Q1 19/20

Jul 29, 2019

Quarterly report

Ladies and gentlemen, good day and welcome to the CDSL Q1 FY 2020 Investor Conference Call hosted by Axis Capital. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Babal from Axis Capital. Thank you and over to you. Thank you. Good evening, ladies and gentlemen, and a warm welcome to the CDSL Q1 FY 'twenty earnings call. From the management, we have Mr. Bharat Seth, CFO Mr. Varang Shah, Vice President and Mr. In relation to AVP. Without further ado, I'll hand over the phone to Mr. Bharat Seth for his opening remarks. Over to you, sir. Yes. Thank you, Aditya. Good evening to everyone. With me, Mr. Sunil Alwaris, subsidiary's venture also It's me and Mr. Gaurang and Mila Salsu. I welcome you all to the quarterly conference call for discussing the standalone and consolidated results of CDSL Group for the quarter ended 30th June 2019. Due to various uncertainties in the economy like election budget, etcetera, and global factors like Fed interest, rate Moments, oil prices, etcetera, the Indian stock market was in turmoil, which resulted in not many IPOs reaching the market. And overall sentiment was negative. This resulted in the CDSL top line showing a marginal uptrend In the first subsidiaries, Series 2 Venture Limited, the TRA performance is linked to the stock market with weak resulting in lower devices operations and pricing. I will come to the 1.56 crore devices recorded on March 2019. 3 wheeler has RUB 1.93 kyc recorded in June 2019. Other subsidiaries, residual insurance policy has Growth Fylac e insurance accounts and Fylac policies. CRL also started to offer services to health insurance companies. Regarding Sirius, the Commodity Repository Limited is also making steady progress with 970 registered warehouse service providers, 1,000 clients and 5,500 EMW are generated today is on 2018, 2019. The numbers take up please follow: consolidated results on Q and on Q basis This quarter ended June 2019 through quarter ended March 2019. Corporates per income up by 50% that is from NISR54.94 to NISR58. Whereas other income down by 15% due to higher Gain in March 2019, that is from RMB14.74 crores to RMB15.024. Our total income Altogether up by 7% that is from RMB68.68 across RMB73.42. Whereas total expenses, this is from INR25.50 crores to INR35.44 crores, INR38.44 crores that is up 51%, mainly due to increase in employee costs, Salary risen by approximately 30% to 32% across the board to bring delivery levels to Market levels and corresponding regulatory provisions and other expenses like So, apologies. That pertains to Committee appointed by Supreme Court, we are doing that and expect very close tourism that is tourism for the outputs, Postpaid and telephony, etcetera. So profit after tax on concluded expenses on Q and A Major head of excess income on consolidated basis where annual issuer charges up by 7% on Q on Q that is INR17.91 crores to INR19.23 crores. Strong return charge is hardly any negligible Market capital from INR9.8 crores to INR9.86 crores. Consolidated account charges Up by 25% is 1.69% comes to 2.374%. Where is this committee appointed by this project? We have taken It has increased from INR 6.83 crores to INR 6.90 crores that is up by INR 153 crores. That is past highest we have Completed, yes, sir. Whereas on year on year basis, that is quarter ended June 'nineteen to quarter ended June 'eighteen, Yes, sir. Yes, sir. Operational income up by 28% that is INR45.54 crores to INR58.40 crores. Other income up by 10.42 crores to 15.02 crores. It's 1 88% to 2%, that is higher mark to market gain and Interest on IT refunds what we have assumed. So total income up by 45%, that is INR 50.76 rose to INR73.42 crores on a year on year basis, whereas certain expenses Tucked by 72%, that is INR22.38 crores to INR38.42 crores, mainly due to increase in entry cost delivery division by 32% and corresponding impact on Brexit and U. S. Steel and other expenses like costlier, ECS, etcetera. INR 19.22 crores. Transaction charges up by 2% which is INR 9.66 crores to INR 9.86 crores. Concluded account charges from INR2.03 crores to INR2.37 crores. Online data charges that is revised savings, that is INR6.84 crores to INR7.64 crores. And that Amit, we appointed by the same code in this one. What we give it is INR6.93 crores. That is up to 100%. Now I am going to stand alone results. 1st on Q and Q, this is projected June 'nineteen versus 29 March 'nineteen. Operational income up by INR 7,000,000 that is INR 37.88 crores to INR 30 point INR 34 crores. Other income down by 14%, that is INR 13.10 crores to 11.37 Percent due to lower mark to market play. So total income was INR50.99 to INR51.85, up marginally by 2%. Total expenses, 20.25% to 26.84% was up by 33 Mainly due to increase in employee cost. Salary reasons by 30% to 32% to bring the salinity levels to market levels And corresponding The reason for doubtful is posted in telephone expenses. So profit after tax down by 17% From INR54.53 crores to INR20.35 crores. Major head of operational income that is up by 7% to 19.3 crores. Transaction charges marginal, which is INR 9.8 INR 3 crore to INR 9.86 crore. Case charges that is INR 1.8 crores to INR 2.37 crores that is On stand alone results on year on year basis, that is Quarter ended June 2019 versus quarter ended June 2018, operational income up by 36.67 crores, up From INR 36.31 crores to INR 40.53 crores, other income up by 181% due to interest on IT refunds as well as higher mark to market spend, that is INR4.02 crores to INR11.31 crores. My total income up by 28%, that is INR40.4 crores to INR51.85 crores, The restructure expense is up mainly 45% due to increase in employee cost, which is INR 18.5 crores to INR 26.64 crores. The major head of occupational income that is INR15.67 crores Of course, the period was INR 19.23 crores, that is up by 23% transaction charges from INR 9.66 crores to INR 9.86 crores, This year, it's 54.7 crore. With this, I leave the floor open for questions and answers. Thank you very much. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. And First question is from the line of Takash Kapadia from Animate BMS. Please go ahead. Thanks for taking my question. If you could give us the status of the appointment of the new MD and CEO, Where are we in that phase? And I think we had suggested one name and then Subhi said give us more names And those were to be approved by shareholders. So is that the status by when do we see this closure? Mr. Prakash, when you gave 1 NIM to Freddie, they told us to give It is 2 names. So our Board has given 3 names without any preference. So, maybe first one, that is your prepared shareholders approval. So in June 27, we have started offshore bullet and July 27, it has got over. Today, we have received the results. We have updated study about it. The shareholder has approved panel of names, panel of 3 names And when is going to decide about it? So we have submitted to the study, panel of name, now BOL is in the court of 3 to this segment. Understood. So on the Adhar status update, I think Supreme Court came out with the ruling. So is my understanding point you can Use online Aadhaar as you were saying earlier for KYC, but you could do physical verification in 1 year, is that the right way to interpret the note? My colleague, Sunil, is from CBSL Venture. He will I'll tell you about it. So far as online ADAR is concerned, it can be used only for direct benefit streams, Okay. Which is humanity out of the consolidated fund of India. And all other private companies, okay, except for telecom and bank, Yes. Because we recently the other act was amended permitting telecom and banking Investing has KYC to be done. But for all other parties, they have to do an offline KYC, With Adar, let us come out with the guideline, and we are currently doing offline each KYC for some of our projects. In case we want to Continue to online each KYC. We have to approach Aadhaar through our regulator. So we have approached I actually approach Aadhaar and permit us to do online e KYC as well for the industry. And once the approaches Aadhaar, then there will be some Changes in the UITI Act or permission given by the central government after which we will be permitted to do online ECWIC. Okay. Okay. So we have to do offline? Currently, all private parties can do only offline, if you guys. Except you said banks and telecoms. Except banks and telecoms because the law was recently amended. And I had one more question. What is the market impact of So gains on the investment book in the other, if you can quantify that figure. Yes. 1 minute, sir. On quarter on quarter basis, for the quarter ended March 2019, We have got a gain of INR9.73 crores against the June 19, INR8.97 crores. But if you compare it with a year on year basis, that is June 2018, yen was only INR1.9 crores, around INR8.97 crores. And lastly, Madhul, you mentioned about that INR 6.90 crore Revenue stream, saying this is we've completed the 1st phase of the company And there were some expenses pertaining to that. So are you on a government project? And how much of that is in other expenditure? If you could just explain the last question. The INR 6.93 crore is the government's Supreme Court Asset Management Committee, that project we are doing And that is refund of investor funds. So 6.93 we have booked during this quarter. What? Is it EPS related what? Investment is very important or is it some other skill? Some other things. That is the confidence we can't divulge it exactly. Okay. So again, 693 what we have booked as an income during this quarter, We have booked expenses also. We have provided for it that is INR5.4. That's why other expenses are There goes up, right? Yes, because of that mainly. This is a lower margin business as compared to some of our Existing businesses, but because it is a government listing, we are doing it because they're like mandatory. Yes, yes. And few quarters ago, there was a revenue stream of INR 2,000,000,000,000, which we had said it was above in quarter. So this is the same or that was Thank you. Next question is from the line of Harit Shah from Reliance Securities. Please go ahead. Yes. Thank you for the call. So I just had one clarification, just one small data point. This year, Yes. Revenue this quarter was 2.37 and the year ago, it was 1.80 crore. 1 year ago, INR 1.89 crores And now it is INR2.37 crores. Okay, sure. Secondly, obviously, your detail regarding the incremental market As on June 2, we have made 6,000,000,000 new accounts Again, this was the 3rd 2,170,000 accounts. That is our incremental market share is 75% for this quarter. Right, right. And finally, the can you just give me a figure for the unlisted companies that has been admitted? I think it was about 1400 instead of the last Thank you. Next question is from the line of Abdul Mehra from Moshe Laloswala AMC. Please go ahead. Yes. Hi there. Good evening and thanks for the opportunity. Yes. I can tell you major expenses in personnel. Other expenses due to this So I mean project in which you provided around BRL5.49 against BRL6.93 as our income. That is a major bank in the carriage as it was 16 excess days and System measures cost increased by $71,000,000,000. It has a major area. Got it. And during the conference call, you also had some recovery, right, For the assessment year, 20 12, 13, INFAX has given us a refund with interest. That is around INR 2 crores interest amount is INR 2.2 crores. INR 2 crores and along with that 1.23 and 1.74 is the right size amount. Capital gains, right? Yes. Yes. And it includes INR 2.2, INR 3 crores of income tax reform, That is interest on your competitors. Okay, sir. Thanks, and wish everybody. Thanks. Thank you. The next question is from the line of Nitin Agarwal from JMP Financial. Please go ahead. Yes. Thank you for joining, Mr. Chekke. Sir, can you give some more line on what exactly is this committee appointed by our Supreme Court? And how is it functioning? How are we earning revenue from that? And going forward, what is the revenue potential from this? Or is this just Oh, short span when we have earned revenue from this team. Yes. 1st and foremost, this is a one off assignment. This is a committee appointed by Supreme Court to ensure refund to investors in a particular company, also who are deported by the company. And we have been appointed to create an interface of these investors, call for the certificates and receipts. Based on that, we will decide on the refunds and then we will credit the refunds to the investors account. Once this is done, it will be a one off event. So till when is it expected to continue for next how many quarters do we see? See, the conference is for 1 year, but there are large number of investors, about 4.5 crore investors. So would you Next year as in FY 'twenty one? That's right. And so Only because of the numbers involved. Okay. And what is the potential revenue which we can get you this year and next year Everything we cannot divulge. That is all. No problem. And which entity are we recording this? This is non parent standalone The question is regarding the employee cost increase. So there is a 30% increase across the board. So this is coming after how many years like So kind of increase, do we have a set pattern that every after these many years we'll be increasing our employee cost base for? Last incident in October 2016, we did it. Every 2 to 3 years, Yes, please. Okay. So this time it was for this particular. So this 30% increase will be reflected throughout going forward in next What was your earnings, please? No, no. See, there is a one time impact before this leave and testament and So around approximately INR3.5 crores to INR4 crores In fact, it was there in 1st quarter, but it won't be there in next quarter. Okay. That trend, it should continue going forward for employee cost? Yes. That much. It is for 1.5 to 2 crores, so I can't show this much of it. Okay. Okay. Thank you. So that's all from my side. Thank you very much. Next question is from the line of Dheesh Babadia from Oech Securities. Please go ahead. Good evening, sir. My question was regarding, I didn't catch the numbers of revenue bifurcation on a year on year basis for the That is annual issue charges from INR10.66 crores to INR19.22 crores. Okay. IPO corporate exchange from INR5.55 crores to INR5.36 crores. INR 9.67 crores to INR 9.86 crores. Okay. What about online income? Online income from INR6.84 crores to INR7.64 crores. INR7.64 crores. And EOT? You're working from 50.85x to 40 4.86x. 47.8 44.86, yes. Okay. And my second question is regarding what was profitability income from the government projects regards to document verification in the Q2 of fiscal 2019? So if 1st phase was over, So we have already booked an income for that first phase. When second phase is going to start, what time we are able to see? Okay. So what would be the questionable time for example, second phase? The contract is for 1 year. Within this, financially only, yes, sir. Okay. Thank you. And also, what are you seeing? Could you please tell the number of Cash at the end of our Q1 of the next question. It will be INR 715 crores, altogether INR 715 crores. And also that could you Share the information regarding the number of new universities at Enrolled in the division of the EMEA depositary A number of records have been on the same. Yes. Shay, year on year basis, that is June 18 versus June 19, also 375 academic institutions we have signed agreement, it has went up to 350. Okay. Yes, it is. Okay. And I will comment that to yes. Number of academic record load is From 40.1 lags to 1.71 lags records. 44.47 lags Means 40 lakh 46,000 records, it went up to 1 Crore 71 meg record. Of 70 lakhs. Okay. And are you not able to generate revenue from September 2019 onwards? Yes. MHRD is to notify what will be the charges, but once we notify, I think we should be on track. You have not indicated that it has to be the pre period has to be increased or anything like that. What we are getting is that there will be no Okay. Can you share the information regarding how the pricing is decided on the same? There are 2 types of charges. 1 is for upload of records and second is in case any record is verified, okay, a charge is levied by the verifier. You have to verify our charges as well as large charges. And like I said, there are 2 charges, 1 for upload of the record to the university and one for verification. Okay. Thank you very much. The next question is from the line of Ashish Sood from Rishi Kapoor. Please go ahead. Yes. Helmut, thanks for the opportunity. My question is regarding insurance policy business. So as on date, how many health insurance policies are you doing online? And Life Insurance Quality, can you take break up and charge for them? Around 5,000 health insurance policy is added Into the system. Okay. So this is the first time health insurance policy has been added? Yes. Yes. And pricing, what is the pricing on that, 50 rupees or it's different? No, it's a different one. That is around 30 That answers your question, Ashish? Yes. Thank you. Next question is from the line of Sriram Srinivasan from Shema Health Management. Please go ahead. Last quarter, it has been headed by around 893 companies, 533 companies in last quarter. We're not able to understand your question because your voice is very faint. We are already ending the There are 250,000 policies out there as on 30 June Against 2 lakh 25,000 March 2019. 25,000 additional policy, sir. 30,000 is the additional deals have been added, right? Yes. Yes. Yes. Or we can see the set of unnecessary companies. Last time, you have been almost 200 to 2 Yes, same thing. No, this particular company is in 1 quarter. It comes to 3.5. Yes, that's what we can see the similar kind of Thanks, sir. Yes, yes, definitely. Yes. And as well as in terms of other, all your expenses, we have been Order us to do some specific projects for the investor fee granting, right? In such case, Yawu made a RUB5.48 as a provision for that business. And you have mentioned that 6,590 as an income. Is that right? Correct. Yes. Is this It's a one time, one time. One time for the Phase 1 of the project, for the Phase 2 of the project, we again will have some income and some expenditure out there. What will be the expenses that we can expect? I think we can make it up in the processes. No, we cannot I mean, we are In the process of finalizing the vendors and also that, we will not be able to disclose anything at this point in time. Okay, fine. Yes, yes. Fine. So in terms of university difference, you have been saying this is the loss, the same quarter of last year for 300 funds for universities, I think from this financial year, right? We are committed to chart from September 2019. That's what our MOU The MHIT says, now MHIT has to come out and specifically issue a sector to all the universities and then going forward they will have to pay this charge. Okay. So that's how things stand currently. One last question, sir. In terms of the stand effect, I guess, we can put the total number of tonals My question is on, how about the winter, actually, the wind staging this quarter? Just from June, 1, we can do the interest rate. I have 1st note, we can there is a while in NSE, even if it Yes, it does not matter if somebody has sold a securities, there's either The next question is from the line of Hithin Jain from Invesco AMC. Please go ahead. Sir, I would like to understand other expense better. So if I repeat it, so last year in 1Q 'nineteen, the expense was INR9.5 crores, which has now become INR3.4 crores, So approximately an increase of INR9 crores. Out of that, if I remove this INR5.5 crores, which is you are saying one time related to this specific project that you have signed up. Sir, despite that this 9.5% has gone up to 12.9%, which is an increase of 36% year on year. So, Anurag, normally, I see you don't have that expense growing at this scale. So what is exactly happening this quarter? What expenses, if you remove there is a 6.23 in employee expenses, That is 16.06, no? Yes. See, apart from this 5.49 crores in This is Crore, a problem for you. Other than that, crores we have provided for household debt. So, sir, you would have also provided us provisions for doubtful debt in 1Q 'nineteen also, right? No. Okay, then why is this specific why is this 1.6 crores? What has changed this quarter? No, no, see, last year, But what did I insist from this Q1 also, we have to provide for you. Okay. So if I remove that also, still it is up 19% year on year other expense. Sorry. Normally, you see 10% to 15%. Yes, yes. But certain expenses like postal telephone communication increased by 62 That is because of the government project? The government project, all communication was by way of SMS. So there was a So, Sudhakar, is this project loss making for us? No, right now. No. Okay. Because It's low margin, very low margin. It's very high volume and low margin. Correct. No, because if I look at the revenue contribution is 6.93, expense you are saying 5.5 plus 70 lakhs increase Those are reimbursable expenses basically. So basically, I incur those costs And those are hindrance to me on Axis? Correct, correct. And my second question is, if I heard you correct. You said you Salary hikes after 3 years, is it so? Yes. But if I look at your employee expense over the last for 3 years. So even in FY 'nineteen, employee expenses grew by 13%. FY 'eighteen also employee expense grew by 22%, FY 'seventeen also grew by 16%. So, Albany has grown more than around 15% to 15%. So why would that be then? That is on Total expenses you are converting that is 14% and like that. Yes. Here, see for the new project number of employees also, If you see, in March June 19, 2018, 235 employees were there. Now it has increased to 253 employees. Then all this promotion's annual increment is through you to consider it. So you have annual increment, right? Yes. What is this 3 years hike? That is to compare with the market. So every year, you give a hike, but after every 3 years, you The earlier annual increment was 2% to 3%, Okay. So it was not in case of the inflation as well. So that is why every 3 years we look at having a provision of the case scale itself. We don't have DNS allowance and all. Okay. So, okay. And you are saying that the employee expense growth that we are seeing is Because of any sort of new people. Yes, yes. It is kind of because as the projects have increased, people have increased, unlisted company, we have required more people. So what are the number of people are included? Okay, okay. So I mean, do you envisage This I mean to add more, because this is a new opportunity which we are Getting revenues from the 1 listed shares. So do you expect additional more employees going forward? No, no. See, the volume increases substantially. I think Employees also, number of employees will have to keep in pace as the business increases. It cannot be that the business increases and the number of employees in any sense. Plus, as we get into new projects, obviously, there will be some additions there as well. Or say, has the Academic Depository, the team and MHRD permit us to levy a charge. We will require people to market the product. Thank you. Next question is from the line of Amit Gupta from HDFC Securities. Please go ahead. Yes, sir. Thanks for the opportunity. So my question is relatively understood opportunity. So we are adding around 400 companies monthly, whereas the competition is adding around 500 companies on a monthly basis. So, I want to understand is that this 500 Kamila, 2 and Kamila are all operating. This is or are we incurring any cost or Sales cost, I know to get these 200 companies. And if you want to complete with them in terms of more and more companies, so can you see an increase in cost, Yes. Whatever there is some incentive we pass on to the RTS To admit more of the company into situation. So as we make more aggressive, that cost could go up to maybe up. Okay. So as of now, I would look at it more as a promotional expense. Okay. So we are providing incentives to the RTA for We just started doing that, yes. Okay. So we are No. There is business promotion expenses. It's present hardly anything. Recently, only we have introduced this. Okay. Okay. Sir, in terms of the comments that we're doing, so as Vince has already discussed that The margins are below in that. So can you quantify that what exactly the margins and Can these margins increase its scale or is this starting point where the margins are slower? So as we scale, the margins can increase or how to say No, I think the margins are pretty okay. It's around 30% And we have already booked some income in the last quarter, not only this previous quarter, the previous quarter, Okay. So the 30% margin is for the full year, right? Yes, answer the last question of the challenging costs. We are taking the increment 30%. This includes the increase that you're seeing in salary costs. It includes only the impact of 3 months or is applicable As on 31st, whatever actuarial valuation on lease investment and gratuity was there, that has come into picture in this June 'nineteen, This is around so close we have infected during this quarter. It won't be there in 2nd or 3rd quarter. So whatever increase is there, 100 and 30, then Thank you. Next question is from the line of Nitin Chhatri from Green Capital. Please go ahead. Hi, good evening. My question is pertains to, I'm beginning to understand the cash and Investments and general reserves are around INR 650 crores to INR 670 crores is what we've highlighted. So my question is why is it possible to deploy certain amount of reserves from the treasury In terms of creating a buyback of the shareholders or improving the dividend yield because isn't that a better use of the cash rather than going at a yield 7%, 8%. Just want to lay out the management and points on that. Amendment About our dividend policy is consistent that is around 60% payout ratio is over there and on concentrated basis around 40% payout ratio is Regarding buyback of shares and all, now is it because everything is gone now, it is equal to whatever dividend you are giving, it wants to claim only. But definitely near future means different from new and new to come and then we'll review it and Thank you very much. Next question is from the line of Gaurav Lohia from Go Head Investments. Please go ahead. Hi, sir. Have you processed heavily for revision in the annual issue fee? Not yet. Market. Are we looking in the near run or probably a spillover test? In 2015, they will revise the tariff from now. This year, next we will do. Okay. And sir, what was the revenue from these unlisted public companies in Q1? Is it your charge of INR 19 crores. It would be around 75x. 75x. Okay. And how much of that would be one time admission fee? That would be much higher, 2.75 lakhs? There is 500 companies around 16,000 rupees, so 600, so 19 Lex around. 19 Lex or 90? Not 90. 19 Lex. Okay, understood. And sir, you had mentioned that around 5,000 to 6,000 companies would have the G Met listing. Now how many companies would be left since they are under that we are going out of competition in adding companies? Yes. Out of which 2,000 orders administered over here, then Whatever you think it is around 4,000 at NSPL, must be 60,000 companies to come. It is not mandatory unless and until they Yes. And any word on the private companies as well? Private This is only for Mr. Gamsi, but any word on private companies? No, there is a second phase that is MCA is going to come out. Okay. And but there is no clarity as of now and that would happen? Not yet. Okay. Understood. What was the ECA provision last year? Was there any provision last year or there was no provision? It was only in Q3 or Q4? That is Q3, Q4 also. Okay. There was nothing in Q1? Yes. Okay. Understood. Thank you. Thank you. Next question is a follow-up from the line of Dheesh Babaria from Hodak Securities. Please go ahead. Sir, just one more question regards So I didn't catch the number of revenue contribution from unlisted space in the company. Please share the same. From previously I made a mistake, but in this quarter, 643 companies added And we do an income of L99.63 lakh. L99.63 lakh. Okay. Thank you so much, sir. Good luck. Okay. Thank you. Thank you. As there are no further questions, I now hand the conference Over to the management for closing remarks. Over to you. Thank you very much to all of you And keep safe from us. We'll definitely give you good results. Thank you very much. Thank you very much members of management. Ladies and gentlemen, on behalf of Axis Capital, that concludes today's conference call. Thank you all for joining us and you may now disconnect your lines.