers have to maintain the rate or offer them good rates.
I would say...
Sir, can you give a rough idea how much percentage of the AUM has been passed on?
Very difficult to say. I don't have a number in mind, but I'll ask the CFO to calculate and get back, because I don't want to hazard a guess.
Okay. So, my second question is, so your MTF loan book, how much it is financed by the internal source of funds and how much is financed by the external source of funds?
Actually, it will be 50% from our own books, and we have borrowed about 50%. So that is the correct answer. [Foreign Language]
[Operator Instructions] Our next question comes from the line of Prayesh Jain from Motilal Oswal.
Sir, I just wanted to pick your brains on how do you see the brokerage rates moving from here on, on the retail side, especially now that the compliance costs have been moving up, possibly there will be loss of growth income, as and when ASBA implemented. So how do you see the brokerage rates kind of trending from here on?
Prayesh, that's a very good question, and if you ask me to put a forward-looking question, in the last 20 years, maybe we have seen only one way decline of interest rates -- of brokerage rates. And so now I'm feeling that, given the fact that, as you rightly pointed, your technology -- compliance cost is going up, float is going away, TERs will come in and impact the institutional broking. And you have forgotten one more thing, the tech cost, technology cost is also rising every day. And so effectively, I was feeling that if this trend continues, then all brokers will have more choice but to increase rates. So I think there will be a time soon in the next 12 to 15 months where rates will go up. If not rates are going up, at least the continuous decline of rates which are going -- which we have seen in India, will at least stop. So now based on all these super discount rates are -- my opinion, difficult to come back.
Okay. Okay. And we also anticipate more consolidation if you look at the number of brokers, that has been reducing every year. Do you think that's where you kind of gain, you will further momentum and eventually much lesser players will be there in the industry and that will be kind of good for large brokers like us?
You know what is happening in the industry is that, in the last maybe 5 years or maybe we have always -- all the industry players have always been talking about the consolidation of the industry. But for some strange reasons, it has never happened. And I think your company, Motilal, was a pioneer in taking over regional workers. Even in the last 3, 4 years, what has happened is, 2 things have happened; one is technology costs has increased dramatically. Second is compliance costs have increased dramatically. And every day, new compliance comes to smaller region brokers, where earlier relationship-based broker, they were finding it more and more difficult. So all of them had surrendered their cards and become sub-brokers or partners of larger brokers.
So in my opinion, what you say is correct, this time it will increase, especially given the fact as now your upstreaming comes, this comes, that comes, then obviously, it will be much more and more difficult for them for the -- they were earlier a class of brokers who were small, but they catered to a niche audience and what we call a typically super relationship broking. So all those people are going to have more or less [ troubles ]. The consolidation will happen.
Okay. Okay. And sir, more on this, in the affluent strategy, say, from a 3-year, 5-year perspective, how do you see the business kind of shaping up in between of mix of broking, distribution and interest income kind of -- how do you see this kind of shaping up for IIFL Securities?
So my guess is that, as of now, we have about 70-30 transactions and non-transaction. And the next 3 years, we should -- in the next 3 to 5 years, we should be able to flip it fully.
I didn't get it, you will be able to?
As of now, the transaction to non-transaction 70-30, and this number should become a 60-40, whether it's 60 for non-transaction and 40 transaction. That is what we are working towards.
Okay. And sir, again, last question, in terms of transfer of 1.5 million DEMAT accounts to 5paisa? At what stage we are in and how do you plan to complete that?
Sorry, second question?
So on this -- when do you plan to complete this 1.5 million DEMAT account transfer?
So what has happened is that, as of now, we have -- we are awaiting for SEBI approvals, right, then we have go to -- so then we have to go by NCLP. So I think we are about 9 months -- 8 to 9 months away.
Okay. And how has IIFL Securities gain out of those, by transferring?
See, if you look at this -- the reason why we did this was -- so if you know, IIFL Securities had online retail trading customer, private client group institutional equities and franchisee reserves. So the entire online trading business, which was a small, I would say, online retail customers, that has been transferred to 5paisa. So what we are benefiting is that -- so this will help us to mitigate the overlap and have focus on both the Private Client Group and the franchisee business. So I would say that the big benefit is about focus and conducive consent for the business is suited for that, because the same item, it was difficult for me to handle a INR 100 customer out there and INR 1 crore customer also.
Makes sense. Sir, and the traded terminal sits in IIFL Securities as a cost or as an effect?
See, traded terminal sits with us, but effectively, 5paisa has its own separate tech platform and tech costs.
Okay. Okay. So basically, the customers will be transferred from traded terminal to 5paisa, right?
[Technical Difficulty] from 5paisa, will be traded from IIFL Securities [indiscernible].
Our next question comes from the line of Kajal from ICICI Direct.
Congratulations on good set of numbers. Sir, 2 things. One is the incremental customers which we are adding, as early from this flat fee plans or we are seeing because we wanted to move to more affluent customers, so we are seeing some traction there also? And the increment volume surge, which we have seen sequentially is coming from this bracket only on sub-broker, any color on that?
Okay. See, if you look at our customer acquisition, as we rightly pointed out, our customers with -- pace of acquisition of customers has fallen and because we have decided not to spend money on acquiring online retail customers. So most of our customers are coming from either the affluent channel or the sub-broker channel. So the flat fee component of that is less. I would say that earlier, it was about 80-20 flat fee, now it is about 40-60 flat fee. So because the sub-broker in the [indiscernible] segment does not sell this flat fee thing. And the growth is primarily driven by acquisition of some big customers. So it is the affluent broking which has driven this. Affluent broking, whether it is done through relationship manager or sub brokers, which has driven the surge in derivative volumes.
So what will be the color of this customer? Like any income bracket or anything?
I would say network bracket. So network bracket would be primarily more than, I would say, 5 million -- 50 lakhs [Foreign Language].
Okay. Sir, breakeven or CAC is changing for you for these set of customers then?
See basically, earlier, we could spend a lot of money in acquiring customers. So that cost has come down. So this cost is already factored in, because we have anyways RMAs and sub-brokers in place. So on an incremental margin basis, I hope that CAC is coming down.
Okay. Because earlier, we were having a 1,000, 1,200 kind of number --1,000 number on the CAC.
Earlier it was that, because we used to acquire a large number of customers. If you see our acquisition number, we had acquired 2 and 1.5 lakhs per quarter. That has fallen dramatically to 50,000. So obviously, we are spending money to acquire these customers on that -- I don't want to say we don't spend money, but not on that scale.
Okay, Sir, and anything on breakeven for these customers, which you are acquiring?
I think breakeven should happen faster, at least [ INR 800 crores ] because these are brokers acquisition.
Okay. And just second thing is, sequential surge in [indiscernible] volumes, which we have seen, we have not seen a sequential retail back-to-back quarter-on-quarter brokerage income surge? Because if I do that -- INR 118 crores was in the previous quarter and it is INR 121 crores in this quarter on a sequential basis. So how do we read that?
No, because of volume increase, it has happened boss.
But sir, there is no material increase [ debt win ]. So INR 154,000 crore to [ INR 185,000 crores ] is up significantly upon a sequential basis on F&O volume.
No, if you see the numbers actually, the INR 154,000 crores became INR 194,000 crores.
Yes. But accordingly, we are not seeing retail brokerage income rising Q-o-Q? That is what my question is?
This quarter growth has been driven by brokerage from institutional income and retail income growth has been marginal. So not commensurate with the steep growth, because options may -- all the customers who come in the HNI segment, the rate is already quite low. So there is no direct correlation between increase in volumes, especially on expiry date, they get special rates.
Our next question comes from the line of [ Sumit Shanker ] from [ Vardhman ].
I want to know the contribution of derivatives, in brokerage from retail segment. Hello, am I audible?
I didn't understand your question.
I just want to know the contribution of derivatives in brokerage for retail segment?
That it will be about 70-30.
Okay. My next question is regarding active clients. So overall, in the market, active clients are [ whopping ] since from last 10 months. So how do you see in coming quarters? Could this phenomenon come to end or this -- the numbers will consolidate?
No, no, the number of active customers are falling down. And as I said, right now, we are not focused on increasing the number of active customers at all. We are focused on improving the number of active high-value affluent customers. So we are more focused on the -- trying to generate brokerage, do more cross sell, rather than just focus on the one metric, which is a number of active customers.
Our next question comes from the line of [ Devvrat Mohta ] from Capital Group International.
This is [ Devvrat ] here. I had a couple of questions. Actually firstly, on the industry on this -- on the float income, when does this start having an impact on just financials for all the brokers?
I think this will [indiscernible] actually, we don't know when the first loan will come. People are expecting in this coming quarter. So once that comes, only then the impact will start. And then we also have to read the fine print on how we can protect ourselves. So my guess is that directionally speaking, yes, there will be an impact, and you have to wait and watch the final circular before concluding the extent of impact.
Can you just help me understand a little bit on how -- exactly how this coming -- what exactly is the plan here?
So the plan is that, regulator says that the broker will not keep any money of the customer with the broker. So suppose you have INR 100, you give INR 1 crore to me. It is sitting in my bank account. And I report to the exchange that this money is lying with me. Now regulator says that this money has to be given to the clearing corporation. So you lose the float income.
Got it. Okay. Okay. And this would impact, I mean mostly independent brokers like yourself, or I mean, the bank brokers or -- who's kind of most impacted by this? And what about the new age brokers also?
It will impact every broker. Only the degree of impact will be less. So people like us will be very badly impacted, because we don't have a bank in the ecosystem. And so new age brokers, people like us, everybody will be affected. Bank brokers to some extent, will be relatively better off, because anyway, the money was always staying in the bank account, and they were just marking a lead. So the bank will -- and I don't know whatever transfer pricing, or whatever equations they have, so to that extent will be affected. But we have wait and watch the fine print whether they are linked -- what is the final read on the concept of [ lead ], whether the lead can be done or you have to actually take the money and upstream it.
Got it. But basically, I mean, the impact you're seeing would be greater for standalone brokers. So what about the new age ones, they too probably will be impacted just as much or probably worse, I mean, similar to you all, right?
100%, they will be similar to us. When I say dependent broker, I don't mean whether new or old age, or whatever. So there are 2 categories of broker, broker and a bank-based broker. So broker, anybody who's not a bank-based broker, I guess effect will be equal.
Understood. And can I ask one more question on just your own financials; if I look at your results, just quarter-on-quarter, you had a big jump up in insurance revenue this quarter versus last quarter. What's happening there?
So this year that the new regulations kicked in from 1st of April, where INR 5 lakh has been put in for guaranteed return products. So obviously, we had a product closure, and we will be benefited from that. So we sold a lot of insurance in last quarter.
Our next question comes from the line of [ Ankur ] from Alpha Capital.
Sir, you were saying -- sorry, can you hear me?
I said thank you for joining the call and yes, I can hear you.
Yes. So you are saying that the big jump in this quarter is because of the institutional business. So can you comment on the visibility of that in the coming quarters and the year?
Actually, that's a very difficult question to comment on, and it's very difficult to comment on the visibility, especially any transaction [ income ] or the broking industry space. So last quarter, we were lucky that we got a couple of very large order from clients, so that helped us to bump it up.
So any color how has this quarter been like, we have almost 1 month past and we are expecting -- as in, what are your expectations, sir?
Difficult to say, forward-looking statement.
Sure, sir. And on dividend yield, what is our expectation? We have been paying dividend payout of 30%, 30% to 40%. So what kind of expectations can we have on that?
See, my feeling is that, the dividend deal of 30% will continue. So on that, there is no doubt, it has taken a company defined policy, and the only reason why we are not being more aggressive in payout, because I assume that your next question will be directly, some of our competition is even more aggressive. It's because we believe, given the fact that the regulations are becoming tighter on capital requirements of broker, working capital requirement is increased, so it's better to conserve cash.
Our next question comes from the line of [ Raj from Aarav Partners ].
So the earlier analyst, you were explaining about the free float amount to the clearing corporation. So can you explain it to me again?
See, you know what happens is that, historically, when you give money to the broker. [Foreign Language] So then what happens is that, the INR 1 crore which comes to me, stays with me. And as and when you buy, I buy -- I make the payment to the exchange and give you the shares. So there are some customers who give us money and don't trade. So that benefit of that money comes to the broker. Now SEBI is very clear, says that, the moment customer gives you money of INR 1, you have to straight away give it to the clearing corporation. So that, for example, you give me money of INR 1 crores. So the INR 1 crore which was lying in my books will now go to the clearing corporation. So my books will be more or less -- I'll be like a pass-through.
Understood. Okay.
So all the benefit -- will go to the clearing corporation.
Our next question comes from the line of Prayesh Jain from Motilal Oswal.
Yes. Sir, sorry about this, coming on again and again. But just more clarity on this float income again. The regular announcement that happened in the SEBI Board meet, was that the fixed -- the 3 forms of money transfer to the clearing corporation. One is the cash that directly has gone to clearing cooperation. Second, is we can convert it into FDs and possibly place our [ union ] against it? And third is converting into overnight mutual funds. So if the second and third options are followed, then the float income would continue to be with the broker, right?
Yes, yes. That is the reason we said that, we have to see the final circular before commenting.
As of now, as per the current circular, there is no impact on the float income, because we majorly invest everything in FD and [indiscernible].
Okay. And I think the only change would be that you have to do this on a daily basis now? Is that the right thing?
Yes.
Possibly a mix of overnight funds will increase, and that would kind of lower down the lease on the float, right?
On the cash side, we have to upstream it, but majorly all the money is parked in fixed deposit and which are placed with exchange.
Okay. Okay. And second thing is on the other part is the ASBA thing, right. ASBA for the secondary market transaction. Currently, it's voluntary for both brokers and customers. But how do you see this eventually panning out, if this has to be implemented, then definitely the float income will go 100% away, right?
As of now it is for UPI clients. So the amount is like INR 2 lakhs, which will not be a major, because the client base, what we have, they do a bigger transfer. So as of now, there is no major impact for us.
But [indiscernible] saying, what you say is correct [Foreign Language].
So currently, it is lesser benefit to the...
Operational intensity will also increase.
So currently, only up INR 2 lakh can be blocked, right? Is that the right thinking?
[Foreign Language]
[Foreign Language]
Our next question comes from the line of [ Ketan Athavale ] from [ RoboCapital ].
I just had one question. How many franchise or channel partners do we have?
We have about 7,000 franchisee and channel partners?
And how do you see that number in 3 to 4 years?
So this number should double.
Our next question comes from the line of Parin Jhaveri from JNJ Holdings.
Sir, I had 2 questions. One is, basically, what is the status of the real estate sale and the current valuation for it? And I'll ask my second question later.
I will tell you. One second. We have currently 620,000 square feet of real estate. The big chunk is Chennai, 250,000 -- so basically, we have offices in Ahmedabad, Mumbai, then Pune, Thane, Gurgaon, Hyderabad and -- these are the locations. So the book value is about INR 227 crores, market value as per outsider valuer, is at about INR 670 crores. But are keeping -- we are valuing it at INR 220 crores, right INR 220 crores. 27% is leased to outsiders and rental income is 27% from outsider, and rest is in the group. Out of which, I am confident in the coming quarter, we should be able to get rid of Ahmedabad -- we should be able to get rid of Ahmedabad. Talks are in advanced stage, and then we hope that others, we have to work on exiting.
How big is Ahmedabad?
[Foreign Language]
Value wise?
[Foreign Language]
So basically, maybe if you can just, over a period of time, say, in next 2 years, 3 years, you think what should the sale amount be?
To be very honest, we sold some properties 2 years ago, and then we got a hit by roadblock. [Foreign Language] So my guess is actually Mumbai, [Foreign Language], Thane, and Gurgaon we will retain, and rest we will try to sell as and when it happens.
So is it fair to assume that out of this 27%, which we have for captive, you said it's other way round, right? 70% is...
27% is outside, [Foreign Language].
So over a period of time, is it fair to assume that 25%, 30% will be sold?
My guess is that, yes, you can assume that out of the 620,000, our target is to sell about 200,000 for sure.
Okay. And sir, my next question is seeing the current valuation and your dividend distribution policy, which at 30%, would a buyback be a better option? What is your thought process?
No, that's a good question you asked, and I think one of the previous gentlemen asked us a question on dividend payout policy also. So as of now, roughly about 30%, 35%, we are paying out. And the reason is that we have decided as a corporate, as a group to retain cash, simply because working capital requirements for this business is increasing. And it's better to see how this new circular and all unfolds, before taking a call on more aggressive payouts.
So the 30%, 35% payout, would that be used towards buyback and...
No, that I think -- we will work with -- our CFO with work and find out which is best for the shareholders and do the needful. Because we did one buyback [Foreign Language].
Yes, that was in February '21 at INR 54.
Our next question comes from the line of Swarnabha Mukherjee from B&K Securities.
Congrats on a good set of numbers, sir. So 2 or 3 questions. First one, on the client acquisition side, so first of all the 7,000 channel partners that you have mentioned. So if I were to look at your client acquisitions, so earlier, as you mentioned that 200,000 customers you were focusing about a year back or so, and now you have trimmed it down focusing on the affluent segment. How does your sourcing mix change because of that?
The sourcing mix earlier was about 60-40, -- 80-20 because 80 was procured by us, but 20 done by sub-brokers, because of online -- we used to spend money and acquire customers. So now if you look at the business, now I think it will be 70-30. 70 is acquired by partners, and 30 by us.
Okay. And what we do online, that is predominantly online or also through branches as well?
Through branches, RMs, everyone.
Okay. But if I were to look at our own direct mix, how would that number look, maybe right now?
What were the questions?
So question is -- so you are saying 30% right now is done by us directly. So right now, is that predominantly online still, out of the 30%?
I would say that it will be -- maybe 50-50 online-offline. Offline is also there, because we are using all the branches and the RMs also.
Sure. And in terms of, say, the kind of customers we are getting right now, what would be the mix in terms of say, where they are located in the geography or the [Technical Difficulty] demographics if you can highlight?
Tier 2, Tier 3 also and basically all over India. And [Foreign Language]
Okay. So sir, Tier 2, Tier 3 is this now reduced -- I mean, very focused kind of acquisition, what would be the share of Tier 2, Tier 3 right now?
I don't have an exact number right in front of me.
Okay. Maybe I will connect regarding that...
Connect with CFO separately, I'll give you the answer. So basically, your question is that out of the 50,000 customers we acquired last quarter, which is the cities from where we are getting it?
Yes, yes. So what kind of geography, and I wanted to compare vis-a-vis what it was in Q4 last year when you were kind of hitting the peak in terms of acquisitions?
Understood.
Yes. So that is one. And I also wanted to understand that in your retail gross broking revenue, what would be the share of what is coming from sub-brokers? From the partners, what would be the gross broking revenue share that is coming, in your overall retail gross broking [ pile ]?
It's roughly 50-50.
Okay, okay. All right. And in the life insurance distribution, what would be the kind of mix between new premium and renewal premium? And what would be our commission?
The entire project is -- okay, last year, we collected -- first year premium, we collected last year about INR 160 crores in life and INR 120 crores in GI -- this year, INR 280 crores. And last year was the same, it was INR 180 crores. It's not renewal.
Sorry, sir, I did not get. So out of say, for example, INR 81 crores of life insurance premium in FY '22, how much would be the renewals?
100% first year. [Foreign Language]
[Foreign Language] what would be the commission number -- so at least the rate, at a blended level?
Rate, I don't have. Rate, we can't share.
All right. No problem, sir. Yes. The rest of the queries, I'll take offline.
So if I understand your big question is that, you want the geographical spread of the customers acquired on the last -- this quarter and last quarter?
Yes, correct.
That's the big question.
Not last quarter, maybe last year same quarter, when you were...
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you so much for a set of really engaging and discerning questions. And whatever questions I could not answer with clear cut data, you can contact our CFO, and maybe he will get back to you. Thank you so much.
Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.