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Good evening, ladies and gentlemen, and welcome to the earnings conference call of ICICI Securities Limited for the quarter ended June 30, 2020. We have with us on the call Mr. Vijay Chandok, Managing Director and Chief Executive Officer; Mr. Ajay Saraf, Executive Director; Mr. Harvinder Jaspal, Chief Financial Officer; Mr. Yagnesh Parikh. Chief Digital and Technology Officer; Mr. Vishal Gulecha, Head Retail Equities; Mr. Kedar Deshpande, Head Retail Distributions, Product and Service Group; and Mr. Anupam Guha, Head Private Wealth and Equity Advisory Group. [Operator Instructions] Please note this conference is being recorded. I would now like to hand the conference over to Mr. Vijay Chandok to take the proceedings. Thank you, and over to you, sir.
Thank you very much. Good evening to all of you, and welcome to the ICICI Securities First Quarter Earnings Call for Fiscal 2021. I trust that all of you, your families, your near and dear ones are safe and healthy and I do hope it remains that way. Well, as the world deals with one of the most unprecedented event in modern history with wide-reaching ramifications across the globe to people, to economies, to business environment and even business models, we strongly feel there is a need to stay agile, nimble and vigilant on many fronts. India has seen one of the strictest lockdown regimes, which has perhaps helped the medical infrastructure in the country to catch up with the scale that is required to deal with this pandemic. However, all this has happened not without wide economic repercussions. So in this context, we felt it was imperative to look at the emerging market environment and some of the key developments that took place in our operating environment during this quarter, which just concluded. So when we look at markets, which directly impacts the, to a very large extent, our company. The market rebounded from March lows, but clearly is still below the pre-COVID level. And we saw global indices rebounding sharply in the quarter. This is after a massive fall that we saw in the month of March last quarter. And all this is happening despite economic concerns of -- concerns as well as rising COVID-19 cases. All global banks, the central banks I'm referring to, response to the crisis has been coordinated, has been swift in terms of rate cuts and providing liquidity. And we feel this is what has probably helped partially at least, fueling the global rally in the equity market.Close at home, the quarter witnessed a gradual reopening of the nationwide lockdown, starting from June 8 after 4 phases of lockdown that we experienced for most part of the quarter. Despite weaknesses getting reported on macroeconomic front, the Indian headline indices posted their best-ever quarterly returns since 2009, gaining almost 20% in the quarter and recouping 35% of the March 2020 lows. The rise in the Indian equity markets was broader and across market caps with even the small caps rising by about 30% during the quarter. What is also unique during this period that we saw is the rising retail participation in the market. So globally, retail participation in equity markets increased dramatically during this quarter and in line with the same trend, India also, we saw the level of retail participation hitting some record high. What we actually saw was a strong growth in active clients. And this happens with many inactive customers entering the market as well as a sharp rise in number of newcomers into the market. We believe that this trend is getting fueled by availability of a completely digital no-touch format of -- method of engagement, which is offered by large technology-based players. It's also fueled by the fact that work-from-home environment is providing additional time to investors as well as the increase in disposable income, which is caused by the reduction in discretionary spending. And this increased disposable income is being diverted for the purpose of investment and savings. We also believe that the relative attractiveness of the equity, particularly during the early phase of this quarter which was -- where it was trading at multiyear low valuations, also accentuated the strength of retail investors participating in large numbers in the market. We believe that although some part of this retail participation seen in the current quarter may moderate in the coming quarters, there is clearly a structural shift by customers preferring to deal in an online and a remote format offered by digitally led intermediary rather than a physical format. And this trend is visible not just amongst the youngsters and the younger investors, but is also spreading very rapidly and getting embraced very rapidly by mature investors. This quarter also witnessed certain regulatory changes. And if you go behind the skin of these regulatory changes, these are all aimed at providing operational convenience to retail investors as well as there have been a slew of reforms to protect the long-term interest of these retail investors. So in this context, the Securities and Exchange Board of India issued simplified guidelines for digital onboarding and KYC of customers. This helped these retail investors open accounts without any physical intervention or any kind of a physical paper workflow. Regulators have also given certain time line extensions to market participants in light of the COVID-19 situation, which is helping us to manage in difficult times. Recently, certain regulatory changes have been issued with respect to collection of margins upfront in the cash equities and F&O segments. There has also been certain changes in the margin requirement for these segments. Further, SEBI has issued certain guidelines regarding the method of margin finance with regards to pledge and repledging of security. In the distribution business, SEBI has issued norms of segregating distribution and advisory customers. When you again look at all these regulations, our strong view is that these are -- these regulatory changes auger well for the orderly growth of the industry in the longer term. However, there is likely to be some short-term transition challenges and impact in the industry. Given this context, let me now take you through some of the key aspects of the quarter with respect to our company. So being classified as an essential services company, we ensured that we remained accessible to our customers and open for business at all times during the lockdown phase. During this period, we focused on ensuring health and safety of our employees and also followed a prudent risk management approach for our customers as well as for the company, particularly in the context of the massive volatility that we saw during this period. We have also been focusing simultaneously on identifying avenues to digitize all the nondigital parts of business during this period that we could lay our hands on. And this is work in progress as we move forward. Our resilient business model, along with our digital platform has kept us in good stead in the business environment that has emerged. We continued to focus on the input parameters by working on our stated strategic priorities. And I may remind you that these strategic priorities we've been outlining and reiterating every quarter in our quarterly earnings call with the intent to diversify and granularize our business model, and I'm very happy to report to you that we are making good progress on all fronts. In this context, during this quarter, we launched what is called as the ICICIdirect Insta Account. Our open architecture aimed to end digital account acquisition, using the e-DIS process, or the electronic delivery instruction slip process. Through this channel, we have already opened over 20,000 customer accounts. And this channel after facing some initial teething hiccup is stabilizing -- continues to stabilize well. Now this channel is also being used to fulfill the account opening process for customers, which are acquired through ICICI Bank, our business partner network and also our own RM and brand channel network. So as a consequence of now of completely digitizing account opening process and becoming open architecture and also by ramping up our business partner network, we have been able to surpass our last year's monthly average run rate of account opening in the month of June, despite the fact that we've had lockdown, despite the fact that the digital process that is operational is still in the nascent stage and evolving and is also in the process of being spruced up. We have also, as a consequence of this, being able to diversify our client-sourcing channel mix with the largest sourcing channel partner, which is ICICI Bank now contributing approximately about 65% of the total customers that we post as compared to 80% that this channel was actually contributing in the last fiscal.In the equities business, we witnessed an increase of about 90% year-on-year in terms of the average number of customers trading with us on a daily basis. Our ADTOs, or the average daily turnovers, across equity and derivatives grew faster than the market, aided by our propositions like Prime, Prepaid and the option 20 pricing plan, all of which are gaining traction. As a result, this helped us grow our market share by about 260 basis points and 150 basis points in equities and derivative markets, respectively. We have also been able to scale back our ESOP and MTF book to approximately INR 15 billion as at June 30, 2020, up from about INR 5.8 billion as at March 31, 2020. You may recollect that we had proactively scaled down this business owing to the heightened market volatility in the last quarter and our risk assessment during that period. As a result of our initiatives on improving value of client sourcing as well as engaging existing clients with better experiences and superior proposition, our NSE active customer base grew by 27% Y-o-Y and stood at approximately at 1.1 million as at June 30, and our total active client base stood at about 1.5 million, which is a growth of about 15%. Coming to our distribution business, here, we faced some headwinds. This is due to lower asset value as well as the fact that our contact-based products were clearly impacted as a consequence of the lockdown. In this area of distribution, while our gross flows in mutual funds grew slightly ahead of market, we witnessed redemption in the debt funds bringing down our total net flows in the mutual funds business. On the other hand, our equity mutual fund net flows and our market share increased year-on-year. We also saw good traction in the fixed income business during this quarter. Our wealth management business also got impacted by constraints arising from COVID. However, despite this, it registered a 36% growth on back of the equity franchise and digitally available products, primarily fixed income products with registered book growth.Also during this quarter, we added about 1,600 new customers to this segment. The assets of our clients in the wealth management business increased by about 1% on sequential quarters to about INR 1 trillion. We also saw improvement in yield. All this is detailed in the presentation. As a result of all these developments and progress made, our quarter 1 FY '20 revenue stood at INR 5,464 million, a growth of 36% and profit after tax stood at INR 1,931 million, a growth of 70% year-on-year. We recognize that a sustainable business is one, which is sensitive to the need of its wider universe of stakeholders, including shareholders, customers, partners, community and also its impact on environment. With this thought in mind, we have adopted an ESG policy to formalize our commitment towards conducting our business responsibly to make a difference to the communities and our planet as well as making a positive impact within our markets. We are in the process, therefore, of releasing our maiden ESG report shortly. Further, being an asset-light company that generates high operating cash flows, the Board in our meeting today was pleased to revise our dividend distribution policy, with an endeavor to have a dividend payout of at least 50% of profits after tax every financial year, subject, of course, to parameters and criteria, which is laid out very clearly in our policies. We are also -- we have also worked towards contributing to the ongoing efforts of various agencies fighting the COVID pandemic, including working with IIT Kanpur for development of ventilators, providing PPE material to police force in Maharashtra and contributing quite generously to the PM CARES Fund for the COVID-19 pandemic. This, of course, is all apart from the usual CSR work that we do through our foundation. Going forward, we recognize that the future is fraught with uncertainties. The recent market disruption has reaffirmed that our strategy of providing comprehensive life stage based financial services to retail Indian investors powered digitally, we believe this strategy becomes all the more relevant than ever before in the current context. So while we continue to focus on the strategy, we want to reiterate 4 areas which will get special attention in the current situation and in the current year. First, a rapid increase in digitization at all levels within the organization. I think this is going to get center stage and prominent investment of time and energy and effort and people. Second, higher focus on increasing cost efficiencies in times of uncertainty, increasing your attention and putting your spotlight on cost, clearly, is an item of importance, and we are giving it its due. Third, investing -- using this opportunity to invest in technology for upgrading our infrastructure and capacity. And fourth and lastly, using this opportunity to fortify our talent pool to position us well for the future. Our detailed performance has been circulated through our presentation and uploaded on our website. I would like to end our opening comments and throw open the call to any questions that you may have.Thank you so much for patient hearing, and now we are open for any questions that you may have from your end.
[Operator Instructions] We take the first question from the line of Srinivasan Ramachandran (sic) [ Srivathsan Ramachandran ] from Spark Capital.
Just wanted to get your sense on the 2 regulations that you talked about. One was the net margin requirement that went live from June first week and also the notification that SEBI put out couple of days back on the intraday funding for cash and F&O. I wanted to get your sense obviously, the second regulation has still not gone live, it's another 4, 5 months to go. I wanted to get a sense as to how things will shape up if that regulation, especially the funding one goes live on a “as is where is” basis?
Yes, I'm going to request Vishal, Head of Equity, to step in and address that one.
Yes. Thanks for the question. So this regulation, if you -- I mean, carefully see this is in 2 parts. One is the collection of margin for the cash position. And secondly, the peak margin collection for the intraday product. So as far as the cash market is concerned, I believe market is largely compliant. And I have a reasonable reason to believe that with the advent of the Internet-based and the technology-based platforms, the advanced collection of margin in cash trade has become very, very prominent for a number of years. The another part is which is the intraday, the collection of market or margin and some kind of regularization on the trading product. I think this will have some impact on market. Still, this is very nascent as well as released just a day before. And that also is going to be implemented in 4 phases. And I mean, as we stand, there are different kind of products: Intraday, we have in cash; we have in F&O and different kind of products have different kind of margining system. And I mean complete evaluation, it may take some time. But intraday is a prominent part of the entire industry. And it is likely to have some impact on market, as far as short term is concerned. I think in long term, again, whatever is good for the investors and traders will prevail. And that's what our assessment at this point of time is.
Okay. Just to extend that question a bit for. In terms of -- don't share this information if its competitive in nature. Within your client deal, is there any sense you have, what proportion of expected derivative volumes come from the intraday facilities that you provide to their clients? Is there anything you -- any sense you could give us?
So I'll request -- and we have not disclosed the composition of the total equity or derivatives volume. That is not part of the disclosures as of now. Yes.
Sure, sure, sure. Fine. Second was on the net margining that we saw in June month, effective June 1. Just wanted to get your sense within your client deal, again, is that -- has resulted in higher volume because we saw the benefit of it only for 1 month? Do you see -- was there a noted increase in volumes because that allows covered products to be operated at a much, much lower margin requirement, which allows the same margin to go to a much, much higher traded volume, especially if we're doing covered products. I wanted to get a sense what was the experience within your clientele. We've seen 20 days of June also, any -- that spike in volume that we've seen. Is that something which you can extend -- can be extrapolated to some extent?
Yes. So I mean I believe you are talking about the new framework about the derivatives margining where exposure margin, et cetera was taken within span and the covered positions and the hedge position got certain benefit. So of course, I mean people who are taking this kind of positions have seen some benefit but having said that, I would also say that market largely goes a directional basis. And there, the benefit is not much. So whoever is in strategy kind of thing, of course, the benefit is very much there for them. But whoever is more directional and singular kind of a position there, the impact is hardly anything.
So if you look at markets, markets have not given that kind of reaction. If you look at the market volumes on derivatives, I think you'll get your answer there.
We take the next question from the line of Kashyap Jhaveri from Emkay…
Can we just request people who are not speaking to be on mute, there is a lot of disturbance which is making it difficult for us to hear you on the phone. Thank you.
Congratulations for a good set of numbers. I have just one question, which is on your retail brokerage. If I look at your average revenue per client, so as we're doing retail brokerage divided by number of active NSE clients, over the last 2 quarters, that has moved up from 11,400 to almost about 13,000 now versus about 9,000, 9,500 for probably last 4, 5 quarters. As we understand also from the participation in the market, there is significant increase in the retail participation during last couple of months versus the institutional side. So in that sense, how do you see this INR 11,500 to INR 13,000-odd per client increase on a new line basis. Is it sustainable? Do you believe that in terms of the type of clients that we have onboarded, this kind of revenue per head, is it sustainable?
So this is Harvinder here. First of all, what you are saying is absolutely right that in this period, we have seen a mix of the investors or what you mentioned as retail delivery volume, that's going up and that has been the trend in the market as well. Obviously, with that, the average revenue goes up, but it may not be sustainable because this mix is also, as Vijay mentioned in his opening comment, from an episode of volatility, a multiyear low and a higher retail participation that is happening. What I think we are trying to do is to increase the number of clients that we engage in order to granularize our revenue stream. We have launched propositions like Prime and Prepaid, which offer a full value pack to customers on the back of that, we've been able to increase the total number of revenue-generating clients in our equity business, strong growth has been registered over there. So we are focusing in the direction of creating a more diversified, a more granular revenue stream so obviously, Prime comes at a lower yield, if you look at yield as a metric, but we are more focused on having larger number of revenues at getting customers with a more sustainable revenue stream. So I mean that was slightly longest answer to your question.
Right. So if I understood correctly, what you're targeting is that out of the client base of 4.86, whereas overall active client is about 1.51 and NSE active clients are 1.12, you would try to sort of target that number of 1.12 and 1.51 as we go forward?
So actually, if I can comment, Vijay here. See the way -- we don't want to become a slave to a product and yield. It's a very limiting and, I would say, a narrow way of looking at it because customer doesn't think of me as just providing you one item. Our thinking is customer-centric and give him a great purpose so that you can take him through this life stage. We've been able to demonstrate it because we have customers who actually onboarded us way back 20 years in the past, they still do business with us. I mean 37% of our customers, which are 15-year-old stock, they still be with us. So you can imagine that during this whole journey, his needs have evolved over levels of sophistication and also across different categories of financial requirement. Idea is to monetize life stage value rather than just looking at it, equity product is in a very narrow set. So we are more interested in growing aggregate revenue, keeping customers with us and making him -- providing the right kind of solution and growing aggregate revenue at a customer level across products.
So but if I look at that, then there is a support slide, in the same slide, Slide #14, where clients with more than 2 products or 2 or more products are like 0.95 million, which is like not far away from 1.5 million active client number also. We are almost like 2/3 there. So then how do you -- on an overall client basis, and how do you sort of improve the yield whereas almost 2/3 of our clients are already like for 2 or more products.
Yes. So let me answer that. So you have to look at it from 2 perspectives. One is, if you look at our 1.5 million ever, all from active customer base that has grown at a 15% on a Y-o-Y basis. So as you rightly said, one endeavor is to increase the 1.5 million, and that is where our third lever of strategy to engage clients in a digital manner, offering best, better experiences and a very personalized, hyper-personalized experience, we call it as N=1 strategy. So those are the initiatives to enhance the 1.5 million. So once that starts happening, our monetization, which is the second lever of our strategy to enhance the wallet share. So if a person has a direct equity kind of relationship with us, can we do a managed equity, can we do a PMS if we migrate to wealth and so on so forth. So how do we get more and more relationships with the customer. So clients with 2 or more products is deepening that relationship. So one is you expand the horizon, you try to get 1.5 million customers, up from 1 million customers and then within that, you try to cross-sell, try to expand the product portfolio with the customer. So both these directions, we are making progress, and there are a lot of products, which have -- a lot of initiatives which are lined up. We are offering more product lines. We are offering newer manner of engagement to the customer. So exactly that is the direction what you're seeing.
And just one last question, if I can squeeze in. In terms of nonmutual fund distribution, that number is largely driven or largely an outcome of what's been happening on the loan origination side for the whole sector, right? I mean does that -- the volumes are a little slow…
No, so that loan origination also is a part of that, but it is a very spread-out book. So you have a very wide area of products, it starts with insurance products, protection products. It starts with loan product. We have fixed income products sitting in that city. We have PMS products over there. NPS is over there. So we have a long area of the products, which are sitting over there. So for instances this quarter, fixed income did very well in that. But obviously, as Vijay mentioned in his opening remarks, insurance is contact dependent product, we had some challenges.
We take the next question from the line of Utsav Gogirwar from Investec Capital.
Congratulations on a great set of numbers. My first question is with respect to the client. So if you look at the last 30-months trend, it's clearly visible that the top 3 discount brokers has significantly gained market share on an incremental basis. And we have some challenges because of some of the reasons you already mentioned. But how do you see the growth in the coming quarters, where now we have open architecture. There are some teething issues which are over now. So how do you see this trend in the coming quarters? That is my first question, sir.
Yes. Yes. So Vishal here. So I mean, in the beginning of the quarter, we had some challenges in terms of account opening and the complete nonavailability of completely digitized process. So that process was started somewhere in the month of April and it got stabilized towards the end of April. So we feel that one hurdle is at least off for that now. And now, I mean, we remain committed to the segment, which is mass affluent, we are looking for a very profitable growth kind of strategy. And also, at the same time, with the open architecture and adding partners, I feel that the scaling up is a way forward. But at the same time, as I said, that our commitment is very much to have a very, very profitable growth. So on process-related things plus open architecture, adding new partners, I think these are the things like as far as ICICI Bank is concerned, our engagement remains very, very robust. So these are the 4 things which I look forward to in creating the scale as we move forward.
So I'll just supplement what Vishal is saying. I would concur with what your observations are. And you have to view our quarter in the context of the fact that actually 1 month of the quarter, virtually was not there for business because of the simply nonavailability of our digital process, which was actually working fine, it -- as Vishal explained got tabled towards the end of the month. But more importantly, I think whatever is needed to ensure that we continue our growth momentum in terms of proposition, in terms of experiences, we are vigilant, and we will be agile. We will maneuver ourselves. We will just need to study whether the new clients has got meat or is it fluff and take our calls accordingly. I just want to assure you that we are not going to let this lie down. We will be looking at all options, which are technology options, plan options and so on, so that we remain cutting edge there.
Sure. Second question is with respect to the cost-to-income ratio. That has significantly improved this quarter. And -- but if I look at the employee expenses, there is a pretty steep growth. So is there any one-off in this quarter, employee expenses? And how do you look at the cost-to-income ratio for the full year?
Yes. So actually, there is a fair element of variablized employee costs, which you are seeing. There is a fixed employee cost, which is flat, and there is a variable employee cost which has gone up. It is purely a function of the company's performance. So if the company's performance warrants that variable cost to be there, it will be there. If it doesn't warrant, it will not be there. That's how we are looking at it. So we request you to look at it in that context. Cost is an important focus. We'll be not taking our eyes off that. And you have seen a movement there. We continue to look at various ways of handling -- bringing efficiencies. There are many costs which are WIP as we speak. Apart from that, you also need to know, when you look at our overall operating cost, there is a front-loading of some costs, for instance, given the pandemic, we decided that we will front-load our expenses towards the CSR spend. So we actually almost finished most part of our annual spend, which typically happens through the course of the year or towards the last part of the year. Actually, almost done with our full year agenda in the first quarter. So there's a big front-loading there as well.
Sure. Sir, just one follow-up on that. So when you mentioned that the variable cost will move with the business, what is the driver behind it? Is it the ADTO or market share, which we are gaining? Or how should I look at that?
So that is the both, it's the sort of agenda for us in terms of what they want to see. And largely, they will want to see similar stuff as what the investors would want to see. So if they feel that this is appropriate in line with whatever is the sort of set target for us and set outcome for us, they will permit that kind of a variable spend. Otherwise, it will be per day. We, for instance, did that last year. Despite whatever we did last year, the senior team actually took a salary cut. And there was a very small pay out of bonus compared to what -- incentives that what's sort of spot difference is for. So that's an agenda that is a bold agenda, and they will deal with it. This is the way we look at.
And it is also to be clean in the context of a lower base, as Vijay just mentioned that given whatever overall environment exists throughout the last year. So from there, the variable cost also needs to be clean and leave that waste of last year.
Yes, you should just think about the long-term guidance that we have given. We've given you some long-term guidance, we will be moving in that path, yes.
We take the next question from the line of Madhukar Ladha from HDFC Securities.
And congratulations on a great set of numbers. First, just a small book-keeping question. The MTF and ESOP book has grown to about INR 15 billion. Can you give down -- give a breakup? And what is your average lending rate? And I believe this is period end book. So can you give us a number for the average book for the quarter?
Yes. So Madhukar, a breakup, we have not put out but yes, it is our exit book. The lending rate, we borrow at commercial paper. So for the quarter under question, it was roughly about 5%, 5.5%. Progressively, it has come down or it is coming down with the earlier rates, et cetera, moving slightly downwards. Average yield, as we have said earlier also, it is in the range of about 4% to 5% on this book primary. About 4% to 5% is the average NIM.
Average NIM. Okay.
NIM, yes. And yes, you also asked the average book so…
Book size.
Yes, if that is possible?
So average book was roughly about INR 8 billion, INR 8.5 billion. Because we started with INR 5.8 billion as of 1st of April, and we reached about INR 15 billion. So average for the quarter was roughly about INR 8-ish billion now.
Right. I wanted to circle back on the first question on the new margining framework for derivatives. So can you give us some sort of proportion of the F&O volumes that you do? So I know that you don't declare the breakup of the ADTV. But whatever the F&O volumes, we do -- what proportion of it would be the high leverage sort of customers doing that?
So Madhukar, our ADTO breakup, as we have said earlier also is not really different from the market mix. And we do declare that if you look at our appendix on Slide 33, so we have the market ADTO volume and derivative market share and derivative ADTO volume as well. It is roughly similar to the market mix of about the 97-odd percent of the overall ADTO comprises F&O.
Right. Okay. So then what part of that ADTO could get impacted or let's not use the word impacted, but what share would be coming from high intraday leverage trades?
Madhukar, that, we have not put out as yet. As Vishal also tried to explain, it is too newer development right now. We are looking at all possible options. But that portion we have not particularly put out, but our derivative at an overall level is similar to what the market is. And this circular, as Vijay also mentioned in the opening remarks also is an industry level intraday volume circular. So the impact of movement, et cetera, is expected to be across the industry. So we'll work on our various levers available to kind of arrive at our way forward.
Understood. On -- the investment banking revenues have done well. And what would be the principal drivers of that? I thought that lockdown would have impacted it, but actually, you've done INR 22-odd crores of that.
So yes, there were a lot of secondary block trains or we did a QIP for JM Financial. So a lot of all these transactions picked up in June. And we are seeing the similar trend for the current quarter.
So Madhukar, just to supplement what Ajay said, one of our components of our corporate side of strategy is actually to bring as much predictability and repeat value as possible. So the team has been actually focusing on slow business on the institutional side. They've been focusing on certain categories of market issuances like QIPs, et cetera, which tend to be far more regular and not as episodic as IPOs, so that we are able to diversify and granularize our stuff there as well. So I think some impact of that is visible to our numbers this quarter.
Got it. And just on the employee expenses, can you spell out -- because the employee headcount has come down significantly but the expenses have moved up. I understand that you are providing for some variables. So what's the baseline fixed cost for, let's say, this quarter, just so that we can model this number more accurately.
Yes. So Madhukar, overall, our fixed-to-variable ratio ranges from about 70-30, it's around in that range. The fixed variable as well. And as you rightly said, the fixed cost on the back of the employee count, et cetera are going down. So fixed elements of the employee costs have gone down by 3%. The variable is what has increased in line with the top line and our various other parameters that we generally measure.
Understood. And last, the operating expenses also declined significantly. So any particular reason for that?
So operating expenses, if you're looking at sequential quarter, they have declined -- you are looking at sequential, right, not the y-o-y?
Sequential and year-over-year, both phases gone down. So year-over-year, it's down about 40 -- 24% and Q-o-Q 30%, right?
Yes. So 2 things have happened over there. One is that on a sequential basis, there was a provision that we had taken, a onetime provision on account of COVID about INR 9 crores. So that is obviously nonrecurring and therefore, that is the reason for the sequential decline. On a Y-o-Y basis, some of our transaction charges, we have been able to renegotiate and those are yielding us some benefit. Also going forward, we have now launched the fully end-to-end digital process, which relies on e-franking or it does not require power of attorney. And therefore, some of the franking charges have also come down. So these are primarily 2 aspects, which are driving operating expenses slightly downwards.
We take the next question from the line of [ Dipen Mehta ], Individual Investor.
Can you hear me?
Yes, yes. Please go ahead,
Yes. So my question is that what is the average onboarding time for retail investor client?
Yes. So average, I mean, the completely digitized process, which we had spoken about, this is absolutely online and it takes about 4 to 5 hours time before customer can place his first order. So it is not more than that. So it all depends. I mean if you are at, say, if you open an account at 2:00 during the day, then perhaps the next order placement will be possible only the next day morning. But as far as process is concerned, it is completely digitized. And if you open at early hour in the day, then the same day, your account will be activated.
Okay. So after 4 to 5 hours, the individual, can trade from his account. Is it, sir or…
Very much.
We take the next question from the line of Manish Ostwal from Nirmal Bang Securities.
I have question on your quarterly management commentary. You said that we will be soon adding the option of investing in U.S. security on the ICICIdirect platform. So my question is, what is the size of this opportunity in the marketplace? And I mean in the recent time, when we saw a very sharp movement of stock -- technology stock prices in the U.S. So there must be some diversification from the high-end investors in India. So what are the feedback you are having on that sector?
Thanks. Let me come in. So I think this is a relatively new, I would say, arena in many ways for the industry. The way we look at it is that the total outbound investment from India, broadly, last year, if you look at the numbers, it has been in the ballpark of about USD 15 billion. And when you go into and dissect this USD 15 billion, you will find that only about INR 0.5 billion (sic) [ USD 0.5 billion ] is going into financial investments and everything else, so that means INR 14.5 billion -- sorry, USD 14.5 billion not INR 14.5 billion, is going into nonfinancial areas, so presumably into real estate, presumably into meeting certain kinds of expenses, education expenses, living expenses, et cetera, of people who send their children outside India, et cetera. So -- but a sizable amount of it is also perhaps going into real estate. So if you -- and this number has, in the past, at least been growing at about 40% CAGR. Now we don't know whether in the current context, there is going to be a change in that ratio, that's a growth rate or whether it will come down, we don't know. But given the fact that $15 billion is already flowing out, we could see a very nascent, untapped opportunity to actually not just sort of gain market share from increasing remittance outside India, but also gain market share from taking a larger slice of the money, which is anyway going, so maybe some amount that is going into nonfinancial assets can get into financial assets that was the thinking with which we are looking to introduce this. Today, is it possible? Yes, it is possible even today. But the procedures and processes are so physically draining that itself puts a big speed breaker to the flow of money. So we've been working very closely with our bank partners. And we are uniquely positioned because through ICICI Bank, we have a product called Money to World. So one of the features of that Money to World product is that you can seamlessly send money out of the country. And one of the biggest hurdles in investing outside is lots of paperwork and controls around that remittance. That remittance bank has digitized. And it is the only bank in the country which has been able to give a solution like that. So that's why we felt that an online solution integrated with the payment interface, which all will work seamlessly for the investors will actually give a real first time opportunity where we can invest into global markets, just like we invest in the Indian market, nearly, it will be similar experience. So hopefully, that experience is available, given the sort of returns that the overseas equities have given, also his intent to diversify and also his intent to create probably dollar asset for long-term uses is something that we felt could be an opportunity for the Indian investors. So with that thinking, we are looking to actually grow. We do hope that in the more medium term, this will become an interesting story for the company.
Okay. And apart from providing the platform, what is the value proposition for the customer of ICICI Securities? For example, if somebody is having a portfolio of INR 5 crores a year and he wants to put $2 lakh in U.S. equities. So what is the value proposition ICICI Securities is providing to that particular customer?
So the biggest value proposition is that you have direct access to debt and equity markets in U.S., number one. You can see the prices, you can decide, you can actually execute an order on the platform. And not just that you are able to also transfer your money from your account without having to go -- step out of your house and go to the bank branch and fill up forms and do that, which is required today. If you were to do it, the process of sending money out has got a physical net, let me put it like that. That physical net is completely replaced by the digital process. So it becomes very convenient to invest. So that is the value proposition that we are looking.
[Operator Instructions] Next question is from the line of Aditya Jain from Citigroup.
Just a couple of small clarifications. On the MTF plus ESOP book, which is around $15 billion has recovered quite well. How large do we plan to make this?
Yes.
So Aditya, this -- the 2 books have different drivers. MTF is obviously related to the larger sentiment that we have. And just to give you a sense, we have sufficient headroom, you know that by regulation, it could be 5x the net worth, and we have very stringent internal risk parameters, et cetera, which…
So Aditya, if I can just supplement this. We don't look at any specific product in a very -- put a target on yourself on that, particularly on credit side. Clearly, why are we doing this business, we are very clear. We are doing this business because MTF has equities, core equity business, that's why we are doing it. And why are we doing ESOP business because it helps our business. So if these 2 objectives are getting met, we will keep on adding, right? The idea is not to create an MTF book in isolation of itself irrespective of what it does to -- so we are also careful that we want to give it only to those customers who are actively doing equity business with us and ESOP as a model of acquiring the high-value and quality best customer. We feel that the opportunity is large and enormous. Also, we have to keep in mind that MTF kind of a product is not necessarily a secular product. It is a product which is very much driven by the way markets are moving. When there is an anticipation and hope of markets going up, there is a demand in sort of requirement of an MTF kind of a product. On the other hand, when the market is actually drifting and going southwards, we would definitely not unnecessarily want to encourage our customers to take it because it would land up having bearing an interest cost and not getting returns on equity, which is not the right way of sustaining any business. So rather than looking at it with targets and making sort of a mistake and leading up to challenges with customer experiences, we would rather use this as an allied opportunity for our equities business and allied opportunity for mutual fund -- for wealth business. In terms of limit, yes, we have limits, which are much larger than what we have sort of played out so far. Is there an opportunity outside? I think the opportunity is many times the size of our company, if you ask me, it's a very large opportunity in a sense. So we will try to play the opportunity based on the timing, keeping on -- keeping in view the timing as well as meeting this objective. So you could possibly see this MTF book growing up or you could even see it shrinking back likely as the last 3, 4 years.
Understood, yes. So I understand. Sir, MTF is more cyclical, ESOP also some element of cyclicality, but probably less than MTF. On the activation rate, so the movement from 68% to 58%. Is it just normal volatility? Or is it a function of the change in channel mix? Or is there something else happening?
So as we said at beginning of last year, I mean the focus was entirely on having a very, very profitable customer and the right set of customers. So this is I mean, combination of 2 acquiring right and second, the intensity, which we created around getting the customer active as soon as they are on board. So this is, I mean, the trend which you would have observed in last quarter also, and this continued in this quarter as well.
Okay. I thought activation rate is slightly down, right? So my question was basically, it has been pretty high…
It's an indication of the channel mix, you're right.
Okay. Okay. Got it. So you -- there is a mention of 36% ARPU growth, sorry just last question. So what is the rupee number for ARPU just so that we can compare with the calculations, how we can do it.
Sorry, Aditya, could you just repeat that? You wanted the…
The rupee ARPU. There is a mention of a 36% ARPU growth, what is the rupee ARPU in the quarter?
Just give me a moment. Aditya, let me just come back to you on that.
We take the next question from the line of Mohit Surana from CLSA.
Congratulations on the great set of numbers. I had 2 questions on the open architecture product that we have now rolled out. So as far as I understand, we had a strategy that we wanted to increase the activation rate among the existing clients. And even in the operational clients, we wanted to increase the yields and cross sell, et cetera. So now given that you are embarking on an open architecture kind of a product, is there some kind of a change in strategy to grow overall clients instead of increasing the activation among clients? Second question is, which are the banks that we are partnering with in this kind of an open architecture? And how is the revenue share agreement different from what we have with the ICICI Bank?
Yes. No, no. Just to comment, Vijay here, there is no change in strategy at all. In fact, the idea of having open architecture is to acquire customers in a digital -- without necessarily having a bank partnership. So if we see a slight decline in activation for this quarter, it is not because of any other reason, but because of the change in channel mix, so different channels.So we have now 4 channels. Earlier, we had virtually one channel dominating our business, which is the bank customer. So most of the activation rates was only ICICI Bank customer activation rates. Now ICICI Bank customer activation -- so what you are seeing is the mix between our partners, digital as well as our own network, which has expanded. And because all these 3 are relatively, what I should say, young and nascent, you need a little bit of time for the activation rates to catch up. I can see the activation rates internally increasing week on week. So certainly no departure from any strategy of working on activation rates. That's point number one.Point number two, an open architecture does not warrant us to have any formal partnership with anybody. So all it requires is a customer to come in and state his bank account, and we just link that account, whichever account, it may be. It could be State Bank of India, it could be HDFC Bank or any other bank anywhere in the country. And there is no revenue sharing arrangement at all with them. Everything that comes through that customer goes 100% through ICICI.In terms of which banks, it just so happens that since SBI is the largest bank, most of the customers are there. And also, we find that HDFC is another big contributor as well. So these are the 2 big contributors.
We take the next question from the line of Haresh Kapoor from IIFL Asset Management.
A couple of questions now. We had made some one-off provision last quarter, around INR 9 crores, INR 10 crores for the margin funding or any other impact that we are going to expect, so has that been utilized? Is it still sitting in the balance sheet? Or how is that? Second, if you can just talk through in terms of the employee cost, a lot of discussion there. But if I just look at the broad numbers in terms of how the trend in the revenue and the expenses shaped up. So quarter-on-quarter, the expenses are up 24% on the employee side. But the employee cost is up 24%, but the revenue is up 13% Q-on-Q. So I believe you kind of mentioned it's the Board policy, et cetera, but I would still think that it's linked to the revenue traction. So if you can just throw some color there? And is this employee cost just for the revenue that has come through for this quarter and we see a similar trend there is revenue -- absolute value revenue in the same number. So if you can just talk through that? And third, if you can, a lot of discussion around active clients, you spoke about April first half, maybe not really having all the digital process in place. But -- and even 65% or so coming from ICICI and getting traction in non-ICICI Bank channel, so I think that should be a pretty decent set of. Even then in terms of the numbers that I'm seeing, it's not in terms of overall active client additions or even NSE active clients, that doesn't seem to be a pretty aggressive traction there, is kind of lower than what you saw in Q3, so I understand there could be some element of that, but pool itself has expanded, so just trying to think through what is the reason that this is happening?
Yes. So I'll go one by one, you've given broadly 3 areas to talk about. The first is COVID provision. COVID provision, we have not utilized, it continues to remain in our balance sheet. So it is very much unchanged from the last quarter, and we not had to utilize any of that. We will keep reviewing it based on the movements in the market. We just said it would be all right to keep it right now given the uncertainty. And as things become clearer, there could be release of some of that provision there. Your second question was on employee cost. See, your employee cost has to be viewed in the context of the fact that last year, actually, we, in many ways, cut back very heavily on employee -- variable cost of the employee. Right? So to some extent, we have, in a way, provided, assuming that we are going to be having a certain trajectory of revenue, et cetera, if that revenue, et cetera, does not play out, if there will be a pullback, obviously, we will not be permitted to accrue that kind of -- to account for that kind of payout. That is something that will give us the flexibility to handle the employee costs as we move forward in the year forward. Our guidance is not at a unit -- every element of cost. Our guidance is more at an aggregate level. So please see us at an aggregate level, we have shown an improvement. We have given you a direction, so monitor us there on that number. Given the flexibility to manage cost within the hedges individually, it's important, but to know that there are enough elements of flexibility in our cost which allows us to play out without necessarily the cost disappearing entirely, but we can expand or contract the cost based on performance, and that gives us the flexibility to manage our OpEx as well. The third point was with respect to..?
Sorry, just before the third question, if I can just clarify one thing. You spoke about investment in the employee base and communication there. And obviously, we have seen improvement on the other OpEx line item and other expenses also has a one-off. But we were trying to rationalize rents, so we're trying to rationalize branches. We were also looking at employees, which you rationalized some count there. At what pace have we kind of reached there? Because that can be itself a pretty good delta. And has that already played out? Because we see the employee count down, but obviously, employee expense up. So that is the thought process behind the expense question?
Yes. Yes. So indeed, all the -- so our approach is twofold. One is that try to tackle the fixed elements of expenses, which tend to be stickier. So that is something which is an ongoing process. You mentioned 2 of the levers. So our employee count has come down consistently. Our number of branches have come down. So the rent expenses and the fixed cost expenses have indeed come down. We have also worked on, as I replied to an earlier question on some of the variable expenses where we have renegotiated transaction charges et cetera. Those are also the initiatives that are there. So that is one lever to try and work on the stickier portion of the cost base to say.Second is try and variabilize a lot of costs. So for example, when we are talking about sourcing, and we are trying to kind of have a growth in business partner channel. One is strategically, it expands the distribution network, but it also gives us a more variable manner of getting revenue. So some of those initiatives are also there. So one, variabilize. Second, look at the fixed costs. And all those elements have shown a decline. We are looking at discretionary expenses for this year, for example, in a COVID-related environment, things like travel, et cetera, what all things that we can look at. So those are some of the areas. So that has been our approach.
Okay. And the third one, sorry?
Yes. So coming to the sourcing, although we did address this issue, it looks like there is still probably a little bit of a gap in understanding. So let me just elaborate it with great degree of granularity once in for all.So before COVID happened, we never had a digital process of account opening. There was always a physical link. So when COVID happened and lockdown happened, account sourcing became 0. The only way account sourcing could commence is that we could -- we had to digitize everything. So starting from a process where we did not have a full digital process, which required regulatory approvals, development of the system, testing of the system and then launching of the products, all that was done from 25th of March till about 28th or 18th or so, somewhere around mid of April. Obviously, when we came from a situation of no account sourcing to -- and the ability to source account and then launching it, and it was all done at such a large velocity, we landed up with a situation where there were certain teething issues. Those teething issues are getting sorted out. And they have significantly improved from where they were beginning of this quarter and the account opening started. So whatever account opening you saw, 80,000 accounts that we opened, effectively is an outcome of about 2.5 months or less than 2.5 months of work, point number one.Point number two, account sourcing was happening in a manner, which was largely from ICICI Bank in the previous quarter, right? That was predominantly the source of accounts for us. We also said that we want to not only grow the accounts from ICICI, but also want to add newer channels. And we said that the newer channels are broadly the digital channel, and we said the partner network channel, which is getting augmented, right? So -- and the idea is to make each channel pretty large in its own right? That's our medium term objective. That strategy is very much intact. Now because of COVID, when we look at ICICI Bank sourcing, the way that ICICI Bank sourcing happens is, it happens from 2 methods. One is go and cross sell to an existing ICICI Bank customer and increase penetration to stock client. And two is the new client acquisition, which the bank is doing, link fertilized loans -- sorry, floating the accounts to those customers. Now in the lockdown situation, the second channel is completely shutdown, right, in the bank. Please understand that. In such a context, you are actually largely cross selling. So as things are now gradually -- so what you have seen are some of the links, which were there in a normal unlock situation now out of process right now. As they return to service, they will all spring back into action. Despite that, we have seen this kind of an output that you've seen with our June run rate actually exceeding our last year's run rate. So I completely agree with you that the output is disappointing, even I'm disappointed. But we clearly see that we have to work very hard and spring back to higher growth numbers of quality, without letting go on quality. We have experienced excruciating challenges in doing what we have done, trust me. And we will continue to put our efforts behind it to show growth and momentum. And to do that growth and momentum, we believe we have a sense of what are the levers that are there on our disposal with us. We will take them in a very measured manner so that we do not land up making errors in implementation. So you'll have to trust us with our approach on sourcing with these methods.
And last short one, if I can just squeeze in, if you don't mind. I just wanted to check, you spoke about gross flows on the wealth side, you spoke about some redemption aspects there even on the mutual fund side. If you can just talk through in terms of -- if you just had to-- because there is an M2M impact even on the AUM, on the wealth side and overall, net flows, was it negative? Was it positive for you? Just a broad number will be helpful in terms of positive or negative? And how was it during the quarter or how was the trend, if you can just talk about it.
So Anupam will discuss it.
Yes. On the wealth side, so obviously, as you are aware that at the start of the quarter we had the issue of Franklin Templeton and people were averse to credit. And that saw some bit of outflow from debt fund per se. But on an overall basis, as the quarter went ahead, we saw a fair bit of money flowing into the fixed income portfolio. And when I say fixed income, it essentially includes the GOI bonds, the gold bonds that came in, both tax free and taxable, your perks et cetera. So the entire fixed income market saw a fair bit of net inflow that came in. And also, we saw that on the equity MF, we were able to be in line with the market or slightly ahead of it. And on an overall basis, we were net positive on the overall flow. And from a mark-to-market perspective, Y-o-Y, we were broadly at par, and on a sequential basis, obviously, because the market has gone up, so we had almost a 20% jump on the overall AUM. So that's broadly the story on the AUM as on invest side.
We take the next question from the line of Manish Sonthalia from Motilal Oswal AMC.
Congratulations for a great set of numbers. I have just a very broad question. I mean, on the broking side, you all are doing exceptionally well. Thanks to a very strong brand name and even on the wealth management side, distribution of products is perfectly good, and it's expanding. I just want to understand what stops you from launching a PMS product under your own company? Is it to do with a conflict with the AMC? Because I believe that PMS is broadly an HNI product and the large pool of the HNI client base that you have. If you launch it under your platform, done it yourself given that yourself and ICICIdirect research, you have an ISEC institutional research. What stops you from launching a PMS? Because it is a huge operating leverage business, particularly on the equity side. So any thoughts on this side would be helpful.
Manish, this is Anupam here. On the PMS bit, we -- as you're aware, we have a license both on the discretionary and the nondiscretionary base. And in fact, we have already launched 2 PMS's from ISEC, and we have raised in excess of INR 100 crores already. The distribution has largely been done by the wealth team in-house at ISEC and hence, may not be known in the market per se. But what we want to do with the PMS license and is essentially to curate bespoke solution for our clients. So we should tell you, I mean, what our strategy is. So one is, obviously, there is a big market on passive funds. And I think there, we are collaborating with 1 or 2 models in the market. And one of it that we already have raised INR 100 crore is an index fund. So that is already in shape.The other big strategy that we have is on the NDPMS side, given as you mentioned, we have in-house research, et cetera. Because we have a large pool of Demat assets, we have a dealing setup, and we have fund management expertise as well. And I think NDPMS, we've already launched, and we are seeing -- because that's a big need in the market where clients want a conservative approach to portfolio building. It's just that in PMS given that sales per se still not is completely digital, and hence, because of COVID, we've really not been able to go the full house. But I think as we progress into the next quarter, I think you will see a good traction there as well.
We take the next question from the line of [ Kunal Shah ] from Carnelian Asset Management.
Just 2 pertinent questions while most questions have been answered. My question was more on the distribution part, while equity has been doing fantastic, and the new product introduction has been doing good. My question is more on the mutual fund AUM and the client addition, I would say, that is happening over there, if you could throw some light because from last 4, 5 quarters, our AUM has been more or less stagnant, I'm not talking about the income because of the regulations, that is understood. But more on the part of AUM, which is obviously a function of market movement, but inflows as well, if you could throw some light, I mean, what are the barriers we are facing there when it comes to client addition? And the second part of the question is in the annual report, I happen to read that we have -- for the lending products, we have tied up with partners like HFC, HDFC, BOB, PNB HFC, TATA Capital for Home Loans and more, so if you could throw some light, how this is working and how this can pan out going ahead when it comes to augmenting our income from other than the broking part?
Yes, this is Kedar here. This quarter, we saw a bottoming out of our MF client base. In fact, we grew the number of unique clients investing in MF. We are yet to see the trend bottoming out in the SIP base though. We hope it will be visible this quarter. So the overall SIP value went up, but the number of unique clients doing SIP actually went down. The number of MF-investing clients also went up. And our market share in the equity mutual fund also went up compared to the last quarter. So we are now clearly seeing that the trajectory is moving up. We are also taking steps like launching a dedicated investment app so that clients can start investing in mutual funds, et cetera, as a starting point. So a lot of steps are planned also to focus on areas where we are relatively less strong. So we should see the changes happening on that front.For the loan business, the idea is to capitalize on our own client franchise plus our distribution network of brokers, sub-brokers, et cetera. So the idea was to complete the offering by tying up with multiple partners. It's at an early stage, our core franchise and core loan distribution will be ICICI Bank loans. But wherever the client files doesn't get cleared through the banking risk credit policies, these partnerships will come handy, early days, but we are seeing a good traction, especially in the nonmetro cities where our sub-broker platform dealing in fairly large amount of leads once the loan business is opened up after the lockdown of COVID. So it is getting scaled up. All these tie-ups also help us in engaging clients because many of these cases when they are rejected by the bank, the efforts are going nowhere. So we just thought these tie-ups will help us, just scaling up.
Just trying to understand the thought process out there is to kind of build a platform kind of a business where you're probably going to have various loan products, policies out there for non-ICICI customers as well, which can be bought? Or I mean, just trying to understand the thought process other than providing options to existing ISEC customers, is there more to it?
So existing clients is obviously the franchise, and plus our distribution channel, this also brings a client to the ISEC family. It can be through a loan product, the journey can begin. And that's fine because our distribution, our sub-broker platform now gets the entire suite of loan offerings, apart from insurance and broking and distribution products like MF, fixed income, et cetera. So we become a fairly robust and powerful franchise to tie-up with for all the sub-broker franchise.
Now the eventual thinking is to have a network -- digital network, connecting customer, end customer eventually to us, to banks to begin with. And over time, maybe make it open architecture.
Okay. Okay. Okay. Great. And just one clarity purpose point. Slide #14, we have got these clients which 2 or more products data being shared, right? So just wanting to understand when we say 2 or more products, it is like equity, MF kind of -- or what exactly we mean when we say 2 or more products?
One product is equity, second product is MF, and then there is a slew of products like insurance, loans, PMS, fixed income.
So we have created certain categories of similar kind of products. So for example an insurance family, LI or a general insurance or a health insurance in one family, one product. Mutual funds is one family. Equity, any kind of a direct equity, direct participation is one family. So that is what we try to monitor and kind of try to scale up. So it is not each product type, but product categories, which is a different lead segment of our customers. You can engage in a different manner.
We take the next question from the line of Ritika Dua from Elara Capital.
Congrats on a great set of numbers. A lot of questions have been answered, just maybe still 2, 3 left. Firstly, sir, on this number, which we shared last quarter, on the percentage of contribution of Prime customer base to the total revenue on the booking side. Could we share how that number has moved this quarter? It was a 30, 40-number last quarter.
So contribution from Prime has been rising significantly, I mean, quarter-on-quarter. So this quarter also was no different. So I can say around 50% of our total business is coming only from Prime plan now.
Okay. And sir, on the similar lines, I just wanted to understand because of this new customer addition, which obviously the industry has seen. Any color on the -- I don't know how to really put it, but any plan on the contribution of this newer set of investors to maybe -- can we say the balance 50 obviously will not be because you have your prepaid customers as well. So how significant are these newer customers who are coming on board?
So I -- I mean, at ICICIdirect, we always had a mix of a completely new customer to market as well as the experienced customers trading elsewhere in the market. And we witnessed a similar trend in Q1 also. So it is not that all the customers who are coming are the first time investors, as we have experienced in the past, it is a fair mix of both the categories. And even in Q1, among the new registration, which we did, the Prime registration remains very robust, and we exceeded even the last quarter number. So that gives us a sense in terms of the quality of customers which we are getting in.
And Ritika, just to add to what Vishal said, definitely, the focus is on quality that has been stated very clearly in our strategy. So -- and we are -- we've been able to maintain that level of quality across the plan. So that has been the focus. It's not that this size, I mean there is any dilution on that parameter, so as an approach.
Sir, on this market share gain, which has been a great number this quarter, I mean, across both the products, equity and F&O. I was just -- so while you are gaining, I still wanted to put this question to you. So a competitor of yours who recently reported numbers, they have lost market share. And I just wanted to know your views on that. So they say that the increased interest from the newer set of customers towards option trading probably is one of the reasons that they think that they've been losing market share. So what's just your general comment on that?
See, on market share, I mean -- at ICICIdirect, we look at 2 different aspects. One is the long-term aspect of gaining market share. And then second is the short-term, the tailwinds which we get from the market. So I mean, since last 4 quarters, we have been very, very consistent in terms of adding granularity to the market share, adding more number of customers through offerings like Prime and Option 20. So that brought us to a stage by Q4 end. And beginning Q1, because of the volatility in the market and the products were very much there in place, we got benefit of the tailwinds also. So I mean, the short answer is that this has a combination of all the hard work, the proposition, the consistent approach of adding more and more customers.
Ritika, if I can paraphrase what Vishal is saying, see market share is an outcome of effort. You can't just like that target a market share. But you can certainly put target a set of efforts that you are going to do, which will eventually lead to an increase in market share. And that's what we've been doing. And how are we doing this? We have been granularizing the market opportunity, we are segmenting, sub-segmenting and identifying different categories of customers, which appeal to different categories of some opportunities and then trying to maximize our flow of customers into each of these markets and buckets. You do that. And when you allow the opportunity to take over from the -- having enabled the customers onto the platform, market share is a consequence of that. So what we continue to do is continue to do that. Because we have mature customers, we have been able to attract millennials. If you look at from 2017, '18, '19, '20, 70% of our total customer acquisition is below the age group of 30. So we have a full spectrum of customers. We have age profiles well split, you have a diversification there. We have older customers, we have general customers who are engaging. So quality, as a focus if we do, and you give them a good experience, be sensitive to his needs, we believe market share will be a consequence of that, I think. That's the way we think about it.
Sure, sir. Just on the regulation bit, which obviously you answered. Just wanted to check, if I'm not mistaken, the circular doesn't really mention about the brokers really funding the margin which the customer has to bring upfront. So firstly, am I correct that there could be a possibility? And also, what we are getting to understand is that SEBI might not allow you to borrow it to fund it, you have to fund it through your balance sheet. Is there any clarity on there? And secondly, on this circular, while it came in December and maybe will be implemented maybe whenever December again. So it came in December '19, it will be implemented in December '20, but we were already asked by the regulator to start putting the margins in place since January already. So all in all, what do you really -- so firstly, on the borrowing, if you can clarify if there's any clarity from the regulator? And secondly, would it be really much would be a hassle or we are almost settled there because we were probably already doing it since January.
No. So I mean since January till this point of time, there was actually lot of deliberations happened between the brokers and the regulators and the exchanges in terms of modus operandi, how to implement this, right? And there, you received this circular day before yesterday, which says that now this is the final shape of the new regulation. And which is timing -- going to be implemented in a phased manner starting December 1, right? So last 6 months, a lot of discussions, a lot of things getting highlighted by regulators. But in terms of implementation, I mean, our sense is that it will start from December 1.Now as far as borrowings are concerned, I mean, the new regulation says it very clearly that if you are taking a position for x customer then that customer only should fund the entire margin. If you're taking for y, the y customer should bring the entire fund. I mean there cannot be any component of assisting him in terms of adding to his margin requirements or anything of that sort. So I think that is pretty much clear in the circular. The only, which is the intermediate period, the transition period, starting in December, next 3 quarters that customer may bring 25% of what is required. And the remaining 75% can be added by the intermediary. But eventually, I mean, it will become 100% customer.
We'll take the last question from the line of Alpesh Mehta from Motilal Oswal AMC.
Hello, sir. I just have 2 questions. So firstly, I see that your yield improvement has been quite significant on the broking side. How much of that is because of price hikes you have taken? And how much of that is because of the mix change between F&O and cash? That is question number one. The second question is, in terms of ARPU, what can be the difference in terms of ARPU between your Prime customers and your non-Prime customers?
Alpesh, to answer the first question, the improvement is primarily getting driven by product mix. We have seen, as we discussed in one of the questions earlier also. We have seen that the mix of delivery to the customer that on a relative basis went up. Derivatives, in this particular period. have been relatively lesser in terms of growth. So mix is driving yield improvement from last year. Coming to your second question of ARPU on Prime, non-Prime. We've not put out that level of the granular data. Having said that, we have seen that the Prime proposition where the yield the way we would calculate, I mean, is on a product basis, is lower. But we have not seen that ARPUs are lower. So, in general, and I'm talking in general terms, our experience is that the volumes are relatively high because these customers are the ones who are quality customers, and they are interested in equity transactions and investing, et cetera. So then they bring the volume as well. And that is where Vijay also mentioned that we are not too super strong on product level yield, product level profitability because derivatives could be at a fraction of a yield of an equity, but the ARPUs could be higher. So we look at the ARPU, how do you maximize the wallet share, that is what we are trying to do.
Right. So sir, with the number of Prime customers increasing, how should we think about ARPU? Will they actually come down or will they actually remain stable on a like-to-like basis, I'm not -- how do you budget for your ARPU?
So Alpesh, I guess some of these things would emerge maybe in a couple of quarters, and I'll tell you why I'm saying, because there are 2 or 3 moving factors over here. One is what you rightly said, adoption of Prime. So we are still growing in terms of number of Prime subscribers. Obviously, going forward, it can keep coming down because existing base already have adopted to whatever extent they wanted. So incrementally, the growth rate may come down. So that is one lever.The second lever is the product mix, which could be very, very contextual. For example, currently, there is a lot of equity participation and derivatives is relatively slow. Tomorrow, the mix can change with the intraday circular. So the intraday mix also would be one factor. Third, suppose our initiatives on growing the allied revenues because what we've been able to do or what we are trying to do is to build up allied sources of revenue, which may not be directly linked to the stock prices and brokerage rate. So how we are able to grow, whatever kind of scale or where does it settle? So some of these things, it's too dynamic an environment right now. But the way we are thinking about it is that if we get the input parameters right, if we get the quality of customers that are coming in right, if we're able to engage our customers and they become interested in a DIY manner and then we will be able to -- we'll try to maximize that opportunity. What that opportunity market offers could have some external dependency, but our approach is to maximize the opportunity and to increase the client base. I mean these are the 2 things that maybe you could measure us in.
We take one last question from the line of [ Deepak Khatwani ] from Girik Capital.
Sir, will it be possible for you to disclose the revenue breakup in terms of cash and F&O or cash and derivative?
Deepak, we have not put out that revenue. In terms of volume, where we have said that it is broadly in line with the market, and we have given the numbers also. Revenue share is something that we will not put out.
No problem. No problem.
Thank you. Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Yes. So thank you very much for giving us a very patient hearing and all the support that you've been giving us, really appreciate the kind of interest you're showing. We will continue to take the feedback and input that we receive from you from time to time and we do hope we are able to live up to your expectations. Please do take care and environment is indeed what it is today. And be safe, all of you, and your family. Thank you very much, once again, and have a wonderful evening and days forward.
Thank you. On behalf of ICICI Securities Limited, we conclude today's conference. Thank you for joining. You may now disconnect your lines.