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Ladies and gentlemen, good day, and welcome to the ICICI Securities Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Chandok from ICICI Securities. Thank you, and over to you, sir.
Thank you. Thank you very much. A very good evening to all of you, ladies and gentlemen, and welcome to ICICI Securities Third Quarter Earnings Call for fiscal 2022. Well I'm sure that by now you would have already [ produced ] through our quarter 3 results and also the presentation, which was uploaded. And I'm encouraged to report strong growth across all segments, our headline revenues came in at about INR 941.9 crores, marking a Y-o-Y growth of 52% and a sequential revenue growth of 10%. Further on profit after tax, as you'd have seen, has grown by about 42% on a Y-o-Y basis and 8% on a sequential basis and stacked up to INR 380.3 crores. I would now like to share my thoughts on our industry segments and the performance of the company in that context. Well, as you've all been following the current fiscal has been strong for all our business segments. The retail participation has been strong, leading to growth in market volumes, the flows into mutual fund industry turned positive this fiscal and the primary market activities have also been very encouraging and strong. The current quarter continued on this theme, by and large although I would say that there are signs of moderation that are becoming apparent. The retail client additions for the industry, whether you look at it in terms of NSE active clients or total number of demat accounts where strong in this quarter compared to last year and also the sequential previous quarter. But within the quarter, the trend of sequential month decline was visible in each of the months. Similarly on trading volumes, the quarter witnessed moderation in equity volumes, and this moderation was actually more pronounced towards the months of November and December. Derivative trading volume although continued the growth momentum did see some moderation in that rate of growth relative to the previous quarter. We are also seeing that the pricing pressure in the industry is now settling down. And the entire focus of the market players has clearly shifted to providing better experiences rather than playing the pricing gains. The other noticeable trend clearly is the consolidation of client and volumes with digital players in the industry. With regards to investments into various financial products like mutual funds, the industry, as I mentioned, witnessed a growing traction, monthly flows into mutual funds grew year-on-year and also registered a sequential growth. SIPs continued to show an increasing traction within the industry recording the highest ever quarterly flow. We've all seen primary market, capital market activity. Witnessed heightened levels with respect to the total number of deals done and also the total number of fund raise. As far as the regulatory area is concerned, some noteworthy developments where the direction relating to the T+1 settlement cycle implementation as opposed to the T+2 settlement cycle. On this front, we are getting up our systems to comply with the regulatory guidelines, and we are on track for that. There is also been deferral of directions requiring brokers to keep a minimum 50% margin that exchange in form of cash. This regulation does not really impact our operations since we've always maintained 100% margin in cash with the exchanges. There has also been an RBI direction, which actually are trying to align the lending products offered. By their subsidiaries with those that are applicable to the bank. And the impact of this is that the ESOP financing product is now going to be capped at INR 2 million per client, which is the limit applicable for [indiscernible]. Against this backdrop, our financial performance for the quarter as in the team has remained reasonably encouraging with growth across the businesses. During this quarter, I would specifically highlight that our client additions remained strong and the client added during this quarter actually backed up the whole of what we -- the entire amount that we did in terms of new plant acquisitions last year. Digital transformation has been helping us build scale of younger clients, 68% of new clients actually came in at a age of 30 or below and 87% of new clients coming in from the Tier 2, Tier 3 city. We are keeping close eye on quality as we are growing this franchise because we do understand that these clients may not have the same monetization capability, at least in their initial years as some of the clients that we acquired through other channels, which typically have a more affluent starting base. However, gradually, again, we are encouraged to see that with respect to the digital cohort, we are now already seeing that there has been a buildup of revenue, which has led to a situation where the monthly burn has become negligible on account of direct marketing costs and the burn actually now includes only some indirect costs to this cohort. Our focus on this front actually is to continue to focus on improving the digital marketing efforts so that the client profile and the mix improves in favor of better and better ARPUs and better and better quality. As far as equity business is concerned, we were able to grow as well as diversify our revenues. In this front, you'd have noticed that the total equity revenue -- the allied part of the total equity revenue has started now contributing 34% of the equity franchise and continued the strong growth trajectory in this quarter as well. In respect of our market share, the retail equity market share remains range down. In the numbers, we'd have seen a slightly declining trend, but we can attribute that largely to the institutional side, with retail remaining largely range bound. Our market share in derivatives has somewhat stabilized post the implementation of the last stage of margin norm in the month of September, while our blended derivative volume market was broadly in line with the industry. We continue to focus on implementing initiatives to enhance proposition for investors as well as traders. And we believe that these initiatives will help us improve our market standing in the more -- in the next few quarters to come. As far as our distribution business is concerned, there was a good growth in revenue driven by mutual funds. We registered market share gain for sequentially and Y-o-Y for flows in debt and equity taken together. We also feel satisfied with the strong growth at a granular level in SIP count and sit close market share due to our efforts through the launch of the Money app, which is now gaining good acceptance. As far as the insurance business is concerned, premium growth on a sequential basis has somewhat shown signs of flattening. We are working on multiple prongs to harness the entire insurance opportunity and creating the better journey, enhancing the products suit and integrating with the insurers, improving customer experiences and bringing it all on the Money app. We've also been focused on improving the distribution of assets. And the processes are being booked on to from being nearly digital to becoming more integrated with the partners, and we've also been able to make some progress on this front. As far as the issuer and services and advisory business is concerned, there was good growth on a quarter-on-quarter basis. We became the first Indian lead manager to top the equity deal table, strong pipeline is there across IPOs, project POs, investment REIT. And we are cognizant of the fact that this primary market tends to have an episodic character. And this could moderate in future. However, in such a context, we continue to focus our efforts on improving the recurring segments of our business in this area, which is basically QIPs, lots and advisory. Overall, to summarize, our approach continues to keep investing in fundamental input levers. That will help us build sustainability and build scale. We remain committed to hand holding our clients on their financials really and improving client experiences through the ICICI ecosystem. And therefore, there's a big focus on investing in next-gen technology capabilities to stay ahead of the globe. We are conscious of the elements of our business model being cyclical and this, therefore, could mean that we say it's short-term head. However, we continue to believe that the medium to long-term story of the industry remains strong and intact and we continue to focus on building up fundamental levers that would drive the cyclicality for our franchise and continue to doubling down on building granularity in our business. So we look forward to this momentum and capitalizing on the opportunities in the medium term. I'm going to end my commentary now. Thanks for patiently listening. We open the call now for any questions that you may have. Thank you. Thank you, ladies and gentlemen.
[Operator Instructions] The first question is from the line of Aditya Jain from Citigroup.
So you've disclosed in the presentation that the market share in incremental demat account is 7%. For context, sir, could you talk about the -- so this is on incremental. So what is the market share in the stock cost of demat accounts?
So it be the similar order Aditya, about 6%, I can quickly confirm it to you it be of the similar order. So talking about 1 crore accounts were opened in the quarter of which about 6.86 lakh those are our accounts. And on the overall demat also it be of the similar order, I'll just confirm it to you.
Got it. Then so the way to see the gap between this versus the market share in stock of NSE active clients is that we broadly have a better, active -- a more active client base or better activation rate, right? So that is the bridging metric or is there something else I wonder?
No, that's right. So if you take the NSE active overall population by demat, that could be the industry activation rate versus our would be slightly better.
Got it. And could you talk about the number of clients who are on NEO now for? Sorry if I missed it in the presentation, but I haven't been able to look at it.
NEO based now is about 1.8 lakh customers Aditya.
Got it. And then just lastly, the retail equity market share, so you mentioned that, that is largely stable. So where is this -- I think we had a similar comment last quarter also. So what is the number? And how has that moved Q-o-Q? If it's possible.
So actually, if you look at our retail market share, it is similar to what we saw for last quarter, in a flattish trend. It is -- few of, I would say, efforts that are being introduced, which will help us in our market share, particularly in the intraday side. We use certain products, which are actually not there. For example, T+5 as a proposition we don't offer. We are going to be bringing that out far shortly. There are certain expansion of share is margin shares, which can be in the top of providing margin. We are broad-basing that. One particular -- some products that we offer to our clients does not have this shared this margin all that's being introduced. So initiatives are planned, both on the equity and the derivatives side, which will sort of reinforce both these ends of the pipe, both these segments of the market. So many of them have started getting implemented, many of them will be coming in this quarter, quarter 4 and quarter 1. So I think a quarter or 2 thereon, the impact should be visible. In fact, when you look at derivates, we already are seeing some uptick visible in market share in the month of December on a sequential basis, but it's still early days.
Next question is from the line of Madhukar Ladha from Elara Capital.
Congratulations on another great quarter. So a couple of questions from my side. If I look at the quarterly broking revenues, they are flattening out and at about [ INR 390 crores ] to [ INR 393 crores ]. Now I wanted to understand where is this really happening in which segment? Is cash not growing? Or is it options? Broadly, it would be leased to as the future of this is very small is my guess. So some comment on that. And second, our cash market share is down to about 8.3% last quarter, it was 8.8%. So anything to read in of there or any comments of there, would be helpful.
So thanks, Madhukar, I'll come in and Harvinder can sort of continue this part. So thanks for your comments on the numbers. Yes. So when you look at the equity, briefing, again I think we had mentioned this earlier. And if you recollect our strategy, we have long said that broking alone as a singular line item is not an area that you should be tracking that because we are deliberately adding a bunch of non-broking equity-related revenue. So if you look at the non-broking equity revenue pools, combination, both on a Y-o-Y and sequential basis, you will see a larger number. So I would not be singularly looking at broking as a line item on its own because it really doesn't matter if this money -- the company is earning with providing a product which is right for the customer, whether it is NPS, whether it is a prime fee that he pays or some of the other charges that he uses, under certain plans and he uses, shares his margin and on and so forth. Really, it should not matter to me that it should necessarily count out of broking. So please my request would be to look at it in that context, and you will see a sequential growth and the Y-o-Y growth on equities cohort.Having said that, I think specifically to your question on cash, let me just briefly dissect what happened in this quarter. Actually, October was a very, very decent month in terms of both volumes and market share. November and December if you'll group. Both of these months had shown a moderating impact as far as cash equity were concerned, the volumes are there in the market. And on that side of the market, I would say that there has been -- we are actually -- when cash goes -- does well, we do well. That is something which was not to sort of favorable in November and December. That to an extent, impacted our market share, otherwise you would have seen a sequential growth in market share. That's the way it was all poised. We are actually beginning to see an uptick already in the current quarter -- oh, it is only 15 days thereabout. So I would say that the mix in the period that just got over was relatively less conducive for our construct of business where, which is our -- the areas of our strength. You are the market share in that particular context as far as equity is concerned. Harvinder you want to just -- is there anything that I missed out, you want to just close this?
Yes. So Vijay and Vishal here. So we bought 2 more time plans, there was 15 days back and achieved a very, very long response from our customers. The entire plan prepaid, which is also now our favorite product for the cash and the NPS customer that also under went complete unity and the new plans have been drawn. So I think very early days of this new plan and considering the response we got, I think in this quarter, which is the running quarter, we should really see a good participation coming from them. Also to capture more customers panning, there is a remarketing effort which is going on. We have a team which -- that each and every customer who showed a little bit of interest in cash, NPS and other equity products. So we reached out to them and kind of try to on go, we -- these are already read about the new product T+5 which is in making. And hopefully, we will be able to offer a better leverage because it's only 5 days product and it doesn't fall in NPS definition, that will liberate without hassle of creating plats. We already have bought shares as margin on a collateral in one of our T products, so then when clients have couple of layers back. So keeping in mind all the initiatives and a few more which are in pipeline, and I think everything should play out in the current quarter.
Just one final question. See, in the opening comments, you mentioned that. Obviously, this business goes through cyclicality and especially the investment banking piece of it. So what -- can you share some color on what could you do in case next year is a tougher year. So what -- and maybe if you could quantify how much of -- how much control over costs you could get? What is the reduction scope over there?
Yes. So I will start and then Harvinder, Ajay you can come in and close. So just to tell you, you're very right in saying that investment banking has episodic nature, not necessarily cyclical. It can be episodic. In that context, first, we have to view that investment banking side has bought certain -- the overall cohort is approximately 15% to 20% of our total revenue and profits on an average and historically, that's been the sort of mix. That's point number one. Point number two, when you look at the total cohort of this 20%, you will find that there are broadly elements which are more granular and more repeatable, which is institutional flow business. And then there is an element which is bought an episodic nature, which is the -- between the split between the 2, broadly, you could say anywhere between 10% and 10% of the remaining 20% or 12% and 8% in that kind of a ballpark. Where 8% is predictable and 10% to 12% has got this sort of episodic nature. Within this episodic nature, what we are endeavoring to do, there are certain more predictable elements. For example, QIP. And if you see QIPs and you look at the BFSI space, you will find that if you have a good coverage to the, let's say, top 50 BFSI companies in the country. There's a very decent chart that someone or the other is in a capital raise cycle once every 3 years. So 50, you get free -- will we get a number of opportunities every year coming out of this BFSI. That's a franchise, we have consciously strengthened in the last 3 years by building coverage, by building research capability there. And it is clearly reflected by the fact that we have a market share north of 90% in the BFSI space, when you look at the fundraises that have happened in the last 18 months. So we have a strong presence there. But presence -- sort of in a way nullifies or mitigate the impact of episodic business as being sort of less visible in a particular year. So that's 1 element of strategy. The second element of strategy is growing franchise, particularly on advisory side of the business, where we are seeing that there is a growing opportunity, particularly in the tech space. So tech space side we have increased and augmented people as well as we have increased and augmented skills there. If you look at our total cost structure and the flexibility there, maybe Harvinder, you can come in and elaborate what percentage of our manpower costs have a fixed nature and percentages got a variable nature because the variable nature actually ramps down in case of performance being sort of short. So maybe Harvinder, you can just come in and elaborate that.
Sure, Vijay. So at the overall level, now we have moved to a cost structure where about 57% of our costs are variable, depending on some of or the other parameters, which could be either marketing or volume range or customer base. And within employee cost also somewhere between 25% to 30% of the cost are in the variable category. So that definitely gives us one of the leeway. And I would just add to Vijay's point while he spoke about diversification in the investment banking revenue. Overall also at the theme, diversification is playing out. Within the equity business, we've put out that consistently from 9% to now 35% of the revenues have started coming from now brokerage business. Our distribution income mix overall is growing to about 17%, 18% now. So the lines that are -- trying to create more line at the same time having more variable component in the cost to give us headroom to manage either an episodic or a cyclical term.
Next question is from the line of Vidhi Shah from Antique Stock Broking.
Sir, I just have 1 question. For the new clients acquired, how many will be [indiscernible] so basically for first time they have opened their demat account? And which product do the typically start of with?
Yes, hello? About 25% of our NEO customers are coming from the newly acquired customer. And the behavior is like one can see cash as well as their derivative segment. So invariable customers are active in derivative, they trade in cash. So I'll say equal amount of participation in those segment. So the number is about 25% of our new customers in NEO are coming from acquisitions.
Next question is from the line of Prayesh Jain from Motilal Oswal.
Congratulations on good set of numbers. And my first question is on the possibility of our investment banking revenue pending that you can provide us for say this year at least from a full year's perspective. We have seen a strong traction in Q3 and Q4 come some clarity there, if you can help us understand as to what will be the [indiscernible] to career revenues.
Harvinder, you can comment there?
Yes. So also the investment banking overall sizing, it's difficult to get a overall revenue share. However, we do have a mobilization share. That's set about 68%. On obviously, the lease table is -- we are leasing over there currently on the ECM basis. Our revenue market size, I mean, it's slightly difficult to estimate because it's a bit fragmented industry, nothing for a formal disclosure.
Okay, okay. But from a run rate perspective, do we see Q4 to be higher than what we've seen in the Q3? Was it Q3? Was it [indiscernible] numbers?
So the pipeline is pretty strong still. But yes as Vijay also explains that some of these things are episodic, and they do depend on sentiment in general. We have an [indiscernible] kind of a pipeline right now. But the way it will get monetized. I mean we have to keep this in context that it has been last almost 1.5 years, where the fundraising activities have been quite high. So in that context, we'll have to see how we fundamentally in terms of the kind of deals that we are taking in terms of our role that we are playing across sectors, product expertise although it's fundamental levers we are investing giants. That outcome obviously will depend on -- factors, not all of them would be in our control. But pipeline is pretty strong, even currently.
Okay. And so on the core growth in revenues, like as Madhukar also mentioned about them being flat in the last 6 to 7 quarters now. Sir, is there -- is the understanding correct that the mix of the customers are shifting from also and the mix of the volumes have been shifting from the traditional business model to more [indiscernible] as well?
Yes. So again, broking as a singular line item is not an accurate way of understanding this total revenue opportunity from equities business. It's pretty much like saying that there is a flight from Bombay to Delhi and I will only insist on what is the air ticket of a passenger because over time, what has happened is that air ticket has gotten expanded by saying you need a meal, you want a corner seat, you want extra luggage and so on and so forth. It's pretty much similar what is happening here. So my request would be to look at the total cohort of equity revenue, which includes when you're availing -- earlier, it was broking, you pay 1 broking and everything else comes as a part of the package. Now it is activity-based pricing. So the pricing models are now gradually morphing to become more activity-based. So obviously, count all the activities that are performed by the customer and count all the revenues that activity of performance generate as a cohort. Singularly equity item is an interesting thing to look at, but that's not what we are driving singularly because that will be not right for the customer, just driving equity, just driving brokerage when he is indeed looking for a lower brokerage but willing to pay more by providing you float, by providing you a fee for a certain thing that you avail. Let me take that plan and let him pay as per that plan because that's what is comfort. So please look at it as a cohort. So yes, we have seen 7 quarters of sequential flatness, but just count the total fee and you see 7 quarters of sequential growth actually because that's the -- the strategy is to deflate equity -- the revenue -- the broking yield and not the business model to become a more broad-based activity-based pricing model.
[indiscernible] coming from the fact that the [indiscernible] registered considered them MTF book which still have much higher cyclicality possibly then, possibly even the full brokerage revenues especially if the markets they go for a steep correction. Then your interest book also would see a sharper correction the way you see it's all then -- given FY '21 one. The book is run down the prices are down. So that is most cyclical in nature. So how would you see the MTF book of -- over A medium to longer-term?
No, no, you're absolutely right that this business has a cyclical nature and that is the risk of this business in the short term. There is no running away from that. As a management team, what are we endeavoring to do. We are endeavoring to diversify and add more and more product elements so that you are not singularly dependent on 1 or 2 elements for your revenue. And that's the direction in which we are pushing the whole company, not just into equity texturization, but beyond equity is getting more into other products. It's a journey and with every passing quarter, we are probably getting more diversified than before. That scenario that you outlined, can it happen? Yes, it can happen. Has it happened in the past, last 10 years data we have put out, and we have seen that looked at in a 3-year kind of a horizon. We've seen a track record of about 20% plus CAGR of profit growth in that ballpark, 17% kind of a ballpark in a 3-year kind of horizon. So there is intra 3-year cyclicality that we witnessed in the last 10 years of analysis. But 3 years as a block we have seen consistent growth. So that risk is there. Our endeavor is to reduce that intra 3-year cyclicality by the efforts that we are doing. So we are in the middle of that process. And probably this quarter, we are better than last quarter and we will hopefully be better in the next couple of quarters than where we are today.
Perfect. So last question is on the distribution field. Wherein in spite of we adding a new partner in [ GDFP ] life as we are on a insurance, as we've seen a decline in a sequential for life insurance business. So what could be the trends that is still going ahead especially on a [indiscernible] side?
No, you're absolutely right, and that's a great question. It's a very disappointing outcome that sequentially, we have not grown our equity -- sorry our insurance business. In fact, we were hoping for a very good end of quarter in insurance. And our trajectory was inching very favorably til 20th of December. So 20th December, we were way ahead of where we were on 20th of the previous quarter last month, which is 20th of September. But the last 10 days, unfortunately, because of the sudden outbreak of infection rates, the whole momentum got broken, both at our end and also the customer end. Customers also just said that they just. So we just couldn't capitalize on that momentum and we land it up with kind of a flattish/3% decline actually would be accurate, which is very disappointing. But the pipeline is there, those deals are not going anywhere. They will get done in January. People are recovering and closing deals. So we are hopeful that it's a deferral rather than a loss. And the pipeline looks pretty promising from quarter 4 perspective. So you should see a sequential clear sequential uptick from here. By the way, in the industry also, particularly with our partners, we noted that it has been a minus 1% scenario even for our partner, main partner, which is [ ICSLI ], that's the IRDA number. And the second partner actually is a 2% kind of a growth. So they've also had a very tepid period is what I would say. But the physicality more than closing the deal unfortunately impacted the momentum in the last 3 days.
Next question is from the line of Arash Arethna from IIFL.
Just for us that you custom on the regulatory change where we either ask you to align your top finance product, it's a bank. So any idea on what sort of impact this would have from a revenue perspective in a quarter with this change?
Maybe Harvinder you can just elaborate.
Yes. So the revenue impact could be of the order of about INR 15 crores to INR 20 crores on a gross basis. So this is what we are expecting as an impact if we are not able to build that book.
This is not for quarterly basis, right?
This is for a period of time, Harvinder, INR 15 crores to INR 20 crores.
Yes.
You have to say that period, specify it, please.
So this could be -- for the quarter on a gross income basis.
Sure. And there's a second question on your total broking revenue around INR 392 crores. I think earlier you said that more than half comes from the cash segment. So does that still hold true? And also if you could give any -- as this part withing cash between intraday and delivery has that changed over time? Or is it [indiscernible] revenue stable?
Yes. So cash and delivery first in terms of volume mix, I think that has been slightly on a higher side over the last 1 year. Although what we've seen is that towards the end of this quarter. There we are seeing a bit of a moderation on delivery. But overall, it has been higher than last year in terms of the delivery provision within cash. You asked on cash and economic. Did I hear you right?
I was asking about cash and derivative in the revenue mix and the volume.
Okay. So revenue mix for us, no, no significant change our revenue is more titled towards cash rather than F&O and that continues to be the scenario even now.
Next question is from the line of Aejas Lakhani from Unifi Capital.
Quick question first. Is my understanding correct that the ESOP book, which is, whatever, INR 6,600 crores now, that should remain constant from here on and this revenue that we have booked of INR 146 crores, you're seeing unless we're able to grow this book, it should decline by INR 15 crores to INR 20 crores next quarter. Harvinder, is my understanding correct?
No, no, no. Harvinder, please clarify.
Yes. So the clarifications over here. First of all, the book of INR 6,600 crores is MTF plus ESOP both of them are included in this of which the MTF is the larger portion, there is no impact on MTF. Thus, ESOP which is a lesser portion that will wind down. So it will not be immediately next quarter probably but no new exposures can be taken, but existing exposure will complete that tenure. So yes, eventually, that would be the impact. Only arising out of ESOP and not MTF. MTF and the book continues to grow. We have a market share of 22% over there and that growth even this quarter have grown sequential.
Got it. And could you give the revenue split? Or you're not sharing that from the MTF portion and the ESOP portion separately?
So we're not put together but let just you that a majority at more than 80% of the revenue is MTF.
Majority of the portion, sorry?
It's MTF, MTF. More than 80% is MTF.
Okay. Got that. The second 1 is a bookkeeping question. Actually, in the second quarter result, your other distribution product had a revenue of about INR 61 crores. This presentation you have reported that number is INR 43 crores. So could you explain that. What is the gap?
Do you want to...
Sorry, you're comparing -- can you please repeat the period?
Harvinder, what we're trying to really understand is that you are distribution income. Which is the portion which is the non-MF distribution, which comprises of you know how we report it as life insurance and other distribution products. That's correct, right?
That's right That's correct.
So if you look at this quarter, you have reported the other distribution product for 2Q FY '22 is showing as INR 43 crores. Last quarter, you had reported this number as INR 61 crores -- it's okay, we can take this off-line.
Let me come back to you on this.
My next query is that there -- our market share -- we've seen -- if you look at it from quarter 1 of '22, right, that number has been trending downward. And it's a little worrisome today. So I just like to know it moved down -- from versus 11% to now 8.3% and while the management has kept highlighting what happened quarter-on-quarter, I'm just generally wanting to know how you think we should look at this because the number has been gradually declining.
So you're talking -- sorry, I missed -- your voice is a bit baffled -- as the -- matric you're talking about this...
Sir, I'm talking about ISEC's equity share in ADTO has come down from about 10.7% to 8.3%. And if you look at it over the last 7 quarters, it's been under gradual decline stage. So as an investor, this is obviously worrisome, but we really like how we should be doing this on your side. We really like you sort of point out how we should be doing this?
You're talking about the equity market share, right?
Yes, yes.
Yes. Please go ahead. You'll have to explain it in the context of the MTF -- the marginal regime vs the new regime.
Yes. No, I'm following that. I think we followed you all through the conversations and we're aware of all of that. But the fact that is declining, is that what...
So yes, I got you. But that's what I was saying for the last quarter sequentially, I thought I explained that we have seen a flattish number when it comes to retail, right? You're seeing combo of retail plus insti, which is showing a declining trend on a sequential basis. If you were to dissect it and look at retail versus retail previous, you'll find a flattish trend compared to on a sequential basis, which means that the impact -- adverse impact, rather, of the margin, the new margin regime, has been fully absorbed, and we have started, I would say, seeing stabilization of market share which actually improved in the month of October and then sort of moderated in the month of November and December because of the market conditions that I was explaining earlier, leading to an overall flatness in market share and to offset that. So looking forward, obviously, our endeavor would be now to having stabilized it and flattened it is to show an improvement. So our efforts going forward is to show an improvement for which there is a bunch of initiatives that are planned within the company. So clearly, our endeavor is not to see that trend going down, but to see the trend going up in terms of market share.
Next question is from the line of Digant Haria from GreenEdge Wealth.
Yes. My question is on the margin trade funding book. So just wanted to know, what are the limits of this book? Like can this book by INR 10,000 crores, INR 15,000 crores someday. Are there limits from, say, the rating agency or the regulator or the bank that is possible. So that's question one. And the question number 2 is what are the levers of excellence in this. We already have a good 22% market share. So what are we working a lot on making it so much more easier so that more and more customers use this facility. So these are my 2 questions, sir.
Harvinder and Vishal, if you can comment on it.
Yes. So definitely, I mean, MTF will say it clearly according to the market conditions also. So I mean the endeavor is basically to get new customers and also as you rightly said that create a journey in such a way that product can be consumed while funded -- while transacting. So you have seen 1 small addition which we have done in this last month. Today, when you get a buy order, during the journey, you can decide whether you want to pay it later or we want to pay the entire amount now. Not that's a small change, but that has not a very, very for us. I think the 23, are very, very encouraging outlook for us. I think 2 things are very, very important for this customer, and we continue to on both the factors. One is the interest rate because the unit position and customer actually let's say paid 25% and take remaining amount or borrowed remaining amount to position so interest is very, very important factor and second the brokerage. So as I said that, due to prime plans which we bought those 2 time plans have not on better brokerage rates, but better interest rate also. And we saw -- I mean an initial trend and very encouraging. And a few more initiatives are in pipeline. Basically, MTF book will also grow along with that. And so it cannot be seen in isolation those customers that can't take actioning debt and at times an MTF. So we continue to leverage our existing customer base, simplifying journey so that products can be consumed by more number of customers, great attraction in interest rate in brokerage plan and access new customers for market. So effort to clearly -- scale up number of customer and also the book bank.
Also Digant, if I may comment for the limit, if any. So the regulatory limit basically says that upto 5x the network you can lever. So today, we are at, let's say, about [ INR 20 billion ] or [ INR 21 billion ] of network. So up to 5x of that is limited regulatory limit in that sense. As far as the rating [indiscernible] is concerned that is not a constraint. It's more of the network and 5X the network up to that time is that maximum that we can go.
One more question, if I may ask that in terms of customer onboarding for MTF like how easy or how well equipped are we versus the other players who are providing the MTF. My question is generally because if you look at the F&O volumes in India over the last 6 years, it will be completely countercyclical. Like there is no cyclicality in each of the last 6 years. The volumes just keep on going up. Maybe just because it has been made so convenient for people to do option trading. So can we do something like that in MTF like and maybe how easy would you rate your process or customer to onboarding starts journey versus where you would eventually want to be?
Yes. So Digant, I mean in the MTF today, if you really want to take a position using this product, you don't have to do anything actually. You simply have to go and buy shares just go on the screen and check -- there's 1 check box which you have to tick, that's it. And that's how the entire -- I mean [indiscernible] can happen. So there is absolutely no bottleneck no paperwork, which has required no additional online declarations to be given, et cetera.And because it is simple, I may the Q3, we just ended and we are discussing those results. But ever the higher in terms of number of customers opting MTF. So on a month-to-month basis also, it was one of the -- I mean, the 3 months of debt on quarterly basis also and that is result of the simplification in journey which you rightly pointed out.
Let me comment and add a couple of points. See one thing is trying to remove cyclicality by the product like MTF and simplifying MTF. I don't think that that's the way we would sort of think about it because there are phases in the market, but MTF is not a right product for the customer. It will be not right for us to pursue an MTF opportunity when markets itself are trending downwards. So to expect it to be kind of simplify and you will be able to encounter the counter-cyclicality nature of the market -- fitting it too much. We wouldn't want to do something like that. But we certainly want to provide a good experience. When we say good experience, not just about availing the service, but also making money out of that service because that is what we believe will get longevity. That is important. That is why we actually -- in the last 2 months, we actually pulled off a little bit when we saw there were some uncertainties in the market. It is one of the elements of ecosystem that we have provided is research inputs. It has to be supplemented by a research input..
Right, Vijay. And congratulations, once again, on fighting back in such really turbulent times. congratulations.
Sorry, before we proceed to the next question, I'll just clarify 1 query that was asked by Aejas, about distribution income. It is actually -- if you look at it, there's an additional line of insurance income, which is separately disclosed. So if you add insurance and others, you will get to the same INR 61 crores. So I think that is probably the missing link if you do excluding mutual that income is INR 61 crores, which is you have to add other and life insurance. That I think is the comparison. But if there any follow-up question, we can also take it offline. So maybe -- Suresh over to you.
Next question is from the line of Kartik [ Sahon ] from Myriad Asset Management.
Sir, first of all, wish you a very happy new year. I just want to highlight the fees and commission expense, which has increased at about 77% year-over-year. Can you help me map this will be increasing your brokerage income. It was 8%. And again, your distribution income, which was around 55% growth.
Thank you very much. Harvinder, may be you can come in?
Yes, sure. So this has a few core different type of elements over years. One is the 2 things that you mentioned that we would have revenue share even with various partners will depend on partner-specific revenue increases, et cetera. Secondly, this will also have the investment banking-related revenue share. And if you'll see that investment management revenues, there you would see a strong growth. So bulk of the increases are coming on -- also on account of investment banking, where we have passouts pertaining to our distribution of...
Okay. And in terms of your equity, you said that it should be looked at on an overall basis. So I just wanted to understand what is your target for the ARPU?
ARPU. You're talking about ARPU?
Yes, yes.
So what we have overall is not a very product specific target over here was to try to do that for a particular customer across the various product lines, how do you kind of maximize the opportunities. So today, for example, if you take not only equity but all the retail products taken together, we would be somewhere in the range of about INR 9,000 to INR 10,500 kind of an ARPU. What we try to do is we try to service the customer holistically with -- particularly. So we don't have an equity ARPU target purpose. The idea is that the clients research should grow. And the aspect that our clients are keeping with us, they should keep growing because as and when that happens that is the quarter in which we can earn any kind of proceeds or income or of booking income or a mutual fund fee or whatever name you call it. But that is how we try to approach it. And therefore, ARPU is an output of that.
Okay. Understood. And also, can you give me the number of branches that I said is operating currently?
Today we are at about 140-odd branches.
140. Okay.
Next question is from the line of Nidhesh Jain from Investec.
Firstly...
Sorry to interrupt, Mr. Jain, but your voice is a bit low. Can you speak a bit louder?
Is it better now?
Yes better. Yes.
First question is on the again retail equity and a right revenue. There, if you look at the breakup, this quarter we have seen very good MTF and other part, but prime and other fee income also seems to be moderating despite this reasonable customer addition or on the prime side as well on the NEO platform. So what are the reasons there? How do you see this trend playing out on the prime and the fee income?
So as far as time is concerned, as I said we continue to have a robust set of customers coming in. And in fact, Q3 saw the highest number of additions in prime. So total time book today stands at little over 9.5 lakh customers and hardening factor is more than 75% of the customers had gone for auto [indiscernible]. So they don't want even to come back again and make a renewal request. And as I said, that 2 more plants have been launched with more attraction. So I think it will be our endeavor to continue to build this strength in time and the momentum must continue.
You also the daily runway, monthly, et cetera, we are mentoring. We have seen some of mix economy. So even NEO, I mean, we have not seen any kind of moderation we say over 500 new customers opting for NEO and derivatives. NEO will take, few numbers here and there. It largely is in the same order of 500 daily.
Just to add to what Vishal said, I think we also have to look at it in the context of what really is prime, prime as a proposition is a way to attract high intent customer. Because if a customer has paid a subscription fee and then joining a loyalty program and prime, we have seen much higher ARPUs. And therefore, our endeavor is to maximize the number of customers joining prime. The part of that, what we did over the last 1 year is we have introduced a tranches of prime. We introduced something called [ Sotha ] prime about 3 or 4 quarters back at INR 2.99. We have recently also posed some other variants of prime, the idea is to get high-intent customers and then actually start seeing the result not only as subscription fee, which you Vishal, explained but also as a high-intent customers resulting in higher ARPU. So that context also, I want to repeat it.
Yes. So tomorrow, if there is any other parameter which we can identify where we can assess or measure the potential of the customer I mean, we would rather play out that variable also. So today prime is one way of identifying a set of customers who may be doing higher volumes, leading better pricing, et cetera. And at the same time, such pricing we don't give to any customer to make sure that we make property on the low revenue, giving a low volume giving customers. So I mean, we think as kind of ever changing and tomorrow we may think something else also if [indiscernible].
And sir you talked about some changes in the prime plan and the prepaid plan to improve the activity levels of the customers. So do you expect any revenue impact of those changes? Or how should we think about some revenue perspective of these changes that we are seeing?
Yes. So -- I mean, some impact, I would expect to come from the existing set of customers opting for higher value prime. But at the same time, we have seen attraction from the newly acquired customers and also in our reactivation activities, where we reach out to the other type of customers who are stock for some reason. So we are reaching out to the newer set of propositions. And net-net, I can say there will be alpha we are gaining more than what revenue compression we see coming from the existing set of customers.
Sure. And sir, lastly, on the new plan. Also some slow deal come on the new plan, do you have float income is [indiscernible]?
Yes. So float income will come under the interest income because what we can do for any kind of a client money, fortune, we can only make fixed deposits and keep it with exchanges. That is the only ring fence, which is allowed. So that is where it gets clubs. Under interest income.
The next question is from the line of Sanketh Godha from Spark Capital.
Sir, on ESOP book, which is around INR 530 crores at the end of March '21. If it has to run off completely and then we think only how the quarter run off, I just wanted to wonder -- wondering when we do the modeling, should we assume that after FY '23, it will become almost 0 for us or how it is?
Yes. So it should -- not depend on the exit which customer gets -- if they get a consumer like this things may wind very quickly. And many of the customers who are confident about their investment and then they continue to pay interest and hold their position, and get the trend, which we have also seen so I would say it should take about 4 to 5 quarter in all for this book to turn down considerably.
So if I may comment, I think here the number -- you cited a number. Did I get...
I mentioned ago report as of March 2021 it is INR 528 crores. So I was hoping...
Yes. So that would have been 1-year-old story, it is highest now. So I just want to correct that.
Okay. I was referring to 9 months old which is INR 528 crores.
Right.
Okay. And sir, I just wanted to understand that are we seeing mutual funds have structurally improved by 10 basis points from some 0.65 to 0.67. Sir should we attribute largely to the final contribution of [ HTT ] or there is something else which is leading to the improvement in the yield?
Largely that, Sanketh.
Okay. Perfect. And in the excel sheet which you have disclosed last time in the quarter. Just wondering, there is a number called other revenue of INR 49.3 crores. So sir, just wondering this is largely the float income, what you have will be coming from -- coming from the account which you have opened outside bank, which was probably very small number in the past has now grown to INR 49.3 crores figure? Or it is made up of many more investments?
No. Let me clarify, Sanketh. INR 49 crores, it is always there as a number of interest income, if you remove the interest that we have gone from MTF and ESOP. See MTF and ESOP is clearly part of the allied income. But we also on interest on fixed deposits that we placed this exchanges as margins. That is the most significant portion, may be more than 95% of that element. Everything else would be under that. But yes, it is -- that element which is there. Fixed income, we have total of about INR 7,000 crores or INR 8,000 crores worth of a lease. The interest that is getting all over there is primarily the contributor of [indiscernible].
Got it. But just wondering, given, we have now many accounts opened outside ICICI Bank, if the activity is increasing it should become an meaningful source of flow for us has it reached to that level or it will take a decent amount of time to reach -- to make it an important market in total revenues in.
Yes. So it will -- that is growing pretty rich. We will even also take a call to put that out as a separate line item maybe, let's say, cross INR 1,000 crores or whatever. It is growing well and increasing becoming more and more relevant. And the float income and even the customers are opting for NEO. So -- and account is about 1.8 lakhs. They also have to compulsory come in a short model. So irrespective of where do the growth bank account, whether other bank or ICICI Bank account if they want debt proposition, then they will have to come for their deposits model. There also, we have seen a significant attraction..
Got it, got it. And finally, just on the other non-mutual fund and noninsurance related distribution income. We see a significant traction in the loan book other than home loans. Home loans have actually moderated to 13%, but other loans have grown very strongly, almost, almost like 162 percentage year-on-year. So just wondering each of these products, which are the pilots? And do you see with this INR 178 crores of disbursement, what you've seen in third quarter are sustainable figures or not?
Yes. So Sanketh, 2 things. One is the kind of products, you have 3 questions, what are the kind of products, what is the traction? I mean, what is the reason for the attraction and whether it is a sustainable or not. So specifically coming -- products. We have a total of about 12 products. And it includes apart from home loan, it includes business loan, gold loan, SME, even credit card distribution. So there are almost 12 products. What we're seeing is a traction which is growing because this is a line which we have started focusing on over the last 1.5 years. We are also looking at it from an overall process revamp point of view trying to make the process more decongested, seamless for the customer. Some of those things are also helping. And they're going behind specific needs. So we have had a scenario where you had to move physical pile, we would come or physical pile would need to direct to the manufacturer, which could be banked and clarification. So all this was quite physical. It has also become a bit digital. Digital, if I may say. So closures are becoming slightly better. Lead management is becoming slightly better. So those are some of the structural things we are looking at, it is still WIP. We would not say that -- could be done. And all these products, specifically, we are running campaigns we're trying to get the leads and that is resulting in an increase. We believe actually number could grow lower than being sustainable, I think this number actually could grow because just trying on various level on that.
So again, I just want to clarify one more thing. You put out one number, what was that number, i.e., INR 170 crores or INR 200 crores or something to that effect.
Yes, in third quarter, in the Excel sheet you have the [indiscernible] which has disclosed, it is mentioned at INR 178 crores.
No, no, no. That number is understated there. It is higher. Total number Harvinder, please clarify what is the total disbursed...
I think Sanketh's question is total nonhome loan portfolio.
Okay, nonhome loan. Okay, fine.
Non-loan portfolio is INR 178 for the quarter and INR 410 crores [indiscernible] home loan. So the total number is about INR 5.9 billion, 590 crores.
Yes. That's right. I couldn't hear what you were saying properly. Harvinder, this is 49.4 cores of other distribution income other than the mutual fund and the license share income is completely related to loans only, right?
No, no, no. No, no, no. That is not correct, Sanketh. It has a long tail of products and I'll give you the main product category also. So it has a whole range of fixed income products. We earned distribution fee from distribution of gold bond, corporate bonds, fixed deposits, corporate deposits, that's one category. So we call it fixed income as one category. Then the second category is the alternate or PMS distribution. So that's the second category. Then you also on [indiscernible] of plethora products. So you have NPS, you have general insurance. I mean a lot of products including home loans which will fall into the third category. So three or four predominant categories are sitting in that INR 49 crores of overall. It's not only home loan. Home loan may -- you can say that about -- if you have like INR 590 crores, roughly the yield would be in the range of about INR 0.80 to INR 1 depending on the product mix.
Okay. Got you. Perfect. And just a final thing. When I said clarification, I think I am clear but just confirm me. In the institutional allied business, probably 1 -- INR 25.1 crore figure is part of IB income, right? So it's already imported in INR 110 crores what you reported in net income?
No, no. So this is a revenue share. So IB income is any ways excluding the revenue share. So it is IB income, which is allocated only to investment banking. The part of that they share with institutional bookings earlier. So this is a disclosure that was always sitting in others. We have tried to bring more and more [indiscernible] into reporting and therefore, carried out from other and put that at this particular element belongs to institutional booking. This -- so this plus the IB will be the total fee that we have taken from the client. Again, let me repeat that. The investment banking revenue plus the revenue share that is there with investment bookings. That is the total fee at the company level that we would have received. But what is allocated to our business segment, IB, is different and what is allocated to institutional equity is the share.
So in the older disclosure, where this INR 25.1 crore was sitting then? Which part -- which revenue line item?
So it is the [indiscernible] the fee. The first line item is brokerage. The other line item is fees and commission -- sorry fees, the others are distribution -- other fee. Under that line item, you will have investment banking. You will have a distribution fee. So that is where it will be sitting.
Got it. Harvinder, just a clarity from hygiene point of view. You will incrementally maintain this Excel sheet, right?
That's right, that's right. The idea is that this Excel sheet provides complete clarity for the benefit of people. That will provide complete clarity on comparable line items.
Okay. Perfect.
[indiscernible] disclosure, yes.
Next question is from the line of Shreya Shivani from CLSA.
Just wanted to check on the ESOP financing thing that you mentioned that there will be a cap of INR 2 million per client. What is the exact date from which this is getting implemented? Is it already implemented? Or is there a future date? First is that. Second, on the ARPU, you mentioned that your ARPUs are in the range of 8,000 to 10,000. Specifically, can you help us understand for the new customers who were onboarded last year, what has been the growth in their ARPU? What has been their -- what has the trend with their ARPU. And one clarification I wanted in this. In the beginning, you mentioned that there is a new directive, which requires brokers to keep 50% of the margin money in cash. What is -- you mentioned your percentage on this and how much -- can you repeat that bit as well?
Let me go on one and three and then Harvinder, you can talk about the first. The ESOP has already been implemented in December. We've started moving to that model. And the third one is in terms of the cash that we keep 100% of our requirements in form of cash. The other options to keep in form of shares. We keep it in form of cash always. So it doesn't really impact us because now people who never would keep it in the form of cash and keep it in form of shares will have to minimum keep 50% in form of cash. So I hope that clarifies with respect to the ARPUs we acquired last year, Harvinder you can start...
Yes. So vis-a-vis last year. So we have not put out a cohort-wise ARPU if that is what your question is. Shreya, but I can give you a general direction. What we have seen and we have kind of articulated earlier also that the newer customers which are joining the cohort are much younger. And their ARPUs are expected to be slightly lower as compared to what we have traditionally seen. And as a result of that, the overall portfolio ARPU has seen a bit of a decline as compared to last year. However, what we are looking at is that at an overall cost level, if you take retail distribution plus equity, I mean all the products put together, our -- currently, it's at that level. But as the mix of these customers increases, it is possible that, that could see a downward trend.
The younger customer base, which is joining is more of a trend of this year, right? The previous year trend was not as...
I would say about 1.5 years. So September of last year is where we started getting some traction. October, November and so on and so forth. So from there is where we have started getting some traction.
Got it. Got it.
But just to clarify, the traditional sources have also increased. It is not like that other traditional sources is forgotten. So what we were acquiring for 20 years has also started growing at a faster pace, and this cohort is an add-on cohort, which never existed for us in the past. So it is not one replacing the other, one augmenting the other and the original one piece itself is also getting -- gaining traction. It is growing at a faster pace, [ INR 25,000 INR 30,000 is now at INR 30,000, INR 40,000 ] per month, which is the traditional cohort..
Next question is from the line of Kashyap Javeri from Emkay Investment Managers.
I have one question. When you say -- when you give that NSE active client number, do we remove also clients who haven't traded in terms of activity for the same period as we -- adds the clients in terms of active clients.
Yes. Yes. It's an active -- it's a rolling 12-month number, which is not published by us. Actually that's published by NSE. So this is in NSE data, they publish every month. So for example, if any customer traded in the month of, let's say, we are in the project of 2021 as the last trade -- And we are, let's say, entering the month of February where he did nothing from January 2021 till the month of February 2022, it will fall off. Till January, it will be included as an active customer, but in February, it will fall off from the list of active customers.
Right. And any of the brokerage income -- because of this classification in terms of revenue would have been part of, let's say, income which is classified as prime or income, which is classified as MTFs [indiscernible] Client which have gone off by, let's say, 20% or let's say, versus about 2.27 to let say, 2.75, ideally there should have been some change in the brokerage income. It can't be -- I mean retail brokerage can't be just flat [indiscernible] ...[Technical Difficulty]
Sorry. So if I've understood your question, your question is are you comparing Y-o-Y versus Q3?
If you compare Y-o-Y -- I mean your retail brokerage revenue, if I were to exclude prime and ETF and -- sorry, ESOP and MTF book still would not have grown in line with the active client additions.
Yes. So that is correct...
Some bit of pricing and migration to prime or new would have happened. But even Q-on-Q the client addition is fairly aggressive investments.
Yes. So there are three factors primarily, which will contribute to this trend. One is exactly the way you said that there will be incrementally cemented towards prime, new, prepaid, any of our plans which offer better gains. So therefore ARPUs could have -- or brokerage, absolute brokerage could have an effect of that. Number two, on any kind of Y-o-Y basis, the contribution of that client which are new to us adds a proportion of overall clients that's heavily skewed towards new clients. See, supposing there are 100 clients. And here, you were acquiring let's say 10 clients incrementally the mix was more skewed towards the existing clients. Now what has started happening is because of the growth in digital, a lot of clients are still in their 0 to 12 month vintage bucket, which will definitely not have the same ARPU or same revenue generating opportunity. That's the second reason. And third reason which I discussed earlier, is that we should look at allied income. The reason is not only because it's a different source. The reason is that our strategy has been to broad-base. As a result of that, we have kind of brought down our -- as some of these things have gone up. Other charges -- it's a free texture which is changing. So therefore a more appropriate comparison would be after taking allied also. But even if you do not take that for brokerage, these are the factors which influence that.
And some of this pricing or yield, which would be -- we would be losing probably in terms of retail brokerage revenue? If I understood correctly a bit of that is compensated because of the allied charges that we earn from the same client?
That's correct. A lot of it. So I will give you an example, in [ NEO ], for example, you have a flat brokerage of INR 20 per order. But you have 4, 5 different type of charges. You have interest income, shares margin. You have charges for transferring money and so on and so forth. So therefore, it is -- I mean it's a modular pricing so to say.
Right. And which is by Mr. Chandok, he keeps referring to total -- look at it in that fashion.
Correct because now activity-based pricing and not only brokerage.
Ladies and gentlemen, we will take our last which is the from the line of Sahej Mittal from HDFC Securities.
Congratulations on a great share of numbers. So most of my questions have been answered. Just 2 questions from my side. So given that the activation rates for the [indiscernible] for the quarter, what is the average wallet size of the digital customer which we are acquiring or what is the average trading size? The reason I'm asking is that if the wallet size is totally small [indiscernible] 6,000. And if markets goes through sharp corrections, then are these customers loading [indiscernible] investing, coming again to the markets or [indiscernible] initially then do they turn dormant? What are the trends you are seeing? That was first and the second one was [indiscernible] What was the marketing spends for Q3 maybe also for Q4?
Yes. So let me comment and Harvinder you can talk [indiscernible] You articulated some very interesting points around what this behavior [indiscernible] cohort is going to be. And as we are -- for us, it's now roughly about 8 [indiscernible] of experience in this particular space. What we are seeing also -- we are, in a way, seeing an evolving sort of behavior from this cohort. And therefore, we have not sort of started putting out details beyond what we have already said. We started seeing[Audio Gap]