Good afternoon, ladies and gentlemen. I'm Vidya, moderator for the conference call. Welcome to 5paisa Capital Limited Q2 FY24 earnings conference call. We have with us today, Mr. Narayan Gangadhar, MD and CEO, 5paisa Capital Limited, and Mr. Gourav Munjal, full-time Director and CFO, 5paisa Capital Limited.
As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone telephone. Please note that this conference is being recorded. I would now like to hand over the floor to the management. Thank you, and over to you.
Thank you.
Sir, please go ahead, sir. Narayan, sir, can you please go ahead, sir?
Is there any connectivity issue? Do we need to reconnect, to sir again?
Sir, one moment, sir. We are reconnecting.
Yeah.
Sir, please go ahead, sir.
Yeah. Am I audible now?
Yes, you are audible. Please go ahead, sir.
Hi, everyone. Good afternoon, and welcome to our Q2 FY 2024 earnings call. On the call, I'm joined with Mr. Gourav Munjal, our Chief Financial Officer. The markets have continued to perform reasonably well, and customer sentiment continues to remain strong. Q2 FY 2024 has been a milestone quarter for the entire industry, as we've added 9 million+ Demat accounts, 51% growth from Q1 of FY 2024 across India.
We ended this quarter with 3.7 million accounts. We have acquired 1.35 lakh customers this quarter, a 25% quarter-on-quarter growth. With all our efforts focused on quality acquisition and improving cost efficiency, we have succeeded in achieving the highest ever revenue of INR 96.9 crores, 15% growth on a quarter-on-quarter basis and 21% on year-on-year basis.
The quarter profit in Q2 FY24 of INR 19.1 crore, that is a growth of 31% quarter-on-quarter, and 78% year-on-year, along with the highest PAT margin of 20% this quarter. We are very glad to report strong growth in our retail ADTO segment and our overall ADTO market share stands at 3.23%. That represents a 27% quarter-on-quarter growth.
This quarter, we made significant improvements to our overall MarTech stack by standardizing our tools, fixing data attribution, and introducing best-in-class frameworks to measure efficiency on our digital platforms. We are well-placed to scale our acquisition channels due to the investments we have made in our KYC journey, our one-click identity integration, pipeline optimization, and effective personalization.
Our superior technology investments in this domain will help us scale our top of the funnel over the coming quarters. Our focus remains building a scalable digital acquisition engine to attract new core customers to our platform. This quarter, we have begun investing in artificial intelligence and data science to offer a better suite of products to our customer cohorts.
This past month, we've launched several data science models to understand normalcy and optimize trading behavior while minimizing the risk for our customers. While this is a brand-new domain for 5paisa, we are very excited about the prospects of integrating AI into our product offerings. We will be talking more about these initiatives in the coming quarters. This quarter, on the product side, we've made many significant updates, largely tailored to our traders.
We launched our new market charts products, which is integrated and available across all our platforms in beta. With this, traders can expect better SLAs and throughputs while placing large orders during peak periods. We've introduced a lot of trader-oriented features, such as predefined options strategies, like Bull Call Spread, Straddle, Condor, Butterfly, et cetera. We have fully integrated TradingView webhook into our F&O 360 platform.
Our customers will now be able to generate links from our platform and connect with TradingView alerts to place orders based on pricing. In addition, we also introduced the trading of BSE options on all our platforms. These features that I just talked about are the best-in-class in the industry, and they raise the bar for innovation in the trading space. Over several years, 5paisa has innovated fast for our customers.
However, with time, our products across iOS, that is Apple, Android, and Web, have grown disparately with each other.... Now, while this is true of most products in the industry, I believe our customers deserve a standardized, best-in-class, consistent experience. Therefore, I'm excited to announce that we have launched a major technology project to overhaul our product offerings and make them consistent across all three platforms.
This new product launch will be our largest offering in many years. It will help us innovate faster, reduce technical debt, while helping us launch multiple categories very quickly across platforms. While this is our largest product launch in many years, I expect the full rollout to take a couple of quarters while we start early beta testing later this December.
Our retail customers and institutes and trading investors stand to benefit greatly from these new capabilities, which will help the app flow much more smoothly across different platforms and product types. This, I believe, is the first of our products, of our overall product strategy to introduce cutting-edge trading products to the market.
5paisa is a technology-led broking firm. Our goal is to provide best-in-class trading platform for investors and traders alike. We will continue to provide technology and strategy updates as we chart the journey ahead. We continue to invest in technology and launch innovative products for our 3.7 million strong customers. With this, we would like to open the meeting to any questions. Thank you very much.
Thank you, sir.
Yeah. Moderator, you can take the questions.
Yes, sir. Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you have any questions, please press star and one on your telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The first question comes from Arsenian, an individual investor. Please go ahead.
Thank you for the opportunity. Am I audible?
Yes.
You're audible, sir. Please go ahead.
Yes, sir. So I just have a query regarding the component of bank balance. Could I just possibly know what is the segregation between what amount is owed to the customers, as in what is, what has been deposited as margin and what actually belongs to us, as in the company?
So our total FD balance is approximately 1,500 and 1,588 crore. So other financial liability, you see that, approximately 1,159 crore. So whatever the other financial liability is of retail and retail-
Okay. So apart from the other liability, the remaining belongs to you? Okay.
Yes.
Okay. Thank you, sir. That's it. Thank you.
Okay, so-
Thank you, sir. The next question comes from Sumit Chandkar, an individual investor. Please go ahead.
Thank you for providing the opportunity, and congratulations for a good set of numbers. So my question is regarding the retail market share. The market share, which is mentioned, is 3.23. So is it overall market share or the cash market share?
This is overall market share. Overall.
So, can you just break this between what is the cash market share and derivatives market share?
Sorry for interrupting, sir. Your voice is not audible clearly, sir.
Is it audible now?
Yes, sir. You can go ahead.
What is cash and derivatives market share?
Actually, we don't share that segregated data, but I can tell you that overall it is in the range of 3%-5% cash market, and the same is in the F&O segment.
Okay. Sir, in last 2 quarters, the market share has grown by almost 20 basis points, which is over and above the growth of industry turnover. So, can you mention what has helped you and what could be your target market share in the coming quarters?
So, see, what has helped us is that over the last several months, we have focused heavily on launching trader-specific features, which are very well received by our customers. You know, if you look at our product offering over the last, just the last two months, right?
There's lots of new features that we have built. Such as, for example, you know, users can now make decisions in derivative markets using heat maps, you know, bids versus indices, OI buildup and whatnot, right? All of these are best in class, and they are the first in the industry, you know. So a lot of these features have actually helped drive adoption to the platform. That's one.
Second is that we continue to invest very heavily in our F&O 360 platform, and we have done a lot of work on developer API, which has improved our core infrastructure and market depth APIs and things like that. So all of these product features ultimately have led to greater participation and obviously greater market share as a result of that, I believe.
Okay. What could be your target market share? I mean, in coming quarters, how much growth you can see in coming quarters?
Yeah. See, we generally don't talk. We generally don't think in terms of, you know, these, in terms of these kind of metrics. The metrics which are important to us is we want to continue launching these features so that our customers can be happy and they continue to trade more on our platform. Now, obviously, the growth that you have seen, we will be, you know, our goal is obviously to accelerate and exceed that.
But, in our experience, I think our focus is really on actually winning the trading customers first. And to that end, some quarters, you know, we may launch fewer features, some quarters we may launch more features. So ultimately, we are not so interested in seeing a month-on-month, you know, what is it?
A game plan. We are taking a much longer view. Overall, if you ask me, I would say that within the next year, we should be at least doubling from here on out. That's really where I want to take the company, you know?
Okay. Thank you, sir. Thank you for the insightful answer.
Thank you.
Thank you, sir. The next question comes from Kajal Gandhi, from ICICI Direct. Please go ahead.
Hello. Hi, hi-
Hello.
Congratulations on the good set of numbers. What would be Algo, if any, in terms of overall volume?
So we don't discuss that information. It's as you can understand, it's very sensitive information. But I can tell you it's a nontrivial part of our overall number. Largely because we are the largest, one of the largest actually, API and Algo players today in the industry. And I think that's a known fact. So but for sensitivity information, we don't really divulge that. That said, it's a very, very central part of our overall order mix, you know?
Okay. Okay, fine. Yeah. Thank you.
Thank you.
Thank you. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad.
We can take questions, right? Hello?
Hello?
Yes. Hello. Hello. Yes, yes, please go ahead.
Hello, am I audible?
You're audible, sir. Please go ahead, sir.
So my question was regarding the client acquisition thing. So how do we plan our client acquisition strategy so as to gain market share as well as the models that you're developing on the platform front? So what's-
Yeah.
Could be your strategy for client acquisition thing? So that would drive the overall numbers as per.
Right. Right. See, as we had discussed that, you know, our company, currently we are on the cusp of digitization, okay? So in the past, we have historically underinvested in the MarTech capabilities, which is why we could not really scale acquisitions very quickly. Now, over this past quarter, obviously things have changed.
We are doing a couple of, We have undertaken a couple of major initiatives. One of them is a total overhaul of our MarTech stack. And unless the MarTech stack is, you know, then that holds the key to actually scale. So how are we fixing it? One is we are building new capabilities on the MarTech side. We are building new technology systems. We're deploying them. We are fixing data issues.
Because as over the last 7-8 years, there have been lots of legacy that has been built up, which we are currently, you know, moving beyond, right?
Got it.
So that's one part. Second is, we have, as you may have noticed, we have completely overhauled our KYC platform. It's currently in the beta stage, and we plan on launching the new KYC within the coming, you know, by the end of November, right?
So as these new products come to light, the journey is going to be very seamless for customers. So this is the top main two initiatives we are taking. Of course, now, in addition to that, what we also will do is through this quarter, as the MarTech stack continues to ready, and I just, I discussed this in the, in my earnings, opening earnings script, right?
Yeah.
What we plan on doing is, we plan on scaling more. We plan on expanding the top of the funnel, and we plan on, you know, introducing the pipe as a product offering to, you know, tier two, tier three customers and beyond, right?
Because we believe the market is currently still expanding, and a lot of that growth comes from these cities which we want to target. So it's really three things: fix the product, fix the tech, get the MarTech capabilities, which we are already doing, and over the coming quarter, continue to scale it further. That's really it.
Got it. So with the same thing, considering the competition, how do you see as to, because we are still in the nascent stage, and we are yet to see the growth in terms of customer acquisition, in terms of market share as well?
Yeah.
So considering the competition, how do you view as a overall industry in front of you? How do you go about it?
So, you know. See, it's interesting. If you just look at the industry, I mean, the answer is actually in the history itself. If I were to, if you were to ask me this question three years ago, there would be no Groww or Upstox in the picture at all. There would be the-
Got it.
Top five look completely different. Now, if you look just within two years, the entire landscape has turned upside down, right?
Yeah.
So actually, what is going on right now is there is no clear winner. That is really the hard. Yes, it is true that the top, the number one player seems to have taken away the market. But again, this market is so it is the product experience is changing and customer expectations are changing big time. To give you an example, if you take the number of traders, So their needs, their requirements, their product offerings are changing very rapidly. Everybody is trying to figure it out.
What I see is that when I look at the industry going forward, what we are going to bet on is how can we create a space for these high-end traders and build a very deep and a very, you know, like a defense and depth type product offering, which allows us to enhance and, you know, launch newer strategies, newer models, which are not available on any other platform. And that's why if you look at all our earnings call, my focus is largely on features that we have introduced for traders, because that's where the buck is skating, you know?
Got it. Yeah. So, is it fair to say you would focus more toward the derivative segment of the customers?
Yeah, that is definitely one of the areas we're focusing on. Obviously, cash is also important, but, between the two, yes, I think the derivative part is, more of a, is more where the innovation is happening, you know? Other, other products are kind of already reached a, they have, they've kind of reached that right risk-reward profile. So there's not much in terms of new products that can come in on the cash side, you know?
Got it. Got it. And lastly, if we consider this overall tech, the tech infrastructure that you are going to develop, so how long-
Yeah.
Will this last and how do you see this shaping in coming years? So basically, how long-
Yeah
Will it take the investment journey to complete?
Yeah, that's a great question. So see, as I told you in this, as I mentioned in the call, right? See, we are right now undertaking a major overhaul of the 5paisa app. See, our app is already rated. If you look at our ... If you compare my rating, that is our 5paisa's rating with Groww and Upstox, we are also at 4.3, 4.4, and they are also at 4.3, 4.4.
In fact, I would say 5p is within the top three as far as the product rating is concerned. Now, but what has happened is that, because our product experience is not consistent across iOS, that is across your Apple iPhone and across your Android phone, customers are obviously very about it. You know, they want to-- they are, they are...
The customer bar itself has gone up. So what I think is that I am looking at multiple, at a couple of quarters of baseline development, and I expect that by the time we exit this calendar year, most of the, core work would have already landed. And then post that-
Got it.
It's just continuous iteration, you know?
Yes, yes, yes. Yes. Thanks a lot, Definitely. This is really helpful, and wish you all the best for this journey.
Thank you very much.
Thank you, sir. The next question comes from Deepak from Sapphire Capital. Please go ahead.
Hello.
Yeah, hi.
Yeah, am I audible?
Yeah, yeah. Yes, you are.
Yeah, yeah. Thank you very much, sir, for this opportunity. Sir, I just wanted to understand, you mentioned somewhere in one year we are looking to double the market share. Is that right?
Yes, that's right. Yes.
From 3.25% odd, we are looking at 6.5% of market share.
That's our goal. That's our target, you know?
Mm-hmm. Mm-hmm. Okay, understood. And what it means for the revenue? I mean, if your market share doubles, ideally your revenue should also double, or how should we, or how should one look at?
See, I think when whenever you are in this, in this space, where we are... Currently, see, as we discussed, right, the market is expanding. Okay? So in a rapidly expanding market, the focus really has to be only on growth, because otherwise we will be completely irrelevant in another 4, 3 years from now, you know?
So to continue to expand and improve our presence in the entire marketplace, we will continue accelerating our investment pipeline, which is our customer acquisition pipeline. Obviously, at this, when we are targeting growth, clearly, sometimes the revenue doesn't grow, doesn't go one-on-one in hand. It's not like, that's not a direct correlation. That's, that never happens in any business, not just this-
Correct.
-any business. So the way we are thinking about it is that we know that we want to run the business within the current operating model that you have already seen, right? We have seen, for example, you saw how much profits we made, what margins we have. It's all an open book. So my plan is we want to continue maintaining that framework, and that's how we are operating the company. So I can't give you a straight answer as to what, whether the revenue will grow in straight line or whatnot, but you can expect that it will be in the same ballpark, in the same, measure as it has been so far.
Just to add in this, you understand in the broking industry, we have, you know, broking, allied, cross-sell, and other. So ADTO and all is maybe related to the broking, but that, you know, MTF income and, DP income is not related to the ADTO. It can be, you know... But ideally, it should be in that direction, but there is no 1-to-1 100% correlation between these two.
But I understand that. But ideally, if my market share doubles, at least my revenue should be up by 50, 60, 70%, right?
Yes.
Not having a one-
That is true. That is true. That is a fair understanding, right?
Yes, yes, yes. Yes, that is a past experience. Based on past experience, your understanding is correct, but we don't know that how the, you know, the future market will react. Yeah.
Of course. One important point, Deepak, to remember is that these customers—see, when we acquire customers and as the market share continues to scale, see, many of these customers would not have aged in the system. So for actually seeing the real run rate of revenue, you may have—you'll have to wait for about eight or nine months.
You have to give at least two, three quarters beyond the acquisition point to see the whole effect of it. You know, one great example is if you look at some of our competitors, they, people who have gone off on an aggressive acquisition spree, say, about a year back, if you look at their revenue today, their numbers are looking very solid, because obviously they are reaping dividends of what they have already sown.
When we look at our revenue pipeline, I think you will see a mix of both. You will see mix of new revenue, as well as you will see existing participation increase, and that's really what we are focused on, you know.
Correct. Correct, correct. Fair enough. I got it. Now, I mean, in terms of margins also, I mean, because your fixed cost is largely it will not grow at the same rate, and your revenue is increasing on a—it has been on an increasing trend. So ideally, that is helping your EBITDA margin. I mean, if you see last, maybe what, 9, 10 quarters, we have been straight increasing our EBITDA margin from 10, 11% to now 35%, right?
Correct.
And, and-
Correct.
And that's a commendable job we have done. But what's the steady state we are looking at? I mean, it cannot keep increasing, right? So there must be some threshold we are looking at, that this is the range where we want to stabilize our EBITDA margin, given our investment in technology as well as in marketing. So what's the management thought process on that?
See, our thought process is like any healthy business, you know, right? Currently, you see this EBITDA growth, and right now we are at this number of 35%, as you yourself have said, right? So obviously, we want to continue to keep this and perhaps even grow it to a certain degree, you know.
But clearly, we cannot expect a 50%+ EBITDA margin, because that makes no business sense, because then we are leaving money on the table, because we need to go acquire customer, you know? So ultimately, I think we will be somewhere in the same range that we are in right now. Perhaps it will be; it will be actually better, but overall our focus will be on top line and increasing the top of the funnel, you know?
Fair enough. So, so a 35%-40% range would be a right number to watch?
Yes, that's the right range. Yes.
It's a very healthy range for us. Okay, okay. And this quarter numbers includes the full impact of our acquisition, right?
Yeah, yeah. Yes. Whatever you're seeing is fully accounted. Yes.
Fully accounted, right? The acquisition numbers.
Yes. Okay.
So, so why your gross client numbers have not changed? I mean, this gross client number of 3.73 million does not include that additional, what, 2.75 million or, or 1.5 million, I think, that we, we got from the acquisition.
Yeah, so that's changed. So, I mean, so in this quarter, we have acquired 1.35. In earlier, we have acquired 1.08. So if we add, it will come 2.43, which is matching with our opening figure.
Okay. Okay, understood. Understood. Okay, that's it from my side, sir. All the very best. Thank you.
Yeah, thank you.
Yeah. Thank you.
Thank you, sir. The next question comes from Hrishikesh from Robo Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. So my first question is with respect to the client acquisition. So quarter-on-quarter, we have grown 25% there. How do we see this growth in coming few quarters?
We see it accelerating. You know, one thing to remember is that the this, specifically this month and the next month, because of this Diwali season and because of this cricket craze that is going on, all the inventory costs have gone through the roof.
So almost all digital players, well, unless they are the largest ones, like Flipkart and all, you know, every other player who is in our category, if they spend accordingly, the acquisitions are likely to be muted. Because just because that doesn't make sense to overspend at this, especially for the coming months. But if you take those two aside, I think the overall trajectory is likely to... For us, is likely to be the same and even increase going forward, you know?
Okay. So in last quarter, you had alluded that, the quarter-on-quarter acquisitions, once the processes are built to some point, quarter-on-quarter customer acquisition can be, you know, 15% around. So, do you... So is it fair to say this will be a sustainable growth number, quarter-on-quarter?
Yes, yes. If you take the trailing average, yes, that, that is what we are, that is what we are aiming for. Yes, that's correct.
Okay. Okay, got it. And, so my next question is actually on the cost structure. So we have roughly INR 140 crore OpEx in this operating expenses in this H1.
Yeah.
Roughly INR 280 crore for the year. How do you see this cost structure growing for the next one or two years?
See, I'll answer the first part, and Gourav will take over. See, basically, you know, the way it is, is that a lot of these cost structures are already amortized, and they are accounted for. It's not like, we have to, you know—Our existing cost structure is not likely to change very dramatically, because... A lot of the, the team building that's going on and a lot of the spend that is going on is actually replacement spend, you know?
So yes, it may go up slightly by maybe 10%, 15%, whatever the number is, but we don't expect that to change dramatically. Okay. Now, with that, I'll let Gourav take the question also, and he can give his, perspective on how we see things go. Yeah, Gourav?
So most of cost has been stabilized. You know, people cost, tech cost and everything, but there will be a, you know, in other expenditures, there is an advertisement and branding cost, which is purely dependent on the market acquisition.
So if we see the opportunity in the market that we can acquire double customers, so the cost will go up, related to that aspect only. And the second, we are also looking for some investment in technology, but that would not be much. It would be highly 5%-7% increase in existing cost, and other costs will be the same.
Yeah.
Okay, but if we are looking to double our market share, okay, and we say that maybe, you know, 50% correlation within the revenues also. So if cost structure is not going up, and maybe ad expense might not go up that much, the margins should actually increase, right?
Like, but I haven't said that the cost will not go up. I said that in respect of advertisement and marketing, it will go up, because we need to acquire more and more customers, and in that respect, the cost will go up.
Okay. Okay, got it. Got it. Thank you.
Thank you, sir. The next question comes from Abhishek Saraf, an individual investor. Please go ahead.
Yeah, thanks for the opportunity. So my question pertains to lately, growth and the way we are trying to expand into Tier 2 and Tier 3.
Yeah.
So first of all, sir, we all know that the profitability at trader level is quite minimal, means not many traders are able to make profit. So I wanted to understand how will this impact our stickiness going forward? Are you seeing any trend shift in the way the individual traders are able to make profit? Are more traders able to make profit, which will actually ensure that more stick around?
Secondly, since we are venturing into Tier 2, Tier 3, how is the behavior of such traders different from, say, a more steeped into, like, Tier 1 towns? So is there any difference in the behavior of such customers, and what kind of impact that can have on our margins?
And lastly, zero day expiry, how are you seeing this? Because we see with other industry players expect that their margins will kind of lower, although that will have an impact on volume in a positive way. Just these three things, sir.
Okay, so you asked three questions. We'll go one by one. See, first of all, no, this coming-
Hello? Hello?
I'm echoing.
You'll have to mute.
Can you hear me? Am I audible, am I audible?
Yes, you are. You are.
Okay, yeah, please. Okay, yeah. Yeah, so see, basically, the customer behavior today has not been any different than customer behavior even 10 years ago. The actual, on an absolute basis, the number of people who make money in the market and who, for whom this risk, this profile of investment makes sense, that is always likely the same percentage.
You know, it's not like today, customers are losing more than what they were losing 10 years back. That's not true at all, right? What has happened is that with more awareness coming into the market, financial products such as mutual funds have taken off in a big way. So that, if you look, the actual majority growth is going in that direction, actually, you know.
Now, for our industry, what we are noticing is that the sophistication of traders is dramatically increasing, and that is the more interesting trend, actually. Because it's those customers, those top 10%, 20% customers, they are the ones who actually, you know, drive up margins and drive up, the economies of scale for pretty much everybody else.
They kind of amortize it for people like us, you know, so we can offer the product to all. So is the trend changing? No, I don't see that trend changing, and I don't think it has any negative bearing also on the market. So that's first part, and the participation.
The second part is that as the penetration in India increases, and we have data from U.S., from South Korea, from China, you know, if you look, the actual volume, the number of these high-end traders, is only going to increase. And there, the participation in terms of ADTO, is actually only going to keep rising. And we have data going back 10 years to prove that in India, and we have data over the last 30 years to prove that from either U.S. or China or even South Korea, you know?
So overall, I think our economy is not any different than these economies. They are all growing at a very rapid pace. And with the customer profile and the risk profile available in the market, I expect that the retail participation will continue to remain strong, including from brokers, including from traders.
Now, your other question on margin is concerned, see, we have already answered that earlier. I expect that this is a business that can run within this 30-35, 35-40% margin, as we have discussed earlier, you know? Because our goal clearly is, yes, we can run it even at higher margins, but that's not the goal. The goal is right now to expand the market.
So that's really our single-pointed focus, is how do we get more products, how do we get more new platforms in the hands of customers, so that they can get familiar with this equity class and continue to trade. And if you look in every single earnings call I've given here. You can see that my focus is largely on that, because I talk about those features on. Yeah, I'm, I'm done. Yes.
Just one last thing, when we did a query, obviously, how is it going to impact the business?
Sorry for interrupting, sir. Your voice is not clear, sir.
I can't hear you.
Sorry, I am in a poor network zone. Sorry about that. Just want—if you can share your thoughts on the zero-day expiry products. So how is it going to impact our business?
Yeah. So see, actually, Gourav, do you have any—can you share any data that we've seen from the last 2-3 months on this? So let's just, yeah, let Gourav add to this one. Gourav, go ahead.
So the question is regarding that ex-hybrid expiry, right?
Yes.
Okay. So we know that... So overall, the volume has gone up in the exchanges, right? And we are expecting that volume will, I mean, be going up even in future with the more participation of the customers. So with this volume that, you know, and most of the volume is increasing in the option turnover. So that will impact our revenue, which will be in the positive side. And, I mean, it will help us to, you know, increase our market also.
Okay, sure. Thanks a lot for this, sir. Thank you.
Thank you, sir. The next question comes from Anshul Mittal from Tiger Assets. Please go ahead.
Yeah. Hi, sir, this is Anshul Mittal from Tiger Assets. Congratulations on good set of numbers.
Thank you.
My question is regarding, like you said, you'll double your market share, right?
Yeah.
Can you, like, tell me how?
Sir, you got we can't hear your question. Can you please speak?
Yeah. We are planning to double our market share in the next one year.
Yeah.
I just want to know-
Yeah
How exactly are we doing that? How are you going to do that?
See, first of all, you know, asking that question in a public forum, you're not going to get an answer from any CEO. Yeah, because that is our secret sauce. Anyway, I give you an overall idea. See, the,
Yeah
Overall idea is that the reason we are investing in MarTech capabilities is because we can spend on the top of the funnel to acquire customers. So far, our company had never really invested in MarTech capabilities at all. Our investments are underwhelming. Now, we are doing a total revamp of that.
So one is by improving that core technology, which allows us to spend more money and allows us to get customers at a more efficient scale. That's one. Second is we are aggressively investing in building new data science models that help us understand how to curate customers. And this is something that I've discussed in this earnings call earlier, right? I expect that a good percentage of the page list will just come from these products.
This is where a lot of the innovation is gonna happen, because currently, as new customers come online, their onboarding experience becomes extremely critical, you know? Focusing on the KYC journey, focusing on the first trade, focusing on understanding, you know, decluttering the product, all of these things will help us build our brand presence across the platform.
We also plan on investing more in brand adtech. So far, we have not done any of that. But as we look at our growth strategy, it's going to be multiform. It's going to be product, it's going to be a mix of brand, it's going to be a mix of, you know, performance market and such, you know, in addition to organic, obviously.
Right, sir. Right. Also, sir, like recently, Narayan Gangadhar from Angel One has joined us sometime.
You are speaking with Narayan, sir, actually, right now.
Sorry, sir. Yeah.
I think he thought he got... he has misconstrued you for me, sir. Anyway, yeah, Gourav is also on the call. Gourav Munjal, he is our CFO.
Yeah, sorry, sir. My bad. So exactly, sir. So, how are we, you know, planning, you know, since you're onboarding Flipkart, how are you revamping this, you know, management or how are you, like, making changes? What plans do you have in mind?
Yeah. See, we have a very, you know, we are obviously, as you know now, for two quarters, we have said this, that we are continuing to invest in technology. That is, I think, a big area of focus and progress, you know. So clearly, those investments, some of those have finished, some of those are already in progress, and some of those will take place over the next quarters or so.
So my overall strategy is to focus on this part, build these tech capabilities. And in addition, we have a very solid team, but there are some parts of the team which need to be upleveled, you know? So we are continuing to attract new talent to the company. Because obviously, the, the kind of problems we are solving now are also, are also changing over time.
So my plan is that I plan on revamping and rebuilding this new product offering with the new teams. You know, that's already in place, and continue to scale from here on out, you know? So that's how we are doing.
Okay, sir. Thank you so much, and all the best, sir.
Thank you. No problem.
Thank you, sir. The next question comes from Franklin, from Equirus Wealth Advisory. Please go ahead.
Yeah, sir. Thanks for the opportunity. So I wanted to know, what are your yields, average yield and margin for the MTF book?
So, for the MTF book, we have 18%-22%. It is based on the net worth of the customer, but the range is 18%-22% per annum.
Okay. What is the margin that you will be getting on this?
25. So it's again defined, the margin is scrip wise. Most of the securities, I mean, they want it at 25% upfront, so we-
Sir, I was asking about net interest margin after adjusting for your cost of funds.
So we do have a 500 crores of net worth on which we have own funds, as well as, you know, that, the banking facility also. So we can't say that, that own funds have some costing, but overall I can tell you that right now, 11% the costing is coming. You know, it, at, it's a cost of overall industry, and we are getting 18-19. So the, the difference is 7%-9% is the spread.
Okay, 7%-9% is what? Is the spread that,
Yes, yes. Yeah.
Okay. And, what is the outlook for this book?
So actually, we have improved that. I mean, we have mentioned in our investor presentation that it is INR 269 crore, but that is was the average. So even the average has gone up by 20%, but if I tell you that 30th September, it has, it is, it has crossed INR 300 crore.
Okay. Because at industry level, I've seen, you know, a lot of players have scaled up this book. So I was just trying to understand, maybe from a 1-2 year perspective, can we see meaningful increase even from these levels?
So, I understand what you are referring to, but they are also not, you know, earning anything on that. They have reduced the cost drastically. I mean, they are just recovering costs, so they are not getting any profit on it.
Correct.
So we want to grow this with the profit margin. So anyhow, we won't be able to, you know, reach that level, that I can't go with the 10% or 11%. So yes, the competition there, that may impact even in future, but, let's see what will happen.
Yeah. And recently, last one year at least, we have seen 250 basis point increase in, you know, costs. So have you been able to pass on this entire cost for this book?
No, actually. I mean, I mean, as you know that in the MTF, overall industry is, I mean, reducing the rate and the competition is coming. So we haven't... So in terms of income, we haven't changed it. And yes, that 2.5%, we have, you know, internally optimized it, and that is not a 2.5%. For us, it would be, you know, approximately 1.5% for us, but that we are taking in our books.
Okay. So this 18%-22% kind of range, that would have been prevalent even in the last year as well?
Yes, yes. We haven't changed the, I mean, interest rate on that.
Okay, okay. And so in the revenue mix, you have a component, others, which is about 24% of the overall revenues. What would be the broad two, three components within this?
Actually, majority is, you know, that interest on FD that which we earn from own funds as well as on the client funds. Apart from that, there is, you know, very small, the figures is INR 1 lakh. So but I can tell you that out of the 99.9% is interest on FD.
Okay, okay. And, at least, at SEBI circular says that they are in talks or planning to, you know, come up with an ASBA facility for a secondary market as well. You know, so what is your approach on that in case, you know, we lose some of the float?
Yes, we can. We need to see that how the industry will impact, because it is... So even in the IPO, the people got so much confused, but in this, you know, hybrid trading, they may get confused, and they don't accept this kind of facility because it is optional.
So we need to review that, how much it will impact to other revenue. Not us, even in the entire industry need to review that. And if there will be drastic impact on that income, then definitely the entire broking industry will increase the broking income. It won't be able to INR 20 per trade. That's my belief.
Understood. Got it. Thanks a lot, sir.
Okay.
Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The next question comes from Shayan, from Electrum PMS. Please go ahead.
Hey, sir. Congratulations on a good set of numbers. I just have one question: what will be the impact on our interest income due to instantaneous settlement coming in?
So I just answered on that. Your recent circular, you know, ASBA is coming. So if the client opted, you know, not to transfer the fund to the broker, so that other income can be, I mean, can impact, but we need to see that, when the circular will come and what exactly they want, from investors as well as, from the broker and, how much it will impact. We need to review that.
No, sir. No, I'm not talking about ASBA. I'm talking about the instantaneous settlement. Like, right now, we are settling at T plus one, right? Now, if, like, let's say next year, we move to instant settlement, so what will be the impact of that? Like, float income will definitely reduce down, right?
No, no, no, it will not impact. It will not be much impact. Most of the traders... See, every, most of the traders, you know, keep funds and for the intraday facility and all. So they, you know, the margin will be the exchange, and they wanted to play with the intraday. And, I understand there are settlement, so if I need to settle in the T plus and T plus zero, there will be no much impact, for me, even on the interest.
Okay. Thank you so much, sir. Got it. Thank you so much.
Yeah.
Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. We have a follow-up question from Deepak from Sapphire Capital. Please go ahead.
Hello? Yeah. Yeah, thank you very much, sir, again, for the opportunity. Sir, you mentioned one of the remark, I think quarter-on-quarter some 15% growth we are looking at. So what exactly we are looking at there? I mean, which parameter we are talking about here, and is the parameter these four?
See, we are looking at our growth metric is basically the number of customers who have been acquired in the quarter, and that is obviously the meta metric. And then obviously the other metric is all other metrics, such as revenue and others, are derived from that, you know? But the main metric is growing top of the line, created active customers, you know.
So that you're talking about is the active customer, right?
Right.
The 15% quarter-on-quarter. Okay, understood.
Correct.
Secondly, on this other income, I mean, the ASBA and also, will it impact or will it not? It depends upon the circular. So what we are trying to say here?
So I just conveyed earlier that, our ASBA will come, and it may impact, and it may not impact, but I don't know that, you know, that, how much it will impact to our, financials. Because I need to see that how many investors, you know, has adopted that, and, and yes, if, let's say about 10% of the customers, is adopting that, then definitely the income will fall by 10% other income. But, I mean, we can increase somewhere else, so that we can compensate our income, not totally.
So, what exactly here we are saying that the excess fund that is lying at, maybe, our account, 5paisa account, so that-
Yes.
the customer choose to transfer it back to their bank account. So that's how our income-
It will not be transferred, no. It will be in the customer bank account, and it will be blocked by the bank, and the bank will, you know, send us to our RMS, that these funds are blocked, that customer should don't do the trade. So, I mean, I can't earn interest on that then.
Correct. So, that's how it will impact us, I mean, in that sense.
Yes, yes, yes. That's what I meant. Because ultimately the margin which we are keeping in the form of every two exchanges that we are getting the interest, that you can't earn that, ultimately.
Correct. Because earlier these funds were lying in your account, right? Largely.
Yes. Yes. Right now it is lying in the register.
And by when we will get the clarity, I mean, in terms of timeline?
Actually, we are in touch with SEBI. I mean, they are, you know, they will release a detailed circular along with all depositors and all, and then we'll be... I am hoping that in the month of January, they will issue the final guidelines and all, and they will also give, allow some time, 2-3 months, for the implementation.
From April to, yeah. Mm.
Actually, this requires a lot of integration on the banking side also, because ultimately bank, broker and exchanges, all three should be in the line. So their system need to be developed, need to be developed by the banking side also, and that's why it's taking time.
But as of now, we are enjoying that interest income, right?
As of now, yes. Every broker, not every broker.
Yeah, yeah. Everyone, yes. Okay, yeah, that's it from my side, sir. All the very best. Thank you.
Thanks. Thanks.
Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. We have a follow-up question from Sumit Chandkar, Anand Rathil investor. Please go ahead.
Thank you for providing the opportunity. I have a question regarding to Algo Trading. What I have seen is, the Algo Trading, the turnover coming through Algo Trading, is rising quarter-on-quarter, but it is, mainly driven by premium customers.
As it is, it is not much, cost efficient. So how do you see it in coming years, that is, will it, be, affordable for retail clients, and, so that the, as it is, driving your turn, turnover? So how, how do you look, into, Algo Trading?
Yeah. So see, actually, that's a very good question. Okay. With algo trading, the main opportunity that we see is that we have the product easy to use for customers, and that today is the biggest challenge. It's the biggest challenge in any platform, because they make it harder for people to actually go and start and test different strategies, deploy them on cloud and scale.
So, so clearly there's a room there where we can innovate. We are obviously the leader in the category. So we are investing big time in building our features so that with the right infrastructure capabilities and such, the algo guys can reap the benefit. Secondly, what the algo people want is other facilities such as co-location. They want the ability to run their own custom infrastructure.
There's a lot of other unique requirements like that, which make it technologically very challenging to actually provide it. But those are precisely the problems we are solving, you know? So overall, I see algo participation will only grow from here on out. That is definitely here to stay. And your other question on whether the margins are depressed, that is not true actually.
The margins are not depressed. It's just that these, these customers have a very different profile. The way we treat them and the way they look for, you know, the kind of products and all, is very, very different because their strategies are different, you know? Other than that, there's no material difference actually between them and our regular high-end retail customer.
Okay. So, so will low-margin customers will be able to trade in algo?
Yes. Not today, but within time, yes. In time, absolutely. Today, they can't trade. Today, if they trade, they'll likely not have the infrastructure, the tooling, the money and capabilities. But that is what we are, that's what we are building. So it's- I'm just saying in general, for platform, not just our platform, you know?
Okay, thank you, sir. That's all, that answers my question. Thank you.
Thank you, sir. We have a follow-up question from Abhishek Saraf and Individual Investor. Please go ahead.
Yeah, thanks for taking my question again. So when small and non, groups, we are definitely trying to go for 2% QoQ and evolution. So you can share some of your thoughts on the stickiness of the customer, is what kind of customers and what percentage of customers, let's say, stick with the, the platform for, a year out or 2 year out, and, which type of customers will be giving certain kind of product or, a type of trading. So any of your broad level thoughts on this will be very helpful.
I think, obviously, our customers are, you know, majority of our customers are repeat customers, so they are coming to the platform, they use the systems, and as they build the experience, then, you know, they continue to, they continue to improve their engagement with time.
Now, obviously, for those customers, as they age in the system, we have to provide them the right products for their right, for their right risk profile, which is what 5paisa is focused on. So overall, I see that, our retention numbers are very strong. Obviously, we don't discuss those numbers, so they're very sensitive, but they're very strong, and I expect those only to get better with time, you know?
So, the reason I ask is that because many traders or investors have multiple accounts, and as you rightly said, that once you're engaged and let's say you're new to the customer, new to trading kind of customer, he will have multiple accounts, but slowly he will try to migrate towards one where he gets more used to, it and gets more comfort level. So I was coming from that place, actually.
Yeah, I think there, that's why, you know, product experience is the most important thing, right? If you look at customers, if you talk to any of the top customers, it's not like they prefer Zerodha to any other product. There is no such thing. It's a misconception. You know, ultimately, what they want is a stable, reliable platform, and they want a broker they can trust.
So if you look, like, the reason they, our customers trust us is because they can pick up the phone, they can call us, we are engaged, and, you know, we have maintained that good touch advantage with all our top clients. And obviously, we are also one of the few brokers who's heavily focused on traders. We've invested a lot in building capabilities for them, which obviously gives us a lot of leg up advantage over many of our competitors, you know?
Okay, that's good. Thank you.
Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. I repeat, ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. There are no further questions. Now, I hand over the floor to the management for the closing comments. Over to you, sir.
Yeah. So again, thank you very much for this earnings call. We look forward to continuing the momentum and growth, and we will share the investor deck and everything online. You know, we look forward to this call again next quarter. Thank you very much. Have a good day.
Yeah. Thank you so much to all our investors. If you have any questions, you can mail to us at ir@5paisa.com, and I wish you a happy Diwali to all the investors. Moderator, thank you. You can go.
Hello? Hello.
Yeah. Yeah, you can, you can...
Thank you, sir.
Thank you.
Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using DoSubscribe's conference call service. You may all disconnect your lines now. Thank you, and have a pleasant evening.