Multi Commodity Exchange of India Limited (MCX) Earnings Call Transcript & Summary

Good afternoon. I'll just quickly introduce our Managing Director and CEO, Mr. P.S. Reddy.

Yes. Good afternoon Mr. Sailesh and other colleagues from Nippon Union Mutual Fund.

Hi, sir. Good afternoon. Sailesh, sir, I think he'll be joining in the next 10 minutes.

No problem. No problem.

But we can start.

Yes, please go ahead.

Sir, thank you, first of all, obviously, for giving out time and doing this call. Obviously...

Checking on the videos so that I'll be able to, what you call, connect better with your faces.

One second. one second. Just hold on. Yes, let me try and do that.

Hardick, are you there? Mr. Gaurav and Hardick from Union Mutual Fund? Okay. They are at...

Am I audible now?

Yes. Yes, Rishit.

How are you, sir -- I'm good. I'm good, sir. How are you?

You're working from home?

For today, because I had like multiple calls. So it's always easier because the day has been crazy.

Good. There's a lot of traffic jams along the Western Highway. I don't know where you -- which side you stay. And...

So I stay in Kandivali and it took -- so I used to spend about 3, 4 hours. So I took a sort of wise decision that -- don't travel on the other way.

And it happens without knowing ourselves that we are taking a wise decision. As a fund manager, you must have observed it also.

No, no. Obviously, you take the plunge, right? You take a bet and if it works, it works. And if doesn't, it doesn't, it's okay. And that's part of life. Anyway, sir, so again, thanks for doing this call. I'm Rishit from Nippon. I look at -- I've joined these guys about a year ago now. Prior to this, I was working on the sell side for Goldman and Nomura. I've joined these guys and I cover a fair bit of space for them, including tech, part of health care, part of exchanges, aviation, et cetera. So that's what I do here. I think shortly, I'll have our Deputy CIO, Mr. Sailesh Bhan, as well joining me. But -- so that's about us. We manage a fairly large fund. Sailesh sir looks after the large cap fund and -- as well as the pharma fund. And I think we've been holders for MCX for a fairly long time now.

Again, so with that, I would want to start potentially on the 2 or 3 key questions, right? Essentially one -- so one, essentially, let's start with the tech and then I think then we will try and address more on the product side, right? Just wanted to understand on the tech side, what is the status with respect to TCS? Are they on time to deliver the platform or there will be delay? And if there is a delay, what do we essentially plan to do? Will we end up doing a 1-year extension with 63 Moons? How does that sort of contract play out? Can they be opportunistic, et cetera? I mean what's the fallback in case TCS ends up with a delay for the delivery?

Yes. See -- yes, there is a delay in the TCS. In fact, in the call also, I said that. Now they're saying that on August end [Foreign Language] they will deliver. And thereafter, we need to give them mock runs and parallel runs, et cetera. At least I need a clear 2 months of a clean run, okay, without any problems, then we will be able to go live. So sometime in November is what we are looking at it, if the TCS, as planned, delivers it. Since our contract ends at the end of the September, our Board in the last meeting has advised me to get into the negotiation discussion with 63 Moons for an extension for a maximum period of 6 months. So which I have initiated. And I think we are hopeful that we will get some response from them. And -- I mean nothing they will lose if they extend it because currently, the pay that we are paying is also very attractive for them. Having said this, will they turn opportunistic? I do not know. I don't want to ask many questions. It's not fair. And we expect them to be just as professional as any one of us are. And I think we should be able to get that. That's the way I look at it. And -- I mean we are also having Plan A, Plan B, Plan C kind of thing. And we will -- I'm not able to disclose any of those things because I may be jeopardizing all those plans. So that's why I'm not talking anything, but we are working on all the plans.

Okay. And from a, let's say, cost perspective, is there a delta? I think, obviously, we've discussed this in the past as well. But just wanted to still understand this a little more clearly. Let's say, whenever we switch to TCS -- I think last time when we spoke, you talked about that, look, depreciation will eat into the cost savings. And essentially, there will not be a lot flowing into, and it will be only 3, 4 years out is where we see the benefits from a PAT or from a, let's say, lower perspective. Is that something that you would continue to sort of hint on? Or there's more color that you can provide there?

See, it's not a more color but a more -- a kaleidoscopic view here. What I said is true with the current volumes, okay? But once we step into TCS platform, if the volumes increase, there won't be any corresponding increase in the -- either the depreciation or any other cost of it. So whatever that goes beyond will come into the bottom line only. That's the way I look at it. So we need to look at this contract -- fixed versus variable contract kind of situation. If you look at it, then the increase in volumes, there won't be an increase in costs. That's the way it is.

So here, I think there will be -- obviously, you'll purchase the license and then there will be just an AMC bit that we'll end up paying on a recurring basis. That...

That's all included in the costing that we have done for about 5 years -- 1 plus 5 years, already there in it. So it's not an issue, but then probably that AMC costing will be, what we call, debited to the P&L and the year in which it is being incurred. But currently, it's not much.

Also other, we'll have to -- they have already procured hardware, the servers and there'll be some operating expenses. So in addition to the TCS costs, these other expenses will also be there.

And like maybe Linux or Red Hat plus some of those licenses actually...

Okay. And just if I look at the current quarter, if initially, some of those costs will already be there, which also results in sort of lower EBITDA or that's essentially not the case right now?

It's not yet put to use. The new platform has not yet been put to use. It's all under [indiscernible].

But is there any other OpEx costs or any other costs which sits in the P&L? Obviously -- the way I understand, obviously, a new platform is not yet in use, right? But there might be some costs that you might start to incur, let's say, 2, 3, 4, 5 months prior to just maybe test it or -- so that...

There are some manpower costs, but then that we are capitalizing it. Those manpower is put to build this platform and test it and all that kind of thing. So those expenses are capitalized.

Okay. So not a part of P&L as of now. Okay. Understood. Now coming back to the product bit, right? I mean there's a phenomenal rise, I think, in terms of the option volume, right? Bulk of it is obviously crude and natural gas. But still, I think -- even I think this -- so are you super surprised by the way the options volumes have picked up? Because I think -- remember, when we spoke, I think last -- to last quarter, I think you would interact volumes of this kind, similar to futures, somewhere in FY '24, right? And we're -- at the start of FY '23, we're already at that level, right? So just wanted to understand, one, how sustainable is this? Second, who are the participants, essentially, which has led to this option price? And third, I mean today it's crude and natural gas, but is volatility a large part of this? And as and when volatility dries up, is there a reason why this can sort of come off?

Okay. The first part of the question is, did it surprise you? My answer is yes, it did. As you have said that we may reach about 60,000 kind of levels on 2, 3 years' time is what I said. And yes, it did surprise us, and we are almost all INR 20,000 crores, I mean, over the month's ADT. But yes, it does surprise us. But having said this, we have seen -- volatility is always, that is whether it is the futures or it's the options, volatility is the driver. But we need to keep ourselves prepared, the ground for participants to step in and then play in the market are there in the market. That's where of our efforts go. And that's where our systems improvements or margining system, et cetera, all that is directed towards that. Yes, volatility does play a major role but at the same time, when two players are coming in, again, the retail investors who have dejected these counters when the crude oil went into negative, most of them have come back in that sense I can tell through. And even the growth that we have seen in the number of UCCs, it is mostly coming from the participation in options. So as you can see, I will tell you, the -- in the FY '21, '22 in options, we had 172,000 clients -- UCCs, as against 2021, we had 42,500. So that is the kind of growth we have seen. And if you see the futures, the FY 2021, 457,000 and '21, '22, 389,000, okay? So -- and the substantial reduction was in crude only -- crude and NG, not so much in others. But yes, that's the way it is.

I think Sailesh sir is joining as well. But just continuing on this piece, right? How -- so obviously, volatility is a part of it. And in your experience, could you just help us understand -- let's say, volatility was to dry up in one. Will you see an absolute drop? We've not seen that in the past years because something else picks up is what the understanding has always been. But just in your view...

Volatility drops, it doesn't go to zero or anything like that. Maybe there are -- the intraday opportunities will evaporate. So to that extent, intraday play will come down. But otherwise, there are people -- there are hedges, there are people who look at not only intraday, but inter-day also. So today, tomorrow and the kind of thing, and they continue to be there in this.

Okay. So you wouldn't anticipate this coming off materially in the next, let's say, 6 months to a year?

Yes. That's what my expectation is.

Okay. And from a contract perspective -- so we've looked at, let's say, gold -- Gold Mini, which is also something that you launched, right? But I think the scalability of those contracts have been slightly weakish, right? Any reason why that should have happened? I mean Gold Mini is like a contract which should have ideally sort of picked up a lot, right? Any reason why the volumes stick to crude and natural gas?

Yes. So I expected it to pick up, especially the value is 1/10 and the tenor is also monthly as against bimonthly. But some of the players got used to the 1 kilo contract rather than the mini contract. Even now also the -- even in futures also, the volumes of mini are maybe 15%, 20% than the main contract. So keeping that in view, it didn't pick up as much as, but it didn't disappoint also at the same time, I must say this. So what I -- now we are planning to launch monthly options on the bimonthly gold 1 kilo contract, futures contract, probably that may definitely help us to grow. That's the way I look at it.

Sorry, which contract are you planning to launch? The bimonthly contract, is it?

No, no. Monthly options contract on bimonthly 1 kilo...

Okay, okay, okay.

Currently, gold is -- gold futures is bimonthly. On that, we have a gold options bimonthly, options. But we will launch a monthly options contract so that it will -- tenor is reduced by half.

Correct. So any indication -- yes, correct. Obviously, that -- I mean for you, I think you -- the couple of important things is, one, settlement, which today doesn't happen, right, in some of these contracts, which also is a hindrance, right? Because large part of the volumes, let's say, when I was to look at any other indexes, right, or other exchanges, essentially happens on the expiry day, right? So something -- that's something as a volume that we tend to miss across some of our larger contracts, right, crude or gold, et cetera, right? I think this monthly should essentially help us sort of add to volumes. Is there any anticipation on how much do you think that this can happen or this can sort of expand into from a volume perspective for us?

Yes. No, I'm not able to give any number on it, but our road map is -- we plan to, again, subject to SEBI's permission, introduce serial contracts which will expire a monthly contract, but which will expire every week, okay? So the point you are making, the expiry play is not happening, that will happen if we have such kind of weekly expiry contracts. Have I made myself clear? So monthly options, so one will be introduced in the first week of the month, which will expire in the last week. Second week, there will be another monthly contract, which will expire in the second week of the month. So that every week, some contract is expiring here, okay?

But then the problem of physical delivery, I think that's been a hindrance why...

But then physical delivery -- since it is a bimonthly contract, we are not expecting at the end of the -- it will devolve into a futures contract.

But I think that's where the problem has been, right? Most people don't want to get there and, hence, they don't -- I mean they close their positions way earlier.

That's fine. That's fine. They close the position. Since you have a monthly contracts -- I mean weekly expiry play is there, they will move on to the next week, which is expiring.

Okay. Okay. So -- okay. Understood.

It's a serial contract, that's the way it is.

Okay. Understood. And so serial contract should help you sort of take out some of that expiry that you miss out. Okay. So you can keep staying into options, but you can keep playing it every week to the next week, next week, et cetera. And any...

Just one question in this. Sorry for joining in late. See, one is, as an exchange when we see it, right? In India, whatever scale of work which is happening today in terms of volumes being traded and all that. Though they have increased substantially and you've achieved very fast progress in some categories, generally, if you leave aside the near-term issues, a 3-, 5-year view on what size this whole opportunity can be with so much of dominance you have in terms of the presence? How different will it be from, say, any other exchanges which are there? And for commodity exchanges like ours, what are the -- what is the potential size of delta shift? Can it be 15%, 18% compounding for many years to come in terms of growth in the business there? Or do you think there are some structural entrances like -- he talked about delivery in commodities and things like that, which will make it very difficult to execute, or other challenges that most of our corporates hedge abroad or things like that? What will make it change in our favor in a 5-year view is what I just wanted to have an understanding and then maybe I have specific questions.

Yes. See, this particular, what should I say, segment, the commodities markets, have not received adequate attention at various levels, okay? And that is something which is required -- which requires for some kind of reforms to take place. Now I can tell you one of the major reasons at this point in time is the GST issue. And now GST issue is a major reason because all participants, those who want to play in the cash and carry kind of arbitraries, or who want to take delivery and -- I mean -- or if there's any opportunity of what you call going short in the current month and then long next month, et cetera, et cetera, they're not able to do it because every time you need a GST registration. All players are not the ones who are physical market players in the sense who take the delivery and use it for their purposes. In any case, it is a financial exchange. It is only for -- meant for hedge purposes. Delivery is a last resort. That's what we have been telling also. Delivery [ threat ] is needed so that the prices will converse and it will behave in a manner that reflects the prices are more or less reflecting the spot plus cost of carry. This is all theory that other some people say that. But be that so, that intraday opportunities are between the spot and then futures, if there is any opportunities, people should be able to play between the two markets, which they are not able to do everybody because of the GST issues. And we have delivery centers at multiple states and multiple delivery registrations -- multiple registrations are needed. So this is one major bottleneck that we are currently facing. The second, again, people tend to compare with China, et cetera. But there, there is a lot of state support is there. And many of the contracts are -- many of the government entities have been told to do the business via the exchanges but we don't have any such kind of blessing or privilege. So we have more like a private kind of thing and you have to survive on your own. The third important thing is that currently, many of our big players in the country, they are going to the international exchanges and they're hedging it. So keeping that in view, what we have been positioning is this exchange is meant for our domestic medium and small players. Fine, if the bigger players want a bigger depth, I will not be able to generate it overnight. I can only build bottom-up. So the smaller players is what we are catching them. They may not have an international exposure. Domestic exposure is there. Ours is a rupee-denominated contract, so they can come and play on this exchange. Similarly, the prices that they face in the domestic market are the ones reflective of MCX prices. So many people say that if you want to buy or sell, whatever it is, MCX price plus or minus whatever that is. That is the way that physical market transactions are taking place. So we are catering to the -- in that sense, by and large to the domestic players. Second, which is equally important is, we are able to break the monopoly of our cartelization of some of the major players, especially in metals and other products. So they're building around that product. There's a brand they're building, they're doing it. They're charging extra premium. Our platform is giving an opportunity for the lesser -- I mean children of lesser God, put it that way, who can actually come and sell on the exchange platform. And we are, what you call, brand agnostic in that sense. As long as the quality parameters are met and if the quality is good as per our specifications, then they can sell it, any amount of quantity, and that is how we have been able to make a dent in this. So coming back to your question, how big you can be, I think potential is very big at this point in time. A lot of education is needed. And it's also a struggle actually. They are also -- the domestic players, some of them, don't understand the concept of hedging. Hedging means no profit, no loss, and they're not able to digest that, okay?

They want inventory gains, sir.

So the -- we have been telling them you have to keep the financial book and a physical book together and then see that if one book is incurring loss, the other book is making money. So you are locking in your price, you are locking in your margins, that is precisely what this platform is meant for, but they are not able to, at times, take it. And some of their managements are also questioning the CFOs, why did you do this, okay, for incurring loss on the exchange. Then that guy shows there's a profit on the other side. No, no, no, that any way you would have got it had you not also hedged. That is the unfortunate thing, but it takes some time. And the other area is even the banks are not insisting. Although they are lending a lot of money to some of these industries, they're not insisting that they should -- commodities risk, they should hedge on the exchanges. That is another thing. So it's a culmination of factors, which makes this industry grow. And unless those things happen, I mean, the growth will be stunted. I mean maybe we can only go that far, that's the way it is. But we are definitely moving in that direction. And when it comes to agri commodities, has a lot of political pressure. And if the prices are down, the farmers are committing suicide. If the prices go up, the spinners are saying we are not able to meet the obligation. These kind of issues keep coming all the time with challenge. And I think we should be left to ourselves to do the business without any intervention of those or without succumbing to such pressures. That is the way it is. I hope I have not been able to -- I mean I don't know whether I directly addressed it, but then I did sum up what are the factors which are holding us back or which are going to help us if these are addressed.

This is the -- like you rightly said, this is the reality of the market today where we are operating in. So this is helpful. Just one piece on this, for example, like you rightly said, banks are not asking medium or small SMEs to -- or medium-size SMEs to hedge, right? And is there any concerted effective effort on you to reach out to Chairman of all these banks or any of these guys to -- or the risk committees of banks or such to be able to convert them? Because I think, like you said, it is more an effort of education and support across corporates as well as banks. And like we also face similar challenges when we meet corporate. So in terms of how they handle their investment books and all that. But the reality is that the need of this is certainly there, right? The need of balancing your cost versus what you're projecting for the -- or derisking in that context is there. So are you investing in people to reach out to these directly, indirectly with some association or some -- this thing to be able to push through your point and solve a problem for these people?

Yes, yes. No, apart from writing letters to the Governor of RBI and others, we have individually engaged with some banks. The banks -- I mean the Chairman of the bank himself, like SBI and others, they in turn call some of their GMs or somebody and then say, these accounts, we should pursue it. And then thereafter, we keep chasing them and then they are not paying attention -- adequate attention subsequently. We even gone to the banking and finance colleges. Some of these banks have got their training institutes where we wanted to sensitize this subject. So we have conducted courses also and made it a part of the curriculum at some of these colleges. And we have also, fortunately, got, I mean, access to the SIDBI Chairman who happened to be Former Executive Director in SEBI. And so through him, we have organized -- reached out to SEBI and they've organized some seminars, workshops with their MSME client base. So to the extent that we are able to reach out, we are doing it. And the industry associations, another one, labor and industries associations are there in many states, we have organized a lot of programs and did that. But then it doesn't bear fruits as soon as we conclude the sessions. And also, we also introduced some of the brokers. Look, these are the potential candidates. You please go and then start pursuing them. So that's how -- in fact, many of the -- many of these industrialists and industries, they themselves are used to the stock market trading. So they don't need to be introduced to any broker. In fact, they already have relationship with somebody or the other. So that's what we realized it. So it's only a matter of making it a habit, what you call, price risk management as a part of their activity. So that is the way it is. Yes, education is the thing that currently we have to do that.

Lastly, sir, is there a big cost difference in doing a transaction on your exchange price, I meant from point of view the effective price you're able to get, for corporates to not prefer you because there is issues of delivery or whatever. But is there a price difference because like I said, people price it plus or minus 2% of MCX in certain commodities and do transactions. So is that cost pretty large because the volumes are generally low? Or is it not a deterrent? It is -- reasonable liquidity is there across?

No. Here, I must say this, some people compare with LME, okay? Now LME contract is dollar-denominated, our is rupee-denominated. So to that extent, the FX effect will be there. Second, there are also domestic supply/demand management issues are also there. Even if somebody wants to -- there's a price difference, somebody wants to dump the material on MCX, okay? It will take some time for them to get that import. Maybe it may take 15 days to 1 month. And then by that time, the price move away from what it was. So I think those challenges are there. So what we did was recently, just to bridge this kind of gap, there is a free trade warehousing zones are there in the country and Arshiya is one in Panvel. So we have made them as one of the free trade warehousing zone. So if some of the importers who can park their metal here and then see whether there's an opportunity to sell, then they sell it and then bring the -- pay the custom duty and then deliver it. Most of the LME warehouses are, loosely speaking, bonded warehouses, where customs are not paid, okay? So that is the kind of concept we have adopted now. We have opened recently, maybe 15 days or 1 month ago. So probably that will also see some kind of metal coming via that route, which will bring in the price disparity narrowed, okay? -- which brings down the price disparity. This is one aspect of it. Of course, there is something called CTT and all that kind of thing, we can't help it, and that's part of it. I can't do anything on that.

Yes. But these -- are they materials from a customer point of view is the point, sir. CTT and all.

See, for the clients who are currently trading in the rupee-denominated contractual metals, I don't think there is material. That's what it is.

Sir, one example which we -- just to -- because this will clarify the point -- say, if I take a name of a company, say, Titan, or a name of a company which is into gold-based jewelry, a lot of companies are there. Now for them, one was -- it was supposed that some of these guys would be a major part of your customers. I remember even 5 years back, [indiscernible]. What is the kind of relationship you would have with them? And what is their activity level if at all they are in the exchanges?

All gold -- I would say the gold consumers, okay, I will call it, who are traders, including Titan, they have to hedge only in Indian markets because RBI banned them. So they are actually doing it 100% on MCX. So there's absolutely no problem. That's why if you see there, what you call, open interest in gold, it's almost all 18 to 20 metric tons, sometimes even 25 metric tons. So it's not a small number for that reason.

But similar thing can happen for other categories as well, in some other categories, sir?

It can happen, provided RBI bans people to go and then hedge in the international markets, okay? And the RBI has not banned. Others are still permitted to hedge. So that's why we are competing in that sense, loosely speaking, it led me that kind of...

It is like that Singapore Stock Exchange for us, in the sense, there's NIFTY trading happening there 24 hours, the volume gets shifted there, at least for that period of time.

That's right. That's right.

Thank you so much. Rishit, you would have a few questions.

Yes. So just sort of extending on that point, right? What -- sort of is there ever a discussion on, let's say, some of the metal companies, right, because that's essentially where we have some of the producers as well here in India itself. Is there ever a discussion which is started around pushing them to sort of hedging MCX or India market itself? Or -- I mean too early to sort of call out that and -- I mean can't expect that to turn up in terms of volumes?

Okay. Okay. Okay. Now let's go by metal by metal probably. So aluminum, okay? One minute. Yes. In the case of aluminum, I mean the honest feedback was that they're not happy with MCX spoiling their game, because how many players are there? Maybe 4, 5 of them, the primary producers. The only one who is not in the league is NALCO, which is in the PSU, public sector, okay? Now for all these years, we had only the delivery center at Thane. And thinking that imports will come and then they will -- they ought to face the key power markets, if our prices move away from what is reflected on LME, then probably some imports will come and price parity will be established. No, that was also not happening for one reason or the other. Maybe this -- it takes time for the metal to come from Dubai or Singapore and then arrive, it may take some time, maybe a week or 10 days. So what we did was we moved our delivery center to Raipur. Now that's changed the entire game. A, Raipur is a central distribution center because mostly metal comes from the eastern side. And then everybody has got their plants that side only. And they're -- and NALCO are material agnostic. As long as the material is sold, it is okay, they are happy. So they're dumping their material. So others are not able to do anything further to that. They couldn't do anything, but to join their hands. So they also started delivering the metal on the exchange. So the point is no, as I told you, they were building a brand around -- branding around their material and then charge you some premium, that's all gone, okay? Today, we have been able to maintain a platform which is agnostic to the brand. That is one major achievement of us. Of course, notwithstanding this, we keep meeting them, their seniors. I mean, recently, I met also the MD of the top brand and explained to them. They said, no, no, we are open-minded. We take -- if there is an opportunity, we sell it, that's it. We are perfectly all right. That's the way he explained. And he instructed also. Genuinely instructed his other maybe business development players, you must seriously look at it, not with a sense that they are offering any competition to us. You should take it as complementing our efforts to get best price. That is the way he has mentioned it. And that's what happened. Now this is in the case of aluminum. Copper mostly is imported, almost all, so is nickel. And zinc, a lot of players from, what you call, for South Korea. Korea zinc is one major. And there is a free trade agreement or some kind of agreement is there where tariffs are lower. So is from Japan. So we get a lot of material from there. And we are -- they're delivering. And the only thing is maybe in the case of lead, we have empaneled domestic lead refiners, apart from Hindustan Zinc also deliver some zinc and lead, et cetera. But that's the only thing that's very small. But yes, the domestic lead producers, whom we have refined -- we have empaneled them, they've also started delivering on the exchange platform. Not only this, the Russia-Ukraine war has also opened up some more opportunities. Not that I'm proud about those things because not under the duress, they should be coming to us and then trading it. But thanks to economic sanctions and other things, some of them are looking at MCX as an alternative as against LME or maybe CME kind of thing. So these are all -- I mean inquiries have started. We have also proactively written to those producers in those countries. And let us see what will happen as we go along.

Okay. Okay. That's helpful. And just one last question. I know we're cognizant of time, and sorry, if we have to extend just a bit. But let's say, in the next 1 year, right, the 2 or 3 contracts that you discussed in the past, which could be more like a game changer. One of them could be an index options. The second one could be a Gold Mini, right, when you sort of -- within the gold context, right? Once you get it to monthly, the other one is the mini contract, et cetera, right? Which are the other opportunities that you would be looking at? And how big those opportunities can be for you, let's say, in the next 1-year period, if you were to look at it? And where are we in terms of launching that particular piece?

See, one is that aluminum alloy is one we are looking at it and industry -- and steel TMT bars. I think that steel TMT bars has been -- SEBI has sent it back asking for us to revise some of these things, which we'll be revising it and then sending it. And then -- so in the -- I think in the -- and the electricity futures is something which I am also very, very optimistic about. And let us see in these 3 new contracts we should be launching in the next 1 year and then see their growth how it has happened. But agri is disappointing because there's too much of interference and then our entire bandwidth is spent in assuaging the feelings or pacifying one group or the other. I don't think we are here to do that.

Okay. And will index options be -- okay, in terms of the opportunity, do you foresee them -- these 3 opportunities combined to be fairly sizable to your volume that you have today or they will be still smaller part?

I mean, see, in any exchange, almost 2 to 3 years it takes for contracts to mature and then become -- grow robust. That's what I have been told when I joined. Internationally, this is what the experience is. And quarter-on-quarter, we are not expecting a galloping growth unless for some reason or the other it increases.

Then how is your 2, 3-year period? Over a 2, 3-year period, do you see any of these contracts becoming...

That's right. We will see these contracts to do well. That's what it is.

Okay. And index options, can that solve the delivery issue?

Options, yes, they are cash-settled contracts, obviously, on indices. But then, see, this nickel contract has spoiled our metal index futures contract, METLDEX, what you call, because this nickel accounts for about 25% weightage. So that is the reason why this has become zero now. We are trying to revive the nickel contract in the form of bring us -- we made an appeal to SEBI saying that thanks to the price rise, now today, it is almost all INR 30 crores, INR 40 crores of laks of contract won lot, that is too expense, on which 15% to 20% margin. And how many people can actually trade in it? I don't think this is something which is sustainable. So they are listening to us, and they are supportive of this idea of [indiscernible] trading lot and delivery lot size. So once that happens, probably we'll be able to revive that also. Unless the underlying is vibrant, that is the index futures, launching options in a hurry doesn't work. That's what my view is. So we would like the futures to grow first.

Okay. Okay. Okay. Perfect. And any participants which can sort of add to the volumes? I think FPI and et cetera, we've talked about that in the past. But -- I mean is there a case for them to even come and participate here? Because that will bring a lot of liquidity and can...

Yes, they should be able to. That's what I said in the call also. Although FPIs have other markets, but certain opportunities only offer only local markets like cash and carry arbitrage opportunity, or the arbitrage between the international markets and this market. Now they can do it under one legal unit, okay, in the name of FPI. They can do the arbitrage between the LME or CME and our domestic market. So that kind of opportunities are there.

Have you seen anything as yet till date?

No, but they're not permitted as yet.

But it is in the discussion, right? FPIs...

Regulatory framework as to -- I mean circular has to come from SEBI as yet. Circular is not issued.

Okay. Okay. And lastly, on banks, I think you talked about some of these banks starting to inch up in terms of volumes for the customers, right? How is that? Which are the banks which are sort of leading the cause?

As I said, that some banks are still to put their systems in place, maybe 2 of the major banks; one PSU, one private bank. But there are 2 other private banks which have already put in place, and they're doing well. That's what it is.

Okay. Understood. Okay. I think, Sailesh, any more last questions, if you have?

No, thanks. From my side, there is no additional questions.

Okay. Okay. Sir, thank you for spending time. And then, obviously, these interactions are useful for us to understand the business segment better.

Thank you. Thank you so much and stay invested. We are committed to work better after -- year after year, better and better. That's the way. I may not be able to give you any assurance on this quarter-by-quarter, but then definitely year after year, we will do better, okay?

Thank you so much.

Thank you so much for your detailed explanation. It was helpful. Thank you very much.

Good evening, everyone. I have over here with us, Mr. P.S. Reddy, he's our Managing Director and CEO. And also you have with us is Mr. Satyajeet Bolar, he is our CFO. I'll hand it over to you, Hardick or Gaurav, you can take it forward.

Thank you. So I'll just do a quick introduction to our firm as well. So I and Gaurav are from Union Mutual Fund. We are a mutual fund sponsored by Union Bank of India jointly with Dai-ichi Life Holdings from Japan. So both of them are century-old organizations. And we have about INR 10,000 crores of assets under management, of which INR 7,500 crores are equity or hybrid in nature. So we are holders in MCX. We like the story. We like the company. And the way it has weathered difficult times. So that's a brief from us. I manage portfolios over here in the small and mid cap category more specifically. Gaurav is our specialist in the new age businesses and IT, chemical space. He also tracks this company. So this is just a brief from our side.

Would you like to introduce yourselves, Sanjay? Would you like to say a few words?

Yes. My name is Sanjay Singh. I'm from PineBridge Investments. PineBridge is a U.S.-based financial institution. We're a global firm. We have a PineBridge India Equity Fund, which is India-focused fund for FIIs. It's been a fund which has been there for the last 17 years with a pretty impeccable track record. And I -- we manage around slightly more than $1 billion in India directly. And of course, the emerging market funds are more. And I track MCX and -- among other stuff; technology, consumer, et cetera. And we hold MCX for some time now. Recent -- in the recent past, we bought. And we like the company, of course. And we'd like to hear more from you on what's going on.

Yes, please go ahead. Please ask questions.

Let me start with it first. So thank you, Mr. Reddy, for giving us this time. So I think the first will be a broader question on where do you see the market currently? And I'll tell you what is the context in which we are asking this. I think in the 4-year-ago presentations that MCX used to give, there was this nice chart which showed what is the multiplier of the commodity market versus the GDP in our country, what it is in other developing countries, developed countries. And I think the ratio is less than 0.5x. So the overall commodity volume -- commodity market volumes in our country on derivatives side is less than half that of the GDP. Whereas I think in some developing countries, also, it's 3x that much number. And in developed world, of course, it's even higher. So what has happened now, as we observe, is over the last 5 years, half a decade, that ratio hasn't changed. I mean our growth has broadly been in terms of the industry volume in line with the nominal GDP. So just your thoughts on what is hindering this growth to be faster? One would assume that the growth would be typically faster than the normal GDP for the exchange market. I understand there have been some regulatory changes, which has also affected this growth trajectory. But can you briefly tell us about what is the current situation? Where do you think the market is headed for the next 5 years, slightly longer term call if possible?

Sure. The context is well set. But if you see the composition of our GDP, the majority is coming from the services sector. And that is something which we are not dealing with. These are all [ metal ] commodities that we have to deal with it. Second, even the products that we have is a very small portion of it as compared to what the other brick-and-mortar companies are dealing with it. So more and more applications are made for newer products to get -- come in. And I think that is something that we are looking forward to. And probably those newer products will help us to grow beyond what we are seeing this number. Now having said this, let me also say this, that the regulatory changes, at times, may be good in the medium term to long run. But in the short term, it is definitely impacting the way that it is operating, the markets are operating. So peak margin is something which has come in. And whether it is warranted or not, I'm not getting into that discussion, but it did impact in terms of leverage. It has taken away the leverage that, otherwise, members are giving it to the clients. Now is there any default on the exchange? My answer is no. Yet, somewhere it happened in some down the line in other equity markets maybe and it has its cascading impact on our markets also, especially when the commodity markets are brought under the SEBI's jurisdiction. Now that is something which is -- which required a separate treatment. We have been telling SEBI also. They don't equate commodities versus -- and equities. They have a checkered career of about regulatory regime, a well-regulated regime, for almost all 3 decades. But when it comes to the commodities, it's not so great. So you need to nurture it also. The markets have not grown so much. Having said this, we are also telling SEBI that some of the dispensations that are required for the growth of this market are something which falls beyond the SEBI's jurisdiction. For example, the GST is something which has come and where the members -- every player who is dealing in physical markets or in the sense, even on the exchange platform, they don't take delivery. Delivery in the sense, physical delivery, they don't take out of the warehouses. Yet, the commodities will be lying in their name, so they should have paid GST. They have paid GST, then when they sell that product back in the market -- on the exchange, then only they will be able to pass on that credit, and all that kind of things will happen. But all players, especially the financial players and other retail individual investors, they will not have GST registration. They are pure players or speculators. They may do cash and carry arbitrage opportunities, or they may cash and carry from near month and then far month. At the same time, they may -- some of them also deal in the physical market and then delivery. And we have also introduced multiple delivery centers, so across the states. So if somebody wants to take delivery, then he should be prepared to have registrations across all states where this kind of thing is there. So it's getting a little complex, and for which reason we are not able to get as much players as we see in the equity markets. Another important thing is, here, we have a delivery unit concept, okay, and they're trading unit. Now in the case of equities, just one share is one trading unit, okay? Here, one physical delivery that comes from the manufacturers is one trading unit. Now in the case of nickel, it's 1.5 tonnes, so it's almost INR 35 lakhs, on which the margin up for 10% or 20% was thought to be INR 3.5 lakh to INR 7 lakh. And now so it's not a retail place how much as you compare equity markets. That's why the growth in these markets is lower as compared to the equities. So we don't see so many players out here. But yes, our target is to bring in more and more physical market players to bring into this fold. And bringing the -- I mean, build the open interest, and that's what we are looking forward to. And with the open interest increasing, probably, we see a greater interest from other trading classes. Have I answered your question?

Understood. In terms of what we can do, I think there are product launches that can be done. We've made a lot of efforts on this front. I think there was a launch of entices for some of our -- for some of the commodities. We also -- there was this development on bullion spot exchange, gold spot exchange coming through. And at the same time, I think even on the power side, trading of relatively longer duration contracts and the derivatives thereof was probably an opportunity for us. So can you just talk about what are the new products that are there in the anvil that maybe 5 years on the line could be contributing something meaningful to us?

That's right. So one is the electricity features is something which we are looking forward to. And again, one small action that has been taken by the government in the form of imposing a cap of INR 12 per megawatt -- I mean, per kilowatt hour is something which has disturbed some of the market in distress. That happened in the case of IEX, the physical market trading. Now that is getting remote in the month of September. But we don't want such kind of interventions in the healthy development of this market. Now that is something which we look forward to. Maybe a dynamic or a vibrant features market may not necessitate such kind of imposition of apps because it plays with hedging their risk on the exchange platform, and they will be able to still be able to supply the -- what we call the power consuming industries or consumers at some -- at reasonable rate. Maybe the guys who are taking that risk up, this maybe speculate as of somebody else. But that's fine. As long as the consumer gets -- as long as the suppliers are able to make the supplies at a reasonable rate, consumers are able to hedge their positions on the exchange at a particular rate, I think that should be perfectly all fine [indiscernible] That's why they are left in the high and dry. So electricity is one which we are looking forward to. And the steel TMT bars is another one which we are looking forward to, and aluminum alloy is the another contract. And some of the products in the form of some more option contracts, we will be introducing it and options on index features also. But currently, index features, only BULLDEX is doing well, whereas the METLDEX, because of the nickel contract difficult that happened in London Exchange, the nickel contract is carrying 25% vintage in the index futures. That's why that has been -- that's now tracking zero volume. We look forward to revive that contract also in the form of reducing the nickel contract size and introducing a smaller lot. Again, that is in discussion with SEBI. If SEBI permits that, probably, we will be able to launch and revive the nickel contract and then bring in the nickel index features that METLDEX also back into trading. So these are some of the products that we are looking at it. And hopefully, we will be able to do better. I mean, yes, and the SEBI is also seriously looking at the smaller contracts that is [ ME ] contracts also to reintroduce because each one is getting to different segment of the customers and which SEBI has realized it. There are different segments who are participating. And each contract caters to different SEBI, so we should permit them. That's what the issue is. Yes, Mr. Sanjay?

Yes, Hardick, do you have any question?

No, Sanjay. Please, you can also jump.

Yes. Sir, on the electricity derivatives, what is the variance stuff, I'm not able to understand in terms of product was approved? And what stage is it trust? Any thoughts?

See, there is a joint working committee has been concentrated between CERC and SEBI by Supreme Court, and that they have to approve that product. So we have been pressurizing SEBI also that it is high time that you introduce this contract. And unless...

You're right, sir. I thought that was approved, right, the CERC...

No, not approved. It is still pending with them only.

So CERC -- pending with CERC and SEBI.

It's a joint working group.

[indiscernible] You don't have any time line per se.

We know that it is high time. They are also what they call rescue. The SEBI is also -- and because -- and then while we have a contract is pending, they have also permitted a forward contract on IEX. And reverse auction is taking place in, I think, 1 month or 2 months contract kind of think they have introduced this. Of course, this is a forward contract, not a futures contract because they couldn't have introduced futures contract.

So long futures contract, yes.

Yes. So we told them better permit. Otherwise, there's no point in waiting and allowing them to take the lead in those contracts. So SEBI is also now restive. They're going to give us, I suppose, in the next month or so.

And the settlement price will be the IEX DAM price or RTM price?

IEX or DAM price.

Now that's the challenge, right? The DAM price is limited to INR 12, but the [ consensus ] that limit is removed.

That will be removed in the month of September. Now they have already made an announcement.

Not too sure. They have said the removal of the separate window of trading for INR 12...

No, no, no. There is an announcement that's come. That will be removed in the month of September.

Okay. So now if you look at the IEX volumes, IEX is currently around 100 million units a year. I mean, is the derivatives market logically should be bigger than the delivery market? Is it a fair assumption?

It should be, it should.

Okay, okay. So if you take out INR 5, 100 million units is INR 50,000 crores a year. So do you think that there's a possibility of a multiple to that?

Yes, yes. Even if it is at that -- if it starts with so much also, that is good enough for me in that sense. .

You have to do [indiscernible].

Everybody has -- I mean, what is the production? The whole production can be ex what you call the features market, that is the way I look at it. Even if the entire thing doesn't come, even if 5% of it comes, because many may have been tied up under the power purchase agreements with the long-term PPAs, so the entire may not come. But what we are saying is even they are so they can trade. While the PPA price is fixed, the players can still play on the exchange and get a better price.

Yes. Sir, second is a little slightly burning issue in terms of the tech part. Now I know probably, it's difficult for you to say much, but I mean, what is the -- is there any possibility that we will be able to go ahead with TCS from first of October? Or do you think the delay is inevitable?

No, no. The delay is inevitable, no doubt about it, because SEBI -- or TCS says that now they will be able to give it on August and the product, and then we need a stable run and a parallel run, et cetera. Meanwhile, we have written a letter to 63 Moons requesting them for a 6-month extension. And we are to get it maybe 63 Moons, we are hopeful positively respond to our request. . Maybe they may charge something extra. I don't know. I mean, currently itself, we are paying a pretty good amount of decent sum linked to our turnover. So let us see. For 6 months only maximum, we have asked for.

Okay. And because of the delay, do we get any competition from TCS or it is not possible?

There are some clauses are there. For delay, for going live, there are compensation clauses.

Okay, okay. But do you think we have to pay maybe 6 months to 63 Moons?

Maybe, maybe, yes.

Okay, okay. But you don't see a situation where we are stuck with no technological, whether or no -- I mean, is it [indiscernible].

We still have 2, 3 options. That is a 63 Moons support is the best thing that can happen. Now there are other options also because I don't want to disclose all of them [indiscernible] And there are options 2 and option 3 are also there. We are looking at all those options. But yes, we will work out.

Okay, okay, okay. Yes, Hardick, you can continue with your questions.

Yes, Mr. Hardick.

Yes. I think we also wanted some clarification on the cost number you had this contract.

I mean, I just wanted to get some sense around these quarterly numbers when we look at the support charges, what we report. During the quarter, you did explain it a bit on the call, but I just wanted to clarify that our top 10 growth sequencing was [indiscernible]. You did mention that it is a percentage of revenue. The software charges will be paid more, but the growth was sequentially 7%. So just wanted to understand why would that happen in the current quarter. And secondly, I know you have mentioned that on the call that it's difficult to sort of quantify at this point. But if you could elicit the differential amount, which we are going to incur above EBITDA and below EBITDA post this change with TCS.

See, the second one I will answer in a very -- I mean, I may not be able to give you any numbers. What I can say is given the existing, what we call, the ADT kind of numbers, the -- whatever the savings that comes through by discontinuing the 63 Moons platform may go in the form of higher depreciation. But this platform is implemented. If the volumes increase beyond this level, there won't be any incremental cost to the company, okay? That will add to the bots.

Okay. So it's not included on revenues basically.

No, it's not linked. But today, it is -- 63 Moons is linked to the revenue. A portion of it goes to the 63 Moons. About how much, please?

About 10.3%.

10.3% of it goes, I think. That's what the -- that's why every year -- every month, every year, you will -- if the volumes go up, then that also -- that kind of thing will not be there on the rail. And while there is an increase, you can...

I just explained to you the 2 components when we talk of this. The one is what we pay to 63 Moons. There's a fixed component as well as a variable. Also what we pay to CME, that is also included under that nomenclature. There must be some slight difference. Other that is linked to -- and this is again net of what we recover from our clearing corporation. The actual outflow would be, you see the consolidated much more. In our standalone, it will be net of what we recover from the clearing costs.

Got it, got it.

Yes. Since we were actually on that cost point, you wanted to ask this question first. We had at least some more questions on the growth front also. So we've seen the options, volume [ reached ] pretty sharply. And I think we were trying to do some research globally. And we have found that options in the commodity market typically are a very small fraction of the futures volume. So just your opinion on how this whole options market is shaping up. And where do you see it going? And is there some cannibalization probably which has happened from futures to options for us?

Okay. [ It's aggravated ]. First, I don't use the word cannibalization. In fact, thanks to the negative pricing in crude oil, so some of them have dissected the counters. And these are green shoots in terms of options have offered us in shoots to these people to come back and then pass on this. So that's the way it is, and it is helping in that sense. Imperative. Yes, in that sense, it has attracted back the investors to these counters. Otherwise, there will be a lull for some time, one -- when this went negative provide, and their options were also not picking up. So only when the peak margin thing has come and the option volumes went -- when the futures contract -- I mean, what you call, margins on features have gone up substantially high, then they have started looking at options seriously.

Sure. That helps, too. But just generally, sir, your opinion on how big can this be for us. What is it that you are seeing in terms of...

See. It's not only here. Even a few Indian equities also, options are the biggest -- much bigger than anything else, okay? And that's not the case in internationally also. So some of the Indian investors have fired for options. And the premium play is something which they greatly engage in. That's what it is happening in India, and they got used to it.

Understood, okay.

Can I jump in? Or...

Yes, please. Please, please.

Yes. Sir, in terms of cost, you said that you hired some tech people for the implementation of the details of [indiscernible]. So do we -- I mean, is this current quarter employee cost and all you've done this or it can increase more from here?

No, no. The ones who are working on the TCS project that gets capitalized, okay, because only when that project go live, then it will go into that -- in the form of depreciation.

Okay, okay, okay. No, so what I was trying to understand is you -- I mean, I'm just getting my math, if there is -- how long I am. From my understanding, the TCS budget is around INR 150 crores, INR 160 crores and which is the depreciation. So it's a INR 20 crore depreciation. And your AMC plus your own internal cost around INR 30 crores to INR 40 crores. At current volumes, your cost to -- more than INR 60 crores, very even prospects. So is there a [ INR 40 ] crore saving at current value? Is it their understanding a roundabout, an rough figure?

Hopefully, you were [indiscernible].

[indiscernible] I mean, I couldn't...

I understand. That's what I'm saying. Hopefully, you may be right, by and large. Maybe when these bids come...

Okay, okay. No, it doesn't matter actually. I mean, to be fair, I think the fact that what you said, the long -- the volumes -- as the volumes increase, the cost will not increase. Is that more [indiscernible] but is INR 15 crores or INR 20 crores, I think nobody bothered beyond the point. And these numbers, I mean, I guess also go to a third party, and they create some [ INR 125 crores, INR 130 ] crores a few years back. So I just did the inflation and gave us the INR 150 crores, INR 160 crores number. So it's not rocket science per se. But anyway, I got that point. Second point, sir, I mean, you have made in the past that there is a -- I mean, you have around INR 1,500 crores of cash currently, if I'm not wrong. I don't remember this now. But roughly...

We have about INR 520 crores or so SGF around -- across INR 520 crores, INR 525 crores.

And total cash is around INR 1,400 crores, right, sir?

INR 700 crores, plus you have the margin money of around INR 570 crores. So our own coppers is around INR 1,100 crores.

Okay. Now they had -- there were some -- I don't -- I didn't understand the thing properly. That's not crude, et cetera. You can increase the margin money. And hence, the premium can come down or something of that sort. Am I right on this? I mean, what was exactly the issue? I'm not privy on that.

Sorry? I'm sorry. Could you please repeat?

So in this sense, you have mentioned once in the call that you can increase the margin which you have. And as the premium can come down, the margin on which the investors need to put can come down. What exactly...

No, no. What I said is, today, when a GFC is calculate -- no, when the -- what you call when a GF is calculated, they take into consideration what are all the margins that are pulled together. And there are some stress test results are considered where if there is an extreme loss, what will be the loss that will incur top 2 members or 50% of the market members will go bust, then how much is the money needed? So that is accordingly this GF is computed. Now here in this completion, we have brought in the deviations with the equity markets and commodity markets. Ours is stringent, point number one. Number two, what we told them is that -- assuming that remains as it is, today, members don't contribute, that is the stock brokers don't contribute. Only the clearing corporation and the exchanges are contributing. You please make 25%, which is a SEBI rule also is there. But they left it open. They didn't make it mandatory. So let 25% contribute the members who are bringing the risk to the exchange, okay? The third term is even if they don't contribute, okay, worst-case scenario, even if they don't contribute, MCX is willing to contribute provided you -- I mean, provided you allow us to -- I mean, what you call, move in and move out the money as and when the requirements come down. So if I reduce the margins, the trading volumes will increase. I will earn some extra money, but I will -- this is also the -- it's also kind of deposit only a GF -- so I will put whatever the treasury that I'm currently earning. There's hardly any 5%, 6% probably my written on the -- in terms of transaction, this will be much higher. So that is better to earn there than lock the money in the form of some FDs or some kind of investments.

Okay. And on the SGF also, you want an income, right?

On the SGF also, we have an interest, yes. But it goes. It flows back to SGF. It goes back into SGF. It's not reflected enough. This Is kind of a separate trust kind of thing. Although it's not constituted in the trust, you can't dip in at all.

So the interest on the SGF is not accounted into the P&L.

It's not accounted in our P&L.

Interest is not accounted for in the penalties, which we maybe not accounted for that also goes into SGF.

Okay, okay, okay.

So actual contribution is about INR 420 crores or INR 415 crores, something like that. Now the remaining INR 100-odd crore is the penalties, which are imposed over the last maybe some 5, 6 years maybe.

Okay, okay, okay. And cash you said total is around INR 1,100 crores, right?

Yes. SGF is managed by [indiscernible] is clearing corporation.

Okay, okay. So I was trying to understand the total cash balance as of FY '22.

What is it?

Around INR 1,100 crores, consolidated. [indiscernible] of margin.

Sorry?

Margin money. It is sitting in the CCL books. Margins that members pay, that is around INR 570 crores as on 30th June. And our own surplus is around INR 1,100 crores.

But the SGF is separate. No, but you say that 3 companies.

Yes. Okay. So I mean, I'll just reclarify, so there's no confusion. We have our own money of INR 1,100 crores. CCL has margin in their books of INR 570 crores. In addition to that, you also have INR 550 crores of SGF.

Okay, okay. So that's what I'm trying to say is if you have the consolidated books, I see a cash of INR 2,000 crores. So now it is matching roughly. So one question, sir, is you have traditionally given a very decent dividend payouts. It's a request from shareholders and from us is if you look at -- I don't know whether you've ever tried to understand a buyback versus a dividend, which works better for the company or for the shareholders that matter. Just to give you an example. IEX has done a buyback in the past. So for many of your shareholders, maybe a buyback makes more sense. For us, at least, it makes more sense than a dividend. Maybe we can explain to you in more detail some time. But -- and if you can get back to us if you want to take this call. But you could just see what IEX have done in the past. They have done a buyback in the past. All of it is a buyback and dividend to please all of your shareholders. Probably, the better way of stock is not very expensive also, which is reasonably priced. So at this valuation, probably, a buyback is not a very bad idea. But you can probably do a mix of both or consult your Board. It's a request from our side that probably you can think about that because the overall payout is quite healthy, but you might want to bring that between a buyback and the dividend is what I think. Have you ever thought about it or this never crossed the Board's mind?

No. You see, all these ideas are always there. But at this point in time, we want to conserve cash because we need to look at entering into new businesses, especially new lines of business. Some of this product thing, this is something which we are looking at it. And SEBI is also make going forward permit, what we call interoperability and co-location. These are the 2 things that they may look at. Then we need to have our own, what we call, data center, much bigger than what we have currently, et cetera. So there are some investments that we need to make for this kind of infrastructure also. And again, buyback is perfectly fine, but then what is the base? Currently, we have our money. I mean, INR 5 crore -- INR 50 crores is the capital, about INR 59 crores, something like that. It's about INR 5.9 crore shares. So the floating stock also should not be reduced substantially in that sense. In terms of number of shares, not a big base. Unlike, for example, in the depositories, they have INR 100 crores, what we call is the network to begin with. So INR 100 crores itself is the capital that they have issued. So that's a very big number. As against that number, ours is much smaller. But yes, we can look at it maybe a little later. You're right. We will look at it.

So we're not asking for more payouts. You currently pay around [ 70% ] dividend payout. That 70% can be broken into 50% buyback, 50% dividend payout. So it's not the intent to release cash. And we can present separately, but buyback, if the stock price is at a healthy price makes sense. Even if you're -- the equity base is small. Anyway, we'll not go more into that. I think you can go into a few questions, if you have anything.

Yes. Sir, just on the options contract coming to -- I wanted to understand from -- solely from the academic perspective, like what we read about [indiscernible] globally, options has impacted as much as futures on the commodity center. I think the main reason we have these options is a derivative on a derivative. You tend to make less arbitrage or less money as a speculator or a trader. So what is your sense on that, whether this is right or whether, over the long period, people will start realizing and even Indian markets will also sort of follow the same pattern, what globally has been?

No. As I already said, Indian investors have had other options. So my view is that we will continue to grow in this route. And there will also be, what we call, a serial options contract is something which the market is looking forward to. That means you introduce a monthly option, but 4 contracts will expire in a month kind of thing. So every week, there will be an expiry. So there is something called an expiry play. That's what the market they call it. And then they would like to be more vibrant. So maybe, it will expire to the underlying futures only. But they prefer that kind of multiple expiries is what they are looking forward to. So let us look at it if SEBI is to permit, as we are exploring that option also.

But since futures also tend to have a divergence from the spot price in the intermittent price of derivative on our future, which is basically options will have further divergence. Does it not sort of hold back investors or speculators, I should say, to participate, just what my basic -- very basic questions?

See, the option is on futures, okay? There's no further deviation. It's essentially the premium, which gets adjusted with the movement in the future -- underlying future prices, okay? So whether it is in the money and the money are -- out of the money is something which they will always look at it. Accordingly, they will price the premium. And in fact, our premium is much more than what it was expected because most of the transactions are taking place near the money, at the money or in the money. So -- whereas the premium will be much lower, if the bidding takes place far away from the -- on the underlying futures price, then even the income also will be low. So you remember, I said our options potentially is 1/3 of the futures in terms of revenue potential. In fact, it has improved substantially. It's almost all 48% to us, whereas I explained in the past call. So most of the transactions are taking place close to the futures contract, and that's a healthy sign. That's the way it is.

You got it. So I was more -- I think I was trying to sort of connect the thoughts with the federal or corporate, if they want to hedge their sort of actual exposure. It makes sense for them to go into futures or options from the perspective that options will have a slightly more divergence with the spot market prices in the intermittent period. What I was visibly trying to understand.

Okay. See, those who -- I mean, I think which are may take exposure, it doesn't matter because in the case of first one, they pay the premium. And then there's no kind of daily MTM losses or gains, et cetera. They don't need to worry about it. And maybe it is options will work. But then towards the end of the contract, options will expire if days before we -- what we call the delivery period starts. So we have a 5-day delivery period -- staggered delivery period and 2 days before it starts. So if it is a monthly contract, almost all 7 trading days have gone, okay, out of maybe 22 trading days. So just 14 days are only left. So from that point of view, they may not prefer such a loss of trading days. But I think, yes, it all depends on the trading strategies that the market participants will choose.

Got it. Okay.

Can I go to further question? Just one question. So basically to understand what this volume foreign exchange. What is -- where is it at this stage? I mean, you did mention something on the call that this is going to benefit MCX because a lot of coals gets imported, and this is not being treated on the MCX. And after those products, it does come in. Just if you can expand it a bit in terms of how exactly it is going to help MCX and what is the increase in the actual physical amount of coal, which becomes the potential market for MCX.

See, there are 2 bullion exchanges -- spot exchanges. One is the international bullion exchange. The other one is the domestic spot exchange, okay, gold spot exchange. What are the exchanges and deposits of together put up by international bullion exchange in a given city? That is primarily to channel the kind of competition to the challenging agencies. These are hefty premium for every import. But here, the participants can directly, especially the banks, the gold -- the banks can then -- bullion banks can come directly and sell it on the international bullion exchange. And the domestic qualified as well can buy it. So once they buy it,and then they bring it into India, then on that, they have to take an exposure. I mean, risk -- the price risk, they may be taking. So they will anyway take what we call -- I mean, hedge their risk on the MCX in the rupee terms. As long as they keep it in the dollar terms, they will keep it in the international bullion exchange unit. They have the lockers that will be dollar-denominated contract. Once they come into India, then it will be rupee denominated. So it does help us in the sense that they will be taking an exposure on the exchange if they are not taking it so far. They are already taking it even if they imported by a challenging agencies. And once they get into India, they may be taking it also. I do not know. But anyway, the domestic players, as I said, cannot take an international hedge because the RBI doesn't permit. So they have to necessarily do it in the Indian exchanges. That's one part of it. Now there is another exchange is the domestic spot exchange, gold spot exchange, which comes under the SEBI jurisdiction. Now here, again, the GST issues are holding it success back because there is no GST on the transactions that are taking place because the electronic gold deposits are treated as a security. On securities, there's no GST. But the question is who will first deposit the gold and then convert into EDR because the person who is depositing and then converting, he wants to get the GST credit background. How will you get it? So that is the issue at this point in time. And it does not -- if once it is in the form of EDR and he sells it, he or she, whosoever it is the company sells is, then it may not be taken out of the gold till maybe for 1 year or so. So until then, he will not get the refund. So that is a challenge at this point. Have I made myself clear?

Yes, yes. Got it, got it.

So there, we don't have a platform as yet. Again, we have asked the TCS to develop it. Once the TCS platform is delivered in August, then it will pick up that gold and then convert into a spot platform also. So we are not in a hurry in that sense of that domestic spot.

Got it. Sir, just one question, can I say it again? Just we usually talk about the composition of hedges, separators, traders, specifically in that futures sort of segment. What has been the trend? Because in the past, we have talked about bringing in corporates like mining or metal companies, key companies who will come to the exchange, will create open position, which will basically attract hedgers or seculars. I mean, is that happening? And if it is not happening, why is it not happening? Some color on that, sir. Because the future is maybe kind of been languishing for quite some time, specifically, I think, on base metals, which is after post [ medical and physical ] delivery. I think there's never sort of a pickup.

Sorry. I just want you to repeat the question, if you don't mind.

Yes, sure. I wanted to sort of understand the trend in the hedge speculators on your platform. What is -- whether the proportion is increasing in favor of hedges? We also -- you should talk about bringing in corporates who will start hedging their positions on the MCX platform, some steel companies or mining companies. Has that happened? Or if it has not happened, why is that?

Yes. The hedge participation is increasing. There's absolute no doubt on this, okay? But it just will not be in terms of number of -- numbers in terms of -- cannot be as big as the retail investor, just in lakhs, okay? But if you are at this point in place, now we are engaging with various banks and maybe SMEs via the seed B to, what you call, educate them as to how they can do the price risk management on the exchange platform. So it is an education, which will take time for it to convert into the actual, what you call, the participating on the exchange platform. But this number, I'm very happy to say that number is increasing, no doubt about it, which is the participation number. Even their holding in the open interest is also increasing. That is another [indiscernible].

Got it. Yes, Sanjay, you can...

Yes. Just on the cost side, do we see the cost increasing? This quarter, we saw increase in cost per se a little bit. Do you see a significant increase in cost from hereon also? Or do you think, more or less, the increase in cost have been -- will be capped at [ separate trends ]?

This year, I mean, in this quarter, when you're comparing it with -- there was an increase in -- we have explained in the call that in past, when we closed March, we make a provision every quarter for variables. We closed [ March ]. We had a -- the target was -- or the budget as well as the realization was known. So there was a flowback of variable -- a component of variable fee in the fourth quarter. So that's why there was a slide -- there is increase in the employee cost for this quarter. Also in depreciation, we had taken a conscious call when we went through that we would be phasing out certain assets. But when we revisited this in our technology committee in March, and we said, no, probably we could use these assets further. So there's a flow back again of certain depreciation. So these are the 2 main reasons for the difference in the cost in this quarter. And I think going forward, it would more or less remain at these levels, unless there is some exceptional spike in which we will be able to explain because we'll have to incur the expense and then explain. But others, it should be more or less in these levels.

And sir, on the -- one other thing on the indices was the indices don't require any delivery per se. And hence, it is a good tool for speculators. But now, like in the nickel issue or whatever event is completely there, so what can be done to revise it?

So one is that we have approached SEBI to change the nickel contract size, okay? Currently, it is almost all at INR 30 lakhs, INR 35 lakhs on which 20%, what we call, margin on nickel reversal to be worth INR 7 lakhs or even more. So that is something which is holding back other investors. So we suggested we had earlier 500 kg nickel contract. So if it is brought down to INR 10 lakhs appropriately, then probably it is manageable and which SEBI -- actually, SEBI is looking at it. With the many of the contracts, prices have gone up. And the margins are accordingly have gone up also. That is the reason why some kind of resistance to participate by the retail investor.

Because of bullion intake volumes are not too great. I would have thought that because of the delivery issue, it would have been -- have more volume, per se.

Yes, yes. So I'll tell you what the reason is. Again, there is what is called -- what you call, the gross margin benefit is given, but there is what is called options and versus the index -- in the indices. If there is an exposure there, SEBI said that, no, you don't give the benefit. Maybe one is -- I mean, contract positions between the 2 that you have, they are not giving it. So that is something which we are, what we call, battling for. And hopefully, we will get that also. Let us see if there is SEBI risk management company may...

Trying to say in terms of premium, right?

No. The margining on options, option writers have full margin option prices.

I think if I have a contraposition on gold and...

Yes. You should be given countervailing benefit of it.

Okay, okay.

Sanjay, if you are done, then I have another.

Yes, I am done now. Thank you.

And sir, I have one question is on the active UCC. So we have seen substantial increase in the active UCCs. Or the UCCs that we report over the last 3 years, it has gone 4x. And out of that, how many are active? And like you mentioned in the call that around 1.5 lakh are retail investors who are trading actively in commodities. So is it fair to assume that these retail guys are mostly getting into options? And is there any steps that we are taking to increase that further? Because still there is a lot of underpenetration there. So can we see substantial increase in that active traders, especially in the retail side, because the retail participation across the board has increased substantially in the last 2 years? So first is that. And second is on the member concentration. So as per the Angle that they have reported, they are saying that around 125 -- they have been doing a volume of around INR 12,500 crores on commodities, so that accounts to around 50% of our total volume. So is it fair to assume that Angel is 40%, 50% of the total volume? I know it is actually segregated at the client level. But is it a risk to have such high concentration with a single member?

See, the problem is -- I will kind of answer the second question first. They take both buy and sell positions, okay? Whatever ADT we are publishing is what inside it. That's one important thing, okay? But we charge the transaction on both buy and sell. So we -- you -- so when I say that we have an entity of, let us say, for the -- for this year, maybe 8,000 -- 26,000 for the financial year FY '21, '22, 26,000 means 26,000 multiplied by 2, multiplied by whatever it is, that is the average realization rate to INR 207 per INR 1 crore. That is the way it happens. So for them, they count both sides and then they say that we are so big. That's not correct. That's one point. Second, we don't know whether they included futures and options also. Now we can't take the notional value of options and then put it in the futures. That's not correct. We never do that. okay? And that's why we always give the futures volume and options volume separately notional. And what is the revenue potential of it is what we give separately. So as I said, revenue potentially is about 40% of the futures volume is what I have clarified. Now coming back to the active UCCs, I just said that all also member brokers, when they're uploading it, because of the unified members, they upload at the same summit. He is going to trade in equities, derivatives and commodity derivatives, gold, silver, et cetera, et cetera. They ticket and then upload it and broad client [indiscernible]. But then they are not at it, too. I'm not saying that even if the -- we have our own depression. If they are active means they should have traded in the current year. In the last 12 months, they should have traded. That's the way we are looking at it, okay? Now in the financial year, '21, '22, I'll tell you, the futures [ 3 lakh 89,421 ] now traded in futures. As at like last year, that is '20, '21, [ 4 lakh 57,000 ] that were traded. But some of the options, 42,000 have traded -- 42,575 traded in 2021, as [indiscernible] [ 1 lakh 72,924 ] were traded in '21, '22. So that's a big jump. The people have moved away from futures to options. And some new ones have joined. Many new ones have joined also. So all in all, adding just last year, [ 4 66, 5 77 ], there's a marginal increase of INR 4 lakhs 70,000 -- 71,000 is the number has increased.

Yes. No. So obviously, options, as I said, is a retail product, so that's why a lot of retail investors are telling in options, and that is a positive sign. And in terms of the income or the stickiness that options 95%, there's still crude and natural gas, and that is because of the higher volatility. So how do we see the options in terms of gold contract? Because we have launched a new contract, which is Gold Mini. So -- but it's like 2 months, I think, 2 or 3 months. I know the size of the contract has been reduced. And the contract duration also is like -- has been reduced, but still it's not picking up. So any reasons for that? And also in terms of the options contract getting dissolved in the futures, what's your take on that? Can that be corrected in the near term? Or maybe the lack of spot market is the only reason why it is happening. So structurally, can it be comparable to how we are seeing this in equities? Because if the options contract gets actually dissolved in futures, then the last 4 to 5 days, where the maximum volume happens in terms of expiry that we are missing out.

That is where I have explained. I think you joined late in the call, and some of these questions are already addressed. What I told is we have proposed to -- I mean, the market participants has just introduced serial contracts. So until a contract which expires every week, so that the -- weekly, they will be very high in that case. So every week, there is some expiry that is coming, which is a monthly contract kind of thing. So that will -- that we have to get the approvals from SEBI. But then we are looking -- working on it. We have not submitted any proposals as yet. So this is one proposal that is there. And coming back to whether the devolvement will spoil the play, I don't think that devolvement will find the space. If you have multiple contracts, they will roll over to the next contract. There is no problem in doing that, isn't it? So they will roll out to the next contract, the so [indiscernible]. And anyway, the bimonthly contract is there. So bimonthly options contract will be there, and we are introducing monthly options also. And in gold, 1 kg. So probably, these 2 will help us to -- together will enhance the participation.

Helpful.

I just have one question -- final question from my side. So I'm a little less informed on this, so wanted your perspective. So what needs to happen for the peak margin to start reducing? I mean, what do you think would the regulator be looking for before taking a call on that?

The regulators have given some concession. What they have said is, especially, we have made a representation. If somebody has not rated at all and we have an open interest, and then that position is priced. It is the moving target kind of thing because the prices are going up. And again, they are calling for regional margin. I said that is not correct, okay? That means many of the hedges, they have paid complete margin. Why they should be paying -- making them to pay more margin when they have already entered? At the time of contract entry, they have they've paid the margin. So now that SEBI has said it, if at the beginning of the day margin is paid on fully, then that is good enough. You don't need to collect anything else. That's the way they have said that.

But in terms of the percentage margin, is that coming down? Just trying to understand what will the regulator be looking for.

See, it's not a percentage of margin will come down. The intraday play has gone. What we used to do is on the net obligation is what earlier we used to charge the margin, okay? So you buy, sell, buy, sell kind of thing. So at any given point of time, peak margin means whatever is the net buy at that point in time, you have to fully pay. Now probably may not be retaining the position till the end of the day. You may be selling off part of it. But still, you end up being under this disposition. So the way that it has worked out is that brokers used to pay for it actually. Brokers give us bank guarantees. We block the exposures from the bank guarantees. But as peak margin rules sales, brokers also in turn how to collect it from the clients. And at the time of inspection, we verified and then impose 100% penalty. That's the way it has scared away the players. So as far as exchange is concerned, we are completely secure. In that sense, we are -- if we trade, it gets debited from the broker's account.

Yes. I thought we've asked all our questions. So Sanjay, if you have anything.

Thank you very much. It was a pleasure. Thank you for taking time late in the evening.

Welcome.

Thank you, sir. Thank you, Mr. Reddy. Thank you.

Thanks to all. Thank you.