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

Good afternoon. Sorry, I held up in another meeting, so shuffling between the meetings. I'm sorry, I'm late. Go ahead, please.

Good afternoon, everyone. I'd like to introduce our MD and CEO, Mr. P.S. Reddy; and Mr. Satyajeet Bolar, who's our CFO. Amit, I'll hand this over to you, if you would like to take the introduction of the team that's there.

No. So I think I will do...

Amjit, I don't need introduction to my shareholders, they are anyway my shareholders.

I will take the lead here, I'm Anand, CIO of Franklin Templeton. We have in this call Ajay Argal, Senior Portfolio Manager, Janakiraman, Senior Portfolio Manager; Nikhil Walecha, who tracks the company -- Nikhil, who tracks the financials from our side. I will request Janaki and Nikhil to lead the call with the specific questions.

Thank you, Mr. Anand, for joining.

Thanks for -- so this is Amit. Thanks for taking the time and meeting and so as is like a no broker call, so I'll just leave and over to you, gentlemen.

Go ahead. Mr. Nikhil, please 5 questions -- Akhil or Nikhil.

So starting with the contract with the 63 Moons, so I think there has been some glitches in the TCS app for which you are renegotiating the terms. So is the ecosystem prepared for the transition and the alternative solution, which you have finalized. Do you think there will be a risk and any challenges due to the change in technology? So how are the things progressing on the technology shift? And will that enable us to launch more products or that will -- there will be some -- does it -- I mean probably has some problem.

See, primarily the technology shift is happening because the contract with 63 Moons is coming to an end, and that was the contract with 63 Moons entered maybe in 2003, '04, when it started, they were all group entities, so it's a kind of their model of dealing with this is different. So it was a perpetual contract, perpetual services agreements, et cetera, et cetera. So that is why this particular contract has been renegotiated in 2014 when the control of the 63 Moons over MCX has been ceded because of the not fit and proper kind of thing has made order, I mean, as the 63 Moons promoters, et cetera, or M6 promoters were done. So for that reason, it was completely renegotiated. Having renegotiated and having realized that the payment terms were more tilted in favor of the vendor, so they decided that we should put an end to it. So that's how this -- the contract says you cannot float or you cannot engage with a new vendor prior to September 2020, okay? And you had then left with only 2 years, strictly 2 years. You have to develop a new system and then get going. So in fact, we worked even prior to that in terms of preparing RFP and other things. By 17th of October, we have floated RFP, 17th October 2020. So background we have done that without losing any time. And then by end of January in the 3 months' time, RFP has been closed and the contract was awarded to TCS. So it is primarily the TCS, which is bringing in the trading software of Deutsche Börse and the banks, TCS banks, which is the back end, our clearing and settlement functionality will be look after by the TCS banks. So they are marrying the 2 and then delivering it. Even the T7 in Germany is maintained by them, TCS itself. So maybe ownership belongs to the Deutsche Börse, but then they are the ones who are servicing that. So that is the arrangement. Now it is when they are evaluated on their technical terms, they found this is superior over the existing technology platform. In fact, existing technology platform, they don't disclose anything. That's the way it is. We don't know what is their insight, how it happens and all the kind of things, we don't have any documentation. So for us, it is a black box until the contract ends. So whether the new thing will allow you to introduce more contract, even existing one allows you to do the more contract. There's no restriction on it. But for every change you have to pay here and there is a volume transaction income related payment of fee, apart from a fixed fee. So that is something which is going to take here some share of our growth. And in the case of TCS, there is no such contract -- I mean, such kind of revenue sharing. So that is the major difference. But otherwise, the existing platform as well as the TCS platform does not come in the way of introducing more products of trading any number of products for that matter. Have you made myself clear? Now, this is one part of it. The second part is we were to go live -- I mean, the initial proposal was to live in July. Now as we went on fixing bugs and the delivery has not come, fully come. Now they are looking at by end of August, they will give full delivery. Thereafter, maybe we will run -- do a clean run, mock, UAT, parallel, et cetera, et cetera. And expecting by November, we should be able to -- November end, maybe we should be able to launch the new platform. This is the whole proposal at this point in time. But contract ends at the end of September. So we have 2, 3 alternative plans. And Plan A is definitely to seek 63 Moons to give us support for 3 to 6 months maximum period, which we have sought and they are yet to come back, maybe the next 1 week or so, they will respond to us. If there will be some more commercials involved, be that so, but at least we will secure the position for the time being. And when the TCS system is ready, we will migrate it.

[indiscernible] would your arrangements with the extract thing will be more or less over, it become proper [indiscernible].

Sorry, I'm not able to hear you properly.

I thought with this transition, your relationship with the organized promoters will change formally, right?

That's right. That's right.

You become an independent entity both commercial.

Even we are -- today, we are independent, except for technology. Going forward, even technology also...

From commercial arrangements came into existence what I meant.

Yes, we'll come to end, that's right.

But sir, the unlikely event that the 63 Moons declines to offer technical support beyond September. Are there any fallback plans?

Yes, that's what. We have a plan B, plan C, they are there. But we are working parallelly on everything. My view is that they should be able to give us if we pay something more. I mean, if that is the case, and we will pay more. That's the way it is, we will negotiate. But apart from that, there's no reason why they should say no. That's the way it is. But if they say no, assuming that this worst case scenario, we have a fallback arrangement. In fact, I don't want to disclose that because, we are shared with SEBI also. I mean discussions we had with SEBI also, this is what we plan to do it. And fortunately, okay, what we have done it also, I can tell you this. We have by -- I mean, because of this very, what we call, legacy contracts, there are perpetual contracts. So you have a license to run it, okay? You may not get the support -- in terms of when there's a problem, then you -- they will not come and support. That's the way it is. But otherwise, you have a license to run it. That's point number one. Second, we are also not introducing any changes in the existing system so that the stability of the system is protected, okay? Now -- and then going beyond that, some kind of support also we are looking at it. And it will come, it will come. That's what my view is.

And will this new software have any influence in terms of attracting more algos and proprietary traders?

I think it is agnostic, and we are trying to give more speed, okay, in the new application. Maybe whatever BSE claims that get to have a T7 platform. They say we are the fastest in the world whether there are or not, but then at least we would like to couple with the -- fastest with the world and biggest business also. I mean the largest business also would like to have it with that, being fastest is not enough.

Coming to the options, currently only 2 contracts, which is the crude and natural gas, which are the 2 major contributors in the options volume. While the other contracts like gold and gold mini are not scaling up, what is the road block over there? Just to add, the absence of the spot market is also some kind of debt trend. Is there any way to overcome?

Yes. I will handle in the same sequence. Yes, the concentration is, at this point in time, only in these two. But if you have seen the crude oil contract got activated because of very high margins and negative or a peak margin circular that has come in the place, which has taken away the levers. And in the case of options, you just pay a premium and then keep working on it. And this premium plays a lot of things that is happening. And there are people option writers are by enlarge the proprietary mostly, they are -- anyway, they have bank guarantees given and they don't care much about the -- what you call the margins, et cetera, because they are aware. They don't need to move in cash in and out kind of thing. So the options play has picked up in crude, then NGS we have introduced just in the month of January, it's about 8 months old, in that sense, not even fully 8 months old. And it has picked up well. We are also planning to reduce a monthly options contract in a bimonthly gold contract. That means in one contract of underlying features, there will be two options. So it will devolve into the underlying feature. And if somebody wants to go to the next options contract, they will go to the next options contract also. So it will -- what will happen is, it will reduce the premium cost. Now coming back to the mini options, yes, we thought that, that will pick up. But again, in the kind of ratio that you see that is in the future ratio to the underlying rather fixed gold futures versus mini features, if you see that ratio, the mini was never bigger than this one. Maybe it is a 20%, 25% only. That's a mini contract, and they are even less at times. So the options are also are on the same kind of -- on the same -- what you call, on the same lines pattern that's following it. The clients also, we have seen it. There are different one -- for 1 kilo, they are a different bar and then for 100 grams, they are a different cliental base. So it will take some time for us to bring in retail investors into this options contract. And what we did was, you may be aware of it also, and we have recently told that gold can be delivered to home delivery can be made. So we are tied up with this [ old ] managers, so if somebody takes delivery via the option roots, they can definitely get gold delivered at their -- door step delivery is happening. So we wanted to bring in more -- or attract greater participation of retail investors into this contract. Hopefully, we will be able to do that. And the other contracts, yes, we had -- especially nickel, is something which has spoiled our METLDEX contract. But otherwise, it was doing well, METLDEX was doing well. All of a sudden, because nickel has got a 25% weightage, all of a sudden, the contract got deactivated. I mean METLDEX has become almost a nil. Otherwise, SEBI has already come out with the options on index features. Probably that would have -- we would have launched. Unless the strong underlying features is there, I would not like to launch options contract because, obviously, it will devolve into the underlying features. And that is where we are -- our efforts are at this point in time, we want to rebuild those contracts and bring in the last, fit in those contracts. That's the way it is, we are working on.

So currently, like you said, on the index, what is our view on the index options? So given the index future volume is currently struggling and despite it being...

That's why we are not moving towards that. We have not done a market survey as to when to introduce and all that. We would -- our focus is to build that base itself, the index feature itself wider, then I would like to bring in the options.

But what are the reasons why it is struggling despite it being cash settled?

See, the only BULLDEX is doing well at this point in time, well in the sense it's about INR 150 crores ADT at this point in time. But otherwise, as I told you, nickel -- METLDEX was doing very well and almost of INR 300 crores, it has clocked the turnover. But thanks to the nickel difficult that happened in LME and the underlying features contract has dried up. And the main features -- index futures contract also has resulted into zero volume. So first is to revive the nickel contract. So we have gone back to SEBI telling them, the nickel contract size is almost a 1.5 tonne contract, which almost all INR 35 lakhs to INR 40 lakhs, on which the margin were so to be 20%. So is about INR 8 lakhs -- INR 7.5 lakhs to INR 8 lakhs or INR 7 lakhs to INR 8 lakhs margin 20%. So we said this is too heavy and people are resisting from getting into this contract. So we would like it to be reduced to 500 cases, which we had once. So SEBI is positively considering it and so much value of the contract is definitely not in the interest of the market players. So once that is reduced, probably we will be able to resume the indices based on the -- that change in the underlying portfolio, then we will reintroduce.

Got it. And also, can you clarify on the SGF part, like, especially with the regulator or feedback on the SGF with regards to the crude oil features, with the background like why it was being done? And currently, where we are right now on the SGF discussion?

See, in the past 2, 3 calls, I have mentioned it. The crude oil contract is -- currently have about 25% to 35% margin. Now whenever the open interest in crude oil increases, especially in both crude and LNG. And even in the auctions, there is an open interest because the option writer keeps the open interest. Now as a result of which, the SGF requirements are increasing it. If the SGF requirements are increasing it, then we had to put additional margin such as that SGF margin requirements go down, okay? We have a cover of -- SGF cover of about INR 420 crores. Now the penalties contribute another INR 110 crores or INR 120 crores. But for the purpose of SGF cover, when we want to calculate under such results, that INR 100 crore-odd of penalties are not to be considered. That's what the SEBI rule is. So in a sense, we have only INR 410 crore or INR 420 crores is the SGF cover. Now the moment we import the margin because this SGF cover is inception, then the volumes go down. So it's an exigent situation for me. What we told SEBI is we will contribute to SGF provided you allow me also to withdrawn the SGF requirement goes down, which SEBI currently -- I mean, they have put it before the RMRC, risk management and review committee before them, which is likely to meet in the month of August now. If not August, early September, they will definitely meet and then give that dispensation. Today, our treasury is earning about 4%, 5% or 6%, whatever it is. Instead of doing that, I might as well put in SGF and not imposition margin, then volumes will increase, I will get more transaction revenue. So in the net-net, you will be benefited rather than putting it in -- and earn some more treasury income. That is what the whole connect between SGF and the crude oil margin kind of thing. Even in the coal, we have imposition margin.

Sorry, Mr. Reddy, so how much additional part is required in the SGF from the stress test perspective?

No, the stress test is done every month, okay? It is not in fixed. Depending on the open interest of the previous month, the next month, SGF contribution will be decided. So since it is volatile, it keeps going up and down, this SGF requirements also go up and down. That is why we said it, you should give that freedom to contribute and then withdraw. We don't want to keep there only. Because the interest income on SGF also goes back to the SGF.

But ballpark, it will be like a small amount, let's say, INR 10 crores, INR 20 crores or it will be...

No, no, no, it will not be INR 20 crores, it comes to INR 600 crores, INR 700 crores SGF requirement. And what we will do is we import 10% to the margin. So on a INR 25,000 crores open interest, currently, we have about INR 18,000 crores in the features, about INR 6,000 crores, INR 7,000 crores in options. So together, it's INR 24,000 crores, INR 25,000 crores. So on that, the requirement increases.

But is the cost benefit analysis is very clear because you'll be like you said, losing the...

Yes, we are very clear on that. We are very clear.

And can you give -- like in rest of the world, the 4-month contracts that see a decent liquidity. And I think MCX also tried with [ LESN ] have cut the price also by half but still that liquidity. So can you discuss like when the -- also other thing is when the typical option contracts are squared off. So what happens in the time of expiry of the option contract?

No. See, option contract expires 5 days before -- I mean 6, 7 days before the underlying contract -- features contract expires. So it devolves into if there's an open option or open interest of the option, let say, in the money or at the money. And the participant would like to exercise their right, then it get converted into a features contract, open interest. Then the next 5 days, if they want to close it, they can close it, if they want to take delivery, they can take delivery. That's what the options and features is all about. It's not an option on commodities, where optional commodities means if you exercise that then directly commodity will come to you. But here, it is optional features. Now this is one part of it. Coming back to the other question that you -- why this -- what you call, the 4-month contracts are not active, yes, that is where we are -- aggressively pursuing the, what you call, with the hedges. It is a hedger who takes a 4-month view, and then they are the ones who keep the open interest. So currently, about 3 months contracts are the most active, generally speaking. Now if you are comparing with U.S. or LME or China and other things, maybe 6 months contracts are also active, in some cases, even 3 months contracts, 3-year contracts are also active. We have not reached that stage as yet and the participation is still dwindling. And in fact, some of our players only go there and then trade or hedged on those markets. It's an exciting situation for me. If you ask the big players to come on and hedge, they say that you don't have liquidity. So what we are focusing is, let us build from the bottom up. So small players, our liquidity is good enough. So bring them onto the platform, make them what we call hedge on the exchange platform. So if once the liquidity pool increases, the open interest of the smaller players gets added up. Then bigger players, next level of players can be, what to call, enticed or reasoned with. Look, here is the open interest. Now you can also join the exchange ecosystem. That's the way we are proposing.

So that was the next question, like why international players are not hedging on the domestic exchange. I think you answered it partially because...

No, international players are currently not permitted, there's no permitted -- they are not permitted, only domestic players are permitted. Even the domestic players can go on and hedge in international markets, but international players are not allowed to come in hedging. Once the FPI rules are made, which SEBI has already permitted and their regulations are being prepared -- or circulars are getting prepared, once that is prepared, then they will start -- they are allowed to hedge in the domestic market also.

And anything else that you can do to attract the institutional participants like any categories where -- that you can launch where they are not yet present and anything on the -- so what are the key drivers for the institutional participants and FPI to move from global exchanges to MCX?

As I told you, regulatory framework is not in place, so FPIs cannot come. Only in the -- about 2, 3 months ago, SEBI has permitted -- permitted means, they have only in principal approval has been given, the Board has cleared it. The regulatory framework is yet to be put in place. But meanwhile, we are working with FPIs. One area where FPIs may immediately come and is -- the two areas, I would say. There are international arbitraries that can take place, LME versus MCX, CME versus MCX, et cetera. But currently, they have to have two legal infrastructure, what we call legal entities, one to trade and then settle the books on LME, another to trade on the MCX and then settle it because this comes under Indian jurisdiction. But if they permit the FPIs, then one single FPI can trade both in -- I mean they can consolidate the books, both India as well as the international books and then trade without any problems. So that is something which many of the players -- in the past, some players may be doing it without much regulatory framework being in place. But once the tax authorities came around evenly, I think they have discontinued it. And now that is -- that will officially will happen. That's one view. That is what I was told. Second thing is the cash and carry arbitrage opportunities will come. If it comes, it comes in our market and it may be there in other markets also. But there are some cash and carry arbitrage opportunities. We have seen last year in silver, there is a huge cash and carry arbitrage opportunities. A lot of silver was lying in our walls and a lot of companies, I mean a lot of hedges have made money on that also. So such kind of opportunities as and when they come, they can also participate.

And on the bank subsidiaries, which are, I think, less than 10% of the volumes, is there a scope to further increase?

Yes, they are ramping up. See, they are ramping up. Then all of a sudden for me, this technology migration has come. So some of the big players are saying it your technology migration get it done. Then once it is done, then I will work on the new platform rather than working on the old platform is another thing that they were saying. But the existing players are ramping up their business, no doubt about it.

And any specific products or anything enables that you would want to bring in to improve the volumes in the algo traders? I understand it's very high, but still anything that can be further done to increase the volumes? Also, I think the pricing is not different, but can it be different under the regulations?

No. I think regulators are very clear. In fact, there's -- I mean there's a circular also which says that you can't discriminate between A and B. But whatever it is the discrimination, not by class, but by volume, turnover, you can give it. So which we have currently that kind of thing, up to INR 350 crores you have one tariff and then beyond INR 350 crores, you have a different tariff. That is what the like income tax slab we have. There were 2 slabs only. And currently, the average comes to about to INR 207 per crore is what we are earning currently. But otherwise, I can't distinguish between algo and non-algo and give discounts.

And anything that you can launch to increase the volumes further?

Yes. Obviously, new products is another one. I mean, as you keep asking me, you have a concentration in crude and then energy, our energy basket. So we want to go away from that and then try to disperse as much as we can. So that's where we are trying to activate our metal contracts is one. And the second one is we would like to introduce aluminum alloy, electricity features and steel TMT bars, I think approvals are still pending. And it takes time for us to get these approvals, some of them. And especially the electricity features has to be approved by 2 regulators, CERC and SEBI. There's a joint working group. And almost 1.5 years ago, we filed our contract with them. And I think now that things are happening, hopefully, we'll get it cleared this quarter.

So historically, I think we have seen whenever we have launched a new -- adopted any new initiative with the product in terms of the participants. Following that announcement, I mean, the process has been very slow due to the operational issues. So just wanted to understand whether what exactly the market participant needs to start adopting and trading in that product?

See, I mean, internationally, also almost 3 years, a contract takes to mature, mature in the sense to attain their reasonable level of liquidity. Now while we conduct -- I mean we have a product advisory committee, take the feedback of the product committee in designing the contract and then we go on, what you call, go on creating the awareness, et cetera, et cetera. But still, in India, the understanding, even among the corporates also is very poor in terms of hedging. Hedging means no loss, no profit, but they don't understand like that. And to understand, no loss, no profit, both the books they have to put together and then say that, yes, one book, the physical book is lost, then the financial book will be profit or vice versa it will happen. But when it comes to loss on the exchange, they forget about the physical book and then they made money. They say that any way we would have made money. I mean you have lost money in the financial book. That is the way they are questioning the, what you call, purchase managers and other things. So a lot of education is needed. In fact, we have engaged also in the past with the CFO, some of these companies and trying to conduct a 1-day workshop as to how this works. And industry-wise, we have done it. One is for bullion industry. So whichever are companies that are into the bullion -- dealing in bullion, their CFOs have been explained as to how they should be looking at hedging -- similarly, the metal, et cetera. But then it takes time for them to accept it and then get them accepted by their bosses also. So yes, it is a herculean task, but we don't leave it like that, and we will make it happen.

Can you briefly tell us about the profile of the option investors? And how many of these are the new customers, how many of the old customers? So if there is any slowdown over there, then do you think the new customers, which just came recently they've exited? And who are the -- like major participants, I mean, retail [indiscernible], et cetera?

So as I told you, there are a lot of customers who were earlier trading in the crude oil, post negative pricing, they have dissected the counters. Now subsequently, when we introduced this options contract, many have come back. And in relation to do that, a lot of new clients have come with options. Now in the clients also, as I told you, the option buyers or options -- whether they buy a put option or a call option, in that category, they are all retail. On the option writers, okay, whether they write a put option or a call option, they are all the proprietary and concentrated among the big funds. So obviously, they need a lot of money to write option contract because the benefit is only premium, but then actually the downside is unlimited. But whereas in the case of option buyers, be that to put our call option, it's limited to the option premium. So keeping that in view, this is how the distribution is. Yes, a lot of new investors are coming. Maybe Indian investors are used to option contracts in equity markets, so even they are also looking at it. And some of our member brokers are also in their morning calls or research calls or whatever the market few calls, they are also marketing these products to their clients. Every day morning, they have a client call and they are marketing even these products also. So that is something which is renewing the interest of a lot of investors.

So in terms of the new products, like I think the monthly option, by monthly gold features, electricity features, and I think sometimes you mentioned steel also. Where do you think is our largest potential? And do you think -- what would the pricing mechanism in the electricity features? And do you think with -- at what volume will they become profitable?

Okay. I would say this way. There's nothing called not being profitable because you just introduce it in whatever is the ADT, you will keep earning the transaction charges, okay? Now maybe some manpower we may hide in or if at all, we are hide in. There's no such thing that we have done it. For example, energy basket is there. And the electricity goes under that, and the same team is working on that. So there's nothing extra that we have done it on that in terms of expenditure. So the pricing also will not be different. We don't do pricing product by product. And we shouldn't do it because SEBI is very clear. You should just have a tariff across all, and so that's the way we do that. If at all, you want to introduce a LES, you can introduce liquidity and enhancement scheme but not by way of reducing the tariff. They don't want that. It's nontransplant we are doing it, so you please don't do that. That's the way it is. So coming back to the others, what will be the contract, I think electricity is something which we are looking at it maybe in the next 3 to 5 years that should do well once we introduce it. But yes, that's the way it is.

Okay. And I need some clarity on the OpEx side. So there are three elements. So one is the tech where you're already renegotiating the terms. How much would be the saving over there? And then secondly is the employee cost, can you tell us like how much is that fixed in nature? And how much increase can we anticipate in the employee cost? And the other OpEx would it a major consequence? And how much increase can be there in the other OpEx? What are the key things where other OpEx -- where -- I mean is it like more variable or fixed in nature?

I'll start with the employee cost. I mean if you compare it with the March, as we mentioned in the call, there was a -- we have made a provision for variable fee, and it was a budgeted figure. And then when we came to March, we realized actual realization and then there was a reversal. So there is a small component of around on an annual basis, maybe around INR 10 crores for the variable. The rest is all fixed on the employee cost. And I think this -- the run rate would continue the presence -- come to March, and hopefully, we'll meet targets and we'll be paying what we are budgeted for. When it comes to the IT, there's a fixed component as well as a variable component that we pay to 63 Moons. And also, the product cost also includes what we pay to CME, there's a minimum commitment charges that we pay to CME. Going forward, once we go live, we would be only the AMC. I mean, the first year with TCS is under warranty, but there will be an AMC that would kick in from after 1 year. And also, there will be various operating expenses, operating software that we have procured and which will continue to pay because most of the vendors have moved into subscription-based model from perpetual model for licenses. So those licenses would kick in once we go live. Also the amortization of our asset that is the software as well as the various servers that we purchased for the new software that would kicks in once we go live, right? Other expenses are mainly -- I mean, we are maintaining -- we run the business as a building, so there will be electricity, maintenance and there's some traveling expenses, which is, I think, in the normal run, it would be there.

And also, can you give some clarity on the tax rate because tax rate currently, it's around...

Yes, so tax rate for standalone is 25%. Until last year we had a MAT credit, we fully utilized the MAT credit. Earlier our tax rate was 29%. So after utilizing the MAT credit, now we move to the lower rate, which charge and all, it will come to around 25%.

Sorry, for consolidate, it will be 25% from now onwards?

Console, it will be around 20% and stand-alone, it will be around 25%.

What is the difference, sorry?

Because when CCL when they have contributed to the SGF, they have taken that as a part of their expense, so there's a gross over loss for CCA.

And the dividend payout, how much are we looking at?

Up to 75% is what we -- the cash that we earned during the year is what we disbursed.

Okay. Mr. Reddy, on this proposed approval for FPIs to invest in domestic -- participate in domestic commodity exchanges, you also mentioned that they can combine their books across different tax jurisdictions. I mean, is that realistic to expect?

Not different tax jurisdictions. What I'm saying is an FPI can trade in -- on CME as well as trade on MCX. And they can do the arbitrage. And then that arbitrage income, they can show it. There's no problem.

That is like a normal trading in the sense whether it is a hedging or an arbitrage that is a little concern to you, right? As far as you are concerned, you will get a volume.

That's right. That's what I'm saying. That's what I'm saying. We will get the volume. But currently, what the brokers used to do it, that's what I was told that they had one book for the international, maybe from Dubai or something they are trading, maybe, one here. There are losses here, there are losses there and then profit share, they're not able to adjust between the two.

Right. And I'm also seeing some slightly higher interest coming for this GIFT City operations. Does that have any relevance for you?

Well, in the GIFT City, we have invested also in the gold exchange, the spot exchange, and we have a 20% stakeholder along with other 4 others. So equally held, three exchanges and two depositories. And we expect once the gold lands in India probably they have to hedge their rare risk also. So that is dollar-denominated here once they come in, bring in into India, they have to hedge their risk in rupee terms also. So I think that is a win-win for us anyway. Even today also, who so ever is bringing the material via the challenging agencies, they are also hedging on exchange because the RBI rules do not permit hedging and international exchanges as far as gold is concerned. So is hedging, they are hedging on MCX. There's no doubt about it.

But beyond gold, you mentioned that even products like steel, especially in the last 1 year, we have seen lot of companies suffer significant margin volatility because of this commodity price volatility. So now there should be much higher building us on their part to hedge their exposure, right? Why you still...

We don't have contract as yet. We don't have a contract as yet. We are still waiting for SEBI to approve.

Is that taking too long? I'm also using the example of your electricity contract.

Yes, it is taking too long. It's taking too long.

Is it just because of the bureaucracy or some of the existing exchanges are also putting up some resistance for these approvals?

For example, electricity, the CERC has got -- obviously, the spot exchange, spot market development and they would like some of those contracts forward they wanted to be introduced, which they did with recently IEX has introduced some forwards. And we would like the features to be introduced. And that's why they are not giving it. That's what, but then SEBI is also pursuing it. These are regulatory issues, primarily speaking. It's nothing to do with exchange contract. That's the way it is.

Can you clarify once again the cost saving when you migrate to TCS like including taking -- even taking into depreciation in new account? So for example, if we are spending 100 today in the 63 Moons, so when we move to TCS, how much overall cost that will be there?

We have not disclosed the figures as yet. But the way that I'm explaining, in fact, the other day I also explained, given the present volumes, the turnover, et cetera, maybe there may not be any cost saving. But once the volumes increase, then that upside will be not go part of it into the IT expenditure, it will go into the bottom line, that's the way it is. With increase in volumes, there won't be any additional costs in IT. Today, we are showing on variable cost. If you see that, there's one entry variable cost, so that will not be there.

But assuming if volumes remain flat, then you are not expecting any improvement in the cost side or the technology side?

Yes. If volumes remains flat they....

Not immediately.

Yes, not immediately. Not immediately because of the depreciation.

You have the substantial amount of amortization, isn't it? One is for the software as well as for all the new servers and hardware that you have procured.

This gold spot exchange, there are some issues with related to GST, right? I mean is -- what's the progress on that?

That's right. See, the domestic gold spot exchange, yes, we do want to be there. But one is that our technology platform has to be ready, and we have awarded a contract to TCS even for spot. They said that once they develop -- deliver this CDP, that is derivatives platform, then they will pick up that software and then tweak it for first spot also and then give it. So that being the case, we are also not in a hurry in the sense, the EDRs, electronic EGDR or gold depository sales are securities. So securities don't attract GST. Now the guy who is depositing first time, the gold in the vault, he needs to get his GST back, whatever the credit. Now if he deposits and conversion to EGR, then EGR, we don't know when it will be rematerialized and gold will be taken out of the vault. Till then the introducing member or introducing party does not get the credit. That may be in few crores. So that is something which is coming in the way at this point, GST issue.

So there will be no kind of overlap or competition with what you're doing in the GIFT City for the gold exchange?

That is purely only a select brokers are permitted, qualified jewelers are permitted, not everybody can go there and import.

Sir, is it fair to say that the increase that we have seen in the UCC for MCX, I mean, it's largely due to the increase in the option trading volume?

That's right. Shakeel, where are you? Are you there on the call?

No, I think he has dropped out. He has dropped us message. So Nikhil, are we done with the questions?

Yes, yes. We're done.

Thank you so much for your time, sir. Really appreciate.

You're welcome.

And all the best.

Stay invested and thank you for staying investing also, and we will see to that -- we'll put all our weight behind the company and see that we reach greater heights. Thank you. Thank you so much.

Thank you.

Thank you, gentlemen.