Earnings Call: Q4 2020

May 15, 2020

Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q4 FY 2020 Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Abhishek Kundi from Axis Capital Limited. Thank you. And over to you, sir. Thank you, Janice. Good afternoon, ladies and gentlemen. I hope everyone is safe working from home. On behalf of Axis Capital, I am pleased to welcome you all for the Indian Energy Exchange Q4 FY 2020 earnings conference call. We have with us the top management team of IEX represented by Mr. Rajiv Srivastava, Managing Director and Chief Executive Officer Mr. Vineet Sarjalta, the Chief Financial Officer and the entire top management team and business head of the company. We will begin with the opening remarks from Mr. Rajiv Srivastava and followed by an interactive personal answer session. So over to you, Rajiv. Thanks, Abhishek, and I hope everybody can hear me clearly. Good afternoon, ladies and gentlemen. I know these are unprecedented times people are working from home. And so I really want to thank you all for joining this call. Welcome you all to the Q4 and fiscal 2020 earnings call. Abhishek mentioned Vineeth with me on the call, but there are few other colleagues of mine, which I'd like to introduce. We've got Rajesh Medrieta, who is the Director in the company and he runs our strategy Rohit Bhalaj, who is Head of Business Development Sameer Prakash, our Chief Human Resources Officer Indranil Chatterjee, our new product and new initiatives and CRO Amit Kumar, who runs our market operations and new initiatives, new products Gautam Sangh, who is our CTO Shruti, who is a Marcom lead and Aparna, who is Investor Relations lead. And all of them are on the call just like all of us right now, like I said earlier. First of all, let me just do the I hope We just lost the line for the current speaker requesting you all to please stay online. We'll be connecting the current speaker to the phone. Hi. Can you guys hear me? I'm back. Yes, sir. We can hear you. Please go. All right. Thank you so much. So I just wanted to say that I hope everybody in the family and your parents, your children, whoever and your family, everybody is safe and healthy. And from our perspective, from our side, we obviously want to make sure that just to be every frontline worker and we express our gratitude to every frontline worker and others who are providing selfless service, working tirelessly to provide relief and care to the people and all the utilities. So I think it's a great sense of gratitude that we want to extend to them. Let me just move on and just give you a bit of a preamble. And we all understand power is a lifeline of a country. At IEX, we clearly recognize this more than anything else and we also have a huge responsibility to support and enable power on demand to facilitate a completely uninterrupted seamless 24 bus 7 power supply to almost every all the remotest corners of the country, especially to the stressed healthcare ecosystem, to the communication infrastructure, to all the public utilities and related businesses and to millions of employees who are working from home today. All the households who really deserve and need every single moment of power that they have to get. During the lockdown, the robust business continue to be planning of IAS allowed us to make sure we are proactive and ensuring around the clock operations, completely seamless connectivity and very high levels of security. So the network is secure, the information technology infrastructure is completely secure and that allows you to deliver an absolutely seamless 24 VAS 7 experience to all the utilities and all the buying and the selling agencies on both sides. The end to end automation allowed us the flexibility and capability to manage our regular book and operations remotely. And by virtue of that, by virtue of our very high level of technologically secure infrastructure that we've created in the company, we could pivot on employee safety as a first instance. So we have been continuing to work completely remotely even though we are under the essential services, but we can continue to work completely remotely just because our technology allows us to do that. During the lockdown period, power procurement by distribution utilities from southern, western, northern states such as Andhra Pradesh, Telangana, Tamil Nadu, Maharashtra, Gujarat, UP, Bihar, Punjab and a few others has increased just because there is ample power availability on the exchange with very attractive, extremely attractive prices right now. Now this is helping the utilities make significant savings in their procurement cost and several utilities have shared their success stories on how much they've been able to optimize on cost through exchange led procurements in the media. So that's been a good story so far, people trying to optimize in these disparate times. Recognizing our responsibility to support the COVID-nineteen relief efforts in times of this need, we didn't make a very small, very humble contribution of INR5 crores to the PMKS 1. And we are as a public entity, we are obligated to do that. Otherwise, there's no reason for mentioning this point at all. Let me just give you an economic and industry update and I'll share with you how it plays out for our business right now and what the prognosis looks like over the near term. The industrial activity as captured by the index of industrial production did register a serious degrowth of around 3% during the quarter Q4 gone by. Breakout of the COVID pandemic led to deterioration of the overall economic activity, which started to display moderate green shoots in the month of Feb, March, but obviously the COVID push it back now in the New Year. The economy in our estimate should be there about in the region of 4 for 4.0 for the year FY 2020 depending upon the analysts that you choose to end up all the reports that are coming in. Similarly, on the electricity front, Q4 registered a muted electricity demand. The demand growth was only 1.6. Now the 1st 2 months were very good. The Jan Feb months saw average demand growth of 7.7%. March began very promising with a very positive growth. But in the second half of March when the lockdown was implemented, the whole of March shrank by 9.2 points YY. So a decline in the amount of 9.2% in March. And for a frolier perspective, Power Sector was characterized by electricity demand growth of only 1.3% YOY. And for the first time since FY 2014, we did face considerable headwinds on account of several unprecedented developments related to economic growth, industrial growth and the Caribbean slowdown and few weather related changes as well. So all of them, both industrial demand, industrial and commercial demand and the agricultural demand and the weather related patterns contributed to the energy situation being the greatest. So the total installed capacity during the year increased by 4% and reached 370 gigawatts. And in line with India's commitment to the Paris Agreement to increase the share of green energy in the overall mix, renewable grew faster. While the overall grew 4%, renewable energy grew 12% and the thermal increased only by 2%. So I think that's how the whole energy shift is going to take place in the future as you will see more towards a more green, more sustainable mix. The much awaited DISCOM relief package the Finance Minister announced of INR 90,000 crore liquidity injection on 13th May, 2020. We believe this is a welcome step for financially stressed DISCOMs. The DISCOMs will be in a position to be back to the Gen Cos and the Transcos, which I stressed. And the measures like PFC and REC loans, rebates and the forms announced by the central government should create the much needed short term liquidity, financial liquidity in the power sector value chain. Our belief is there will have to be further structural reforms undertaken to make it a much holistic, much more long term sustainable. But clearly in the short run, it's an absolutely fantastic measure because it increases liquidity in the system. Additionally, on the policy and regulatory front, let me just tell you that the Ministry of Power recently did issue a draft Electricity Bill 2020. We will focus on a few things, abolishing cross subsidy charges and cost deflected tariffs, sub licensing franchise and or distribution areas, creating a completely separate authority to adjudicate PPA related disputes and obligations to augment the capacity of the appellate tribunal, promotion of renewable energy as a very, very sustainable way of going forward, allowance of cross border trade off electricity and payment security mechanism. Now we believe that these are great measures. And once the reform when the act gets implemented from a draft to an actual implementation, this will address several structural challenges being faced by the stakeholders today and probably also bring in the much needed efficiency in the sector as a whole. Having said that, let me just move on and give you a sense of financial and business performance. Our business performance for the year for the quarter, IEX reported in Q4, IEX reported a robust 40 percent Y o Y electricity volumes growth from a 9.9 BUs in Q4 'nineteen to 13.84 BUs in FY 2020 Q4. Now on the price front, the day head market did see an overall decline in prices by 14% in Q4 2020. And attractive prices did help the commercial and industrial customers to increase procurement and our open access buying went up by 41% during the same quarter. Including REC, the total volumes did increase by 29%. The volume growth did contribute to a very robust set of financials. On a standalone basis in Q4, our pack Q4 2020, our pack at INR47.2 crores was up 25% as compared to INR37.8 crores in Q4 2019. So PAT up 25%, revenue for the quarter was up 17%. PAT margin at 59% was up 3 points from 56% a year ago. So versus 56% of Q4 'nineteen, you are at 59% in Q4 or 2020 at a PAT level. Starting Q3 2020, the company started consolidating the results of its wholly owned subsidiary, the Indian Gas Exchange and packed with the inclusion of Indian Gas Exchange is 45.62 close during the quarter versus 47.2 which is standalone. Let me also give you a full year picture. For our fiscal full year FY 2020, the electricity demand like I said was a muted 1.3% growth only. IEX reported a 3.2% growth in electricity volumes. The volumes increased from 52 point 2 BUs to 53.9 BUs during the year. RHC volumes were impacted just because there was lack of sell side inventory in the RHC. So that part of the business did decline. For the full year FY 2020 on a consolidated basis, the company did record a revenue close of 1%, but our PAT went up by 6% and the PAT margins stood at 59%. During the year, we continued to rigorously pursue tech led innovations, technology led innovations and made very significant investments in revamping our back end infrastructure, our trading platform, adding new products, security, cybersecurity and a whole range of the automations of the internal processes. So very significant investment in technology and automation, including getting additional resources on the technology front. So our CTO has been a really busy man over the last one year. Further, we undertook various capacity building initiatives and invested in creating various robust practices and processes because we want to make sure that we are robust because exchange demands us to be and your processes have to be absolutely automated. With a pat of INR 175.7 crores on a consolidated basis for FY 2020, the company continues to be very strong and very robust business model. But more importantly, with absolute zero debt, which in times like these you would understand that it's such a huge boon. I'm pleased to announce that in March 2020, we paid out an interim dividend of 2 50 percent to our shareholders. We continue to progress and get close launching new products and you've been hearing us talk about new products working with the regulatory authorities and the Ministry of Power. And there has been obviously there has been some procedural delays because of the situation and times that we are in right now. CRC has approved the introduction of real time markets effective 1st June 2020. So you will see that first product getting launched, getting off the blocks on 1st June. And I just want to show you that operationally, technologically, we are completely ready to launch exactly on the same day. So we are absolutely prepared. Our state of redness is very high. We are also ready to launch the gas exchange, Indian gas exchange. IGX commenced its membership drive in February of 2020. Manikaran Power Limited, which is already a fitting member on IEX, became the first member for Gas Exchange. And subsequently, we've had many other member additions. We've had 6 more member additions. And more importantly, more than the members, we've got more than 75 clients who have registered on IAGX. So we've got a ready pipeline of people who can off take the volumes that we can put on the exchange, on the gas exchange. The company has been proactively developing the gas market, including doing a whole range of reach out activities to customers, including webinars, doing mock trading sessions to make sure our state of readiness is absolutely high and understanding about the role of markets in building a gas based economy. Having said that, let me also give you a bit of a way forward and how we think this is going to all evolve and change. We know that COVID-nineteen has shown up a huge range of challenges. But more than that, we see ourselves as steering on a range of opportunities for the power sector. Clearly, life will not be the same. We will need to assess every single element of the electricity value chain, generation, transmission, distribution, the structure around that and the networks, we have to assess which business models deliver in the electricity business. Clearly, an overemphasis on our 25 year long term rigid contracts may or may not be the most useful date forward and there has to be a certain amount of work done on that topic as well. Strategic involvement of financial institutions, how does the whole funding mechanism work between the bank, the financing institutions, the generating companies, the distribution companies and the transmission companies. The whole regulatory environment, which is working right now over time to make sure that things become streamlined. Operational efficiencies, which is reducing the losses in transmission and distribution. And these are just a few, which will help us accomplish the objective of power for all on a 24x7 basis in a very sustainable way and in a very cost effective way. Collectively, we would need to find out way for these way out of these issues. And we are working very strongly with all the stakeholders in the Ministry of Power and the regulatory commissions to play a part, very strong part. We have to bring in more efficiency and flexibility in terms of structure, operations, finance into the system and that is a key priority. Cost of power needs to be optimized for industry as well as growth and efficiency. And if you guys have been obviously following the Make in India sort of Make in India big program that needs to really take shape for both getting self reliance and also for generating a huge amount of employment into the country. That will happen and that will be facilitated on the back of power being optimized for the industry as well as the homes. And then a huge amount of efficiency in the whole network and the value chain that I said. And because India has set itself on a path of rapid growth for the foreseeable future, In my opinion, I think this is the perfect time to make some real fundamental progressive shifts. And also just because most of the world has solved for these issues. So there is no reason for us to not solve them for ourselves in a very, very, very nice and a very possessive way. So we at IAS believe the sector will require a lot more automation and solutions that enable all of these elements of transformation that I talked about. And we stand because we are such a high-tech sort of a company. We believe that we are standing at the forefront to deliver around these solutions that the industry requires right now. The technology led energy markets will have a very key role to discharge to enable this transformation. So our business growth will be further aided by our proactive and collaborative efforts with various stakeholders and partners, whether they are in the ministry or in the regulatory framework or the partners that help us in selling or associates which help us in going and meeting and managing customers or our advocacy efforts. Then business development initiatives, capacity building efforts and new product launches. So we also continue to rigorously pursue tech led initiatives like I said, tech led innovations to ensure a best in class customer experience through a a bunch of very defined practices and processes. Just the way I mean it is unthinkable that an engineer like us could be so automated to be working remotely in a very secure manner, but that's what our technology innovation and technology implementations have held us secure. And I clearly look forward to working with all those stakeholders to draw a new energy order in this new normal, a new energy order which is built around the pillars of sustainability, efficiency, affordability and led by technology in all ways. Let me do this. Let me stop here and then open it up for questions or anything that's on the minds. Can we open the call now, sir? Yes, please. All right. Sir, thank you very much. Ladies and gentlemen, we will now begin the question This is Sahil Desai. Please go ahead with your question. As there is no response from the current participant, we'll take the next question from the line of Sajid Jain from ASE Investment. Please go ahead. Yes. Good morning, Nirajiv and team. Hope everybody is safe on your side. I just wanted to quickly check the volume quarter till date that is from post April till date, overall total volume including REC. Why why what is the growth or decline or how is the situation? Okay. Look, the volumes of YTD, which is still 13th May, which is therefore yesterday, are 8.1% growth y o y for the same period, including REC. The month of April when it started, it was a slow start. We expected because everything was absolutely shut down. The lockdown was very intense when it started. And the lockdown started to get a little easier as we progress towards the end of the month. So all of April, the peak and I am sure you're following these numbers. The peak electricity demand in the month of April fell by 25%. The volumes on exchange in the month of April fell only by 6.6%. Okay. But come May, in the 1st 13 days of May, the peak electricity demand has recovered a bit from a negative 25% year ago, it is now negative 15.1.5%. And the volumes on exchange have gone up by more than 50%. So YTD, we are at plus 8.1% or 8.2%, something like that. And when you introduced real time market contract in June and eventually long term contract as well, what kind of growth over a 3 to 5 year period you expect? Let me pass this question to my DizDev leader, Rohit, to answer that. Rohit, can you take it on this? Yes, yes, yes. Thanks, Rajiv. Hi, Rohit. Yes, so in fact, your question is about 2 new segments. 1 is real time market, second is longer duration contracts. So, real time market, we expect to start from 1st June. And in this particular segment as we have maintained earlier also, the potential that we see is about we see immediate conversion happening from deviation settlement in the cariesm volume, which is about 20,000,000,000 units, annual volume is about 20,000,000,000 to 22,000,000,000 units that we see now. So we expect that conversion will start to happen from this particular segment to begin with and within couple of years, large part of that DSM will get converted into real time market. So that's our estimate. And second thing that we see here is, since more distribution companies have become very, very price sensitive now, cost sensitive. So we see optimize also, they will use real time market also for the purpose of optimization. So DSM is not the only thing where we see volume coming into RTM. There would be some additional volume which will come from optimization as well. So that's the sizing of RTM. About LDC also we have more than 50,000,000,000 units of banking and bilateral transactions happening in the country today. So if you see the CRC report, you will find that more than 20,000,000 units of direct bilateral happens in the country and more than about 30,000,000,000 units of banking transition happen. So when we are going to launch this longer duration contract, this will provide us ways and means to capture this market as well. So, and of course, it is going to happen in a gradual way. We will once we start to roll it out gradually this conversion will happen some part of it that's the total potential we see. I think I have answered your question. You were talking about sizing only. Yes, sure. I'll come back in the queue. Just one question, real time market the charges will be 4 paisa? Yes. So, it is expected to be 4 paisa because it is in line it is nothing but extension of our intraday market. Today we have intraday market which is 2.5 hour in advance and real time market is going to be just 1 hour in advance. It is very similar to it and it will be for the only. And same for LDC? Should be similar for LDC, but since it is little far, little away, we have not yet finalized the transaction fee. Sure. Thanks. Thank you. Before we take the next question, I'd like to remind participants, please limit your question to 2 for participants. You may come back in the question queue if you have a follow-up. Next question is from the line of Mohit Kumar from IDH Securities. Please go ahead. Yes. Good afternoon, sir. So my first question is what is the state? Of course, you this is the long term trading we have been in discussion to withdraw the petition. But I think this is getting prolonged. I guess the next hearing is on the 8th July. What is holding back the resolution? And what is the time frame in which you see the withdrawal of the petition and there is a suitable resolution to our liking? Look, this is the matter in the Supreme Court from our point of view and from the point of view of the ministry and from the point of view of the regulator. And all the people engaged in the litigants, they want the disposal of that petition as of yesterday. Everybody wants to get on with doing something more active and meaningful versus trying to chase the prediction. Unfortunately, right now, you understand it as much as I do, there are a ton of very significant and very important litigations which the Supreme Court is dealing with, very matters of great, great national importance Supreme Court is dealing with. And also they are taking cases only which are extremely priority cases. They are not taking anything which is and priority cases are really, really priority. Okay. So the hearing which was meant to happen on 7th May has been deferred to 8th July. What the CRC, the regulator and the Ministry of Power have done, they have sought the opinion of the Solicitor General of India David Howe yesterday, whether they can move on this without Supreme Court disposing of the petition. So you can just see the urgency in the ministry from all sides to make this happen. And our view is it will happen very, very soon as soon as it happens. So there's nothing which is holding it up. Up. It is just in line, it's a sequential, it's a procedural thing that is stuck, which is there with the shipping code. Otherwise, every party engaged and involved wants to make this a reality because it will help not only the market, it will help a lot of customers as well just because it optimizes for everyone. Understood. 2nd question, sir, given the COVID situation, do you think there are any challenges in offtake in real time case in near term? And do the states have built the capacity? Are they equipped enough to do the trading and to contribute to the volume? Yes. Look, we've been working and I'm going to defer this question to 2 other people as well. We've been working with all the state governments to make sure that they can come up and I don't know if you participated on the webinar that we did on the real time market, Very good participation and we've been working with NDC, which is at the center level and also the states to make sure that they understand how to trade and we are providing them the software linkages for them to be able to trade very effectively and easily. So all the user interfaces which allow people to trade on a very seamless and very easy user interface business, we are doing all of that. But let me for any further thing, let me also give it to Mohit to address this question if you have to. Yes. Mohit, we have been regularly in touch with all these distribution companies. And I won't say all of them, but yes, most of them are fully prepared. They are geared up for participation in real time market and we do not see any impact on account of COVID as of now. See, what is happening is, as Rajiv rightly said, we conducted 1 webinar very recently and there was huge participation, all the state, most of these states participated. We did mock also some time back and today all of them have installed this our software on their platform and they are doing it. That is one part. 2nd is, we are also helping them in creating capacity to ensure that they are in a position to optimally utilize this new platform. See, there are 2 parts of it as I earlier also explained. 1 is meeting your deficit, right, which is a very simple thing because you are so near to real time, you will immediately calculate what sort of deficit is there and you can place your bid. But that is not the total thing. Large part of volume we are expecting from optimization also. So we have created a tool which we have shared with a couple of DISCOMs now and in next 1 week time we are going we are reaching out to all of them and we are in the process of sharing it with them. And there is so much excitement in distribution companies. This is one of the game changer market model that they are looking at it. And particularly all those states where there is high renewal, they are also very, very excited about it because this gives them another opportunity to address the variability in generation that they see, which is a great problem for them on account of high variable in their particular state. So, I won't say everybody is ready, but I think 80%, 85% of the states are directly dealing with us and creating capacity to participate on this platform immediately. We take the next question from the line of Bhavan Napanee from SBI Mutual Fund. Please go ahead. Thank you for the opportunity. If you can just help us with how was the mix in terms of the sellers and the buyers different than if you take the Q4 and the full year or fiscal year 'twenty? Okay. Rohit, you want to go ahead? Yes, yes, yes, Rajiv. See Q4 is a peculiar quarter when you do not have high demand in most part of the country. So if you are following demand pattern, you see normally you see high demand coming in Q2, particularly in the later part of Q2 and early part of Q3. And Q4, we see demand start to pick up only in the month of March. So the pattern that we observed in Q4 was, we were if you have seen our results or this number may not be there, So there was a very good participation coming from both distribution companies and also from Open Access Casual. Our volume growth in Q4 was about 40%. And in the Open Access side also we saw 34% of that social volume came from Open Access side and there was tremendous growth in the Open Access buy as well. So there are couple of things which happened. On the sell side, there was participation from distribution companies wherever because of diversity in demand and supply across the country, there are many states who were surplus during those 3 months. They were selling very aggressively, prices were low. And since the prices were low, there was huge participation coming from Open Access side also. So I would say on the buyer side, it is state participation and also open access. State was little limited because there are very few sites where they have good demand in Q4. And on the sell side, mix was very healthy. There was ITP participation close to about 40% to 45% and states were also selling and their overall sell was little above 50%. So that is how mix was. And how would you compare on a year on year basis because I assume given the low prices that you mentioned with the strong growth from the Open Access consumers? Yes. So year on year basis, the Open Access, when we started last year in the month of April, Open Access contribution was just 20% of the total buy. But gradually, it started to build up. There were some favorable regulatory orders, which came, a couple of them from particularly one from Gujarat. Also there was so much Quebec consumer addition happened from Tamil Nadu. So it started to change from start of Q2 and it up to end of Q4 it was almost 35% of our total buy. That is about Open Access. And the distribution company buyer pattern is again dependent on their procurement cycle, their agriculture season largely. So we see participation coming from northern states in Q2 and Q3. And then in Q4, there are very few states where you have high demand states like Telangana, AP, then you have some demand coming from Rajasthan, MP also has good demand during those times. So it keeps on changing. It varies from time to time. But on an average basis, for the last year, that was about 30% from Open Access and 70% from distribution companies. Just one follow-up. Historically, it has been observed that as the share of open access rises, some of the states actually take actions to curb that because that's one of their highest paying customers. Incrementally and more I mean and if you could answer more qualitatively, have there been any states who actually changed their open access charges or maybe not given permission on the big site? Or was it more or less constant and actually that resulted in the strong growth? Yes. So in fact, between last year throughout the last year, we have seen many favorable orders. And in fact, as I said, 20% increased to 34% and overall volume was also very good in Q4. So many orders came and many orders came and most of them were favorable. But you are right, every year in the month of March April, we get to see new tariff orders. And in new tariff order, you have new tariff, new cross subsidy surcharge, new additional surcharge, all these elements which are important for any Open Access consumer to source power from exchange, there is some change in that. So we are in middle of May, we have seen many of these orders and none of these orders which came in the month of March April except for 1, there has been any increase in open access charges. So in fact, before the lockdown, we were our mix was very healthy. The Open Access was and it is ever increasing. So what started from last year Q1, it attained a very good high in Q4. And when we started this year, it was low because of lockdown, but we have not seen any adverse order. Thank you. We take the next question from the line of Varun Goenka from Nippon Mutual Fund. Please go ahead. So actually my question is related to RTM and open access is answered. Thank you so much, sir. Maybe if you can also address the gas side, I think we are starting it very soon. What could be the challenges in adoption? And just like you explained in real time market, how do you with what intensity or what success do you feel this adoption will be done over the next 1, 2 years in terms of volumes coming to the exchange? Okay. Let me just give you a bit of a and thanks for asking that question, Varun. Let me just give you a bit of a preamble about what the gas intent of the government is and where the country is headed. So the country is very rapidly moving towards everything possible to do with the clean sources of FMCF. And gas actually falls in that bracket. So the stated objective of the government has been shift the energy mix of gas shift the adoption of gas in the overall energy mix from a 6 percentage point of today to 15 percentage points over the next couple of years. And that's a 2.5 times the shift of today in a growing market because gas economy is growing because you're aware with the city gas distribution and such similar initiatives, there's a huge amount of gas that is building out there. So gas is going to be finding a lot, lot, lot more favor as far as the gold ship of energy mix and the clean energy desire of the government. That's one. And GAAP is situated in multiple locations in the country right now, whether it is Western India or it is South Southeastern India and Southern India in those zones. We will be trying to play in all of those areas. Just to get you a flavor on numbers, the spot market because we will be a spot exchange to begin with, the spot market of gas already is about 30% today. So of all the gas that is getting that is traded, it's about 30% today. And we can we will aspire to be a couple of percentage points of that spot market. I'm not sure if Arkim, Arkim, you're on the call? No, Rajiv. He's not. Okay. So Artem is the one who is leading our gas initiative. That's the reason I wanted to get his perspective also. But the 30% is the spot market and we will aspire to gain a couple of percentage points of that in year 1 of our operations. Okay. Just another high level thing is, are we also to move towards derivatives or any intent towards that or government policy towards that? Not in the gas side to begin with. No, on the electricity side, yes. Of course, I mean, derivatives has become a reality. Somebody asked a question, I think Mohit asked a question about 1 or 2 other questions about the long duration contracts. The long duration contracts which are going to get which are waiting the clearance of the Supreme Court will facilitate trading in forwards and futures on the thing because the spot contract, which is up to 11 days, will still get delivered out of the exchange. And the longer than that period, which are hedged, futures and projects will get done out of there will be under the 4 years' SEB. And so once the long division contracts are allowed, they will make it possible to do future move forward and derivative contracts on the email list. Right. Sure. Thank you. Thank you. Next question is from the line of Avinash Chena from Spark Capital. Please go ahead. Yes. Thank you for taking my role. Sir, my first question is on amendment of this electricity at recently announced. So there is a direct subsidy transfer that from for consumers. What will be the impact? Because we understand that this might reduce the industrial tariffs in future. So for natural volumes, are we looking at any drop? Rohit, you want to take that one? Yes. See, it is talking about direct subsidy transfer, right? So this is different from cross subsidy. So, cross subsidy is something where you are increasing tariffs of 1 category and then using this excess extra money for subsidizing it for some other category, right. But when you are talking about direct subsidy, I can give you one example like in most of the states, we supply electricity to farmers at a RUB50 or 1 rupee tariff. Now the real tariff for them is, as per the government policy, you cannot have tariff less than -twenty percent of less than 20% of your cost of procurement, right, which means that if your INR4 is cost of procurement, you cannot offer any tariff less than INR2.20 paisa. But we give subsidies for supply to farmers and give them tariff of INR1, which means that there is INR2.20 paisa being shelled out by government to for giving subsidy to that particular segment. Now this is called subsidy, direct subsidy. So when we say that it is direct subsidy transfer, it is by direct payment that whatever subsidy government is giving that will be directly transferred to end consumer. We do not see any impact of this on industrial tariff, because industry none of these industries are getting any subsidy from government. In fact, they are cross subsidizing it. Their tariff is more to facilitate the subsidy of some other category. Understood. Thank you. So another question is that of this INR20 crores of other expense in FY 'twenty, software development and maintenance? Can you repeat, please? So we have this other expenses on standalone of INR20 crores in FY 'twenty. How much of this cost is the development and maintenance? Yes. So although this is looking to the total INR 20 crores because the majority of the software team, now we have an in house software. So the majority of the cost is the combination of all. Because technology, we are not depending on the external agency. So the 24 doesn't have the substantial portion of the cost in there. But if you look into the overall side, then you can see the cost is overall coming to the around cheaper in the operating side or the fact. And because mainly the cost of the manpower is because we are building a robust technology team, So that cost is going into the manpower cost. Okay. Any one off changes? Because One off changes there, let's say, because last year we did the buyback and all. So these 2 things were the impact, which were the one time costs in the last year, which are not there. And secondly, because of the earlier 16 weeks came, so the cost moved to the depreciation and finance side. So that will also lead to a bit reduction on the cost. So if you look into the depreciation cost, that's a bit it will be almost 4.5 crores and manpower. So we are studying on the Type 1, but it's no need to build an in house team to have more robust Type team to do the Internet development and all this, so we will not be committed on our extended JV. And the major reduction is of the shifting of the Rant and other cost to that acquisition and few onetime costs you've seen the last year. Understood. Sir, my last question, if I may. On this DSM dependency, so this 25% that can we assume on the conservative side from the real time? Like and what states that we can expect this to be converted towards RTM market? Look, I won't want you to assume anything. And maybe Rohit, you should just Yes. So I don't want to comment on number. So what we shared is a total potential which is available. Now to answer your second question which is about who all states can be initially we can see participation from them. So generally we are seeing major inquiries coming from all the states who are rich in renewable. So states like Tamil Nadu, Gujarat, Maharashtra for that matter AP, Telangana. So these are some of the states, but yes, there are some more states who are heavily overdrawing from grid, where their DSM bill is very, very high, division bill is very, very high. So these states are ORISA and then UP, Vihar also in some of the months it used to be, it is very high. So these are 7, 8 big states and they also contribute to almost 60%, 70% of the total consumption in the country. So all big states, we expect them to come to our platform to make use of this new platform. Thank you. Before we take the next question, I'd like to remind participants, please limit your question to 1 per participant. You may come back in the question queue if you have a follow. We take the next question from the line of Harshita Oshenevar from Premji Invest. Please go ahead. Hi, sir. Couple of questions. One, when we look at the open access business itself, can you throw some light on the mix in the purchase side? And 2, the states from which they come? So we have a lot of Maharashtra and Gujarat as one of our primary sellers to the exchange. Is it more open access heavy in those states? Or are those viscoms who are targeting more from that end? And the second question is more on the outlook on the FY 'twenty one volume. The reason I'm asking is that the recent May month is it was a great number. But obviously, once demand again picks up, then how do you see the FY 2020 volume to come up? Thank you. Let me give you the answer to the second question first, Ashish, and then Rohit can take on the first one. Is that all right with you? Sure. Okay. Look, it is really tough to give our guidance at the moment. And we will continue to calibrate ourselves vis a vis the evolving situation. We have to really wait and watch when the industrial activity will get back to normal. May, like I said, is a little better than April, but has a long way to go, long way to go. The 15% dip in the peak demand in May also is a long way to go. And you know that as much as I do that unlocking the lockdown completely requires the whole supply chain to become as oil as before, if not more. And to my opinion, that becoming oil of the supply chain across industry types, whether it is auto industry or it is consumer durables or it is FMCG or it is logistics, whichever one you take, that oiling of the entire end to end supply chain is involved within quite some distance away. It's not happening in our area. We've seen the migrant livers going bad. Everybody has a find that it will take a while for them to get back. Even as they get back, then all the new normal people The manufacturing system in Malte Binay will go through a huge amount of change management because manufacturing in a factory and I'm sure you have been to many factories like I have, manufacturing in a factory is a station by station by station activity, Okay. That's how the work methods in the manufacturing industry works. But with the new norms of social distancing and all the new norms of staying away from each other a bit, those have a lack of a leverage. So I think all of that activity, we have to wait for the industrial activity to get back to normal. That's the reason we are choosing to be a little cautious and calibrating all the time with the repeat volume situation. But I already told you, look, if April is a good one to go by and May 1, 2012 days is a good one to go by, our volumes in these 43, 44 days are up by the amount I mentioned to you. So that's where it is. I think it's important for us to stay focused on doing what we do best, which is making sure every single customer of ours is covered, making sure that our Exchange technology runs absolutely the best and making sure that we are reaching out in a very, very nice and good and very positive way to all our customers, consumers, partners, whoever is to be of any kind of assistance to them. So I think that's what we are trying to do to make sure all of that we're doing. So let me just defer back to Rohit to answer your first question. Yes, Rajiv. Thanks. So to answer first one, which was essentially around 2 big states, Maharashtra and Gujarat. So as we know, they are Maharashtra is the biggest consumer in the country today and Gujarat is also number 3 or number 4. So what we are seeing is, Gujarat, your question was about balance between Open Access and Discom buy. So this is undoubtedly a state where there is absolutely no deficit. So in fact, if I recall correctly, Gujarat was one state which declared it as a surplus state about 5, 6 years back. And if you see their participation at exchange, so in terms of distribution company buy they are in top 3 most of these years. And in terms of Open Access buy also they are in top 3. So this is one state where people industries as well as distribution companies themselves, they are super commercial sensitive. They do not want to leave any opportunity of doing optimization on cost. And this is precisely the reason that this is in Gujarat you have all the 3, 4 distribution companies they are positive. So they are making money by selling power which is not the case with most of the distribution companies in the country. So in terms of overall balance, Open Access and TSCOM, it is on both sides, they are doing tremendous, their participation is very high. On the other hand, Maharashtra, their participation at Exchange is extremely high. In fact, If you ask me in last 2 months, they were most proactive and they in fact do a lot of replacement and saved 100 crores of rupees by doing that. But open access side, they are not so active. The charges in the state open access charges, which is additional subsidiaries such charge are little on the higher side. And then they have given subsidies also in some part of the state with our buy and all. So we do not see participation coming from there as well. So Open Access, it is little limited. But as a state, they have been very proactive in doing replacement and coming to exchange as and when there is some opportunity to save on the costs. Okay. And broadly mix of Open Access and discount budget for FY 2020? So FY20 so you are asking about share of share in the total buy? Yes. On the total buy side, sorry. Yes. So it is on the buy side. If you on the share on the total buy side, around 30% was done by Open Access Consumers and 70% was by distribution company. Okay. And sir, on the sell side? Sir, I'm so sorry to interrupt. May I please request you to rejoin the queue for your follow-up? Before we take the next question, a reminder to the participants again, please limit your Next question is from the line of Navina from Jefferies. Please go ahead. Yes. Hi, sir. Just I might have missed this. I just wanted to check what was your annual fees that were booked in the quarter? Annual fees for the clients? Yes, yes, please. Yes. So total amount fee for the quarter is almost CLY7.5 crores. Sorry, so I missed that. RMB 7.5 crores. RMB 7.5 crores. RMB 7.5 crores. Okay, got it. So then last thing, just in terms of your investment plans with your cash on books, I understand the gas exchange that's been done. Any other plans over the next 12, 18 months that you foresee? Any other areas that you all might think of? Look, as a company, we'll continue to obviously assess opportunities in the market. There's nothing on the annual right now, but we will continue to be on the lookout for things that align with our approach, which is in the energy field or in the pre look account Okay. Thank you. Thank you. Next question is from the line of Apoorva Sinha from Philip Capital. Please go ahead. Excuse me, sir, I'm so sorry to interrupt. Your audio is not clear, sir. We are My first question is on gas exchange. Possible for you to share about where you're taking the technology over here? Is it On the gas exchange, sir? And what kind of commercial tons are there? Also, is most of the cost related to the employees as well as other business development costs are reflected in Q4 with respect to Indian exchange or should we expect to increase gradually? Are all your questions related to the Indian gas exchange? Yes, these are related to the Indian gas exchange. Please do. Because I missed something in between, so I don't know whether I got it all or not. So I'm talking about yes, so first was the digital technology, like is it in house or we have taken we have licensed it from some of the gas exchange. And what if you can share broad commercial terms like earlier for a year it was 10% of the revenue. So is that the kind of commercial terms there? And also related to the cost, Rajeev, from your cost, I'm presuming that some of the cost has already been reflected in Q4, but given you will be doing a lot of business development exercise in this case, should we assume what kind of cost should we expect to come in subsequent quarters? Shailene, look, the technology on that has been in collaboration with a company in UK. So the gas exchange technology comes from a company in UK called GMAX Technologies. They are one of the leading pioneers in gas technology business across the world, and they are helping us develop. It's not a revenue share. We are buying it outright. It's not a revenue share. So it will not have an impact in the subsequent years in that. And it's a huge amount of work which we are helping us with and that's what I said is really ready right now. On the cost, on the manpower cost, look, we are building the business. So we'll obviously keep adding headcount to the gas business as we go forward. Right now, the headcount was very, very small headcount and it was just a start up. So there wasn't too much needed because we had to get the rest of the operational infrastructure in place, which is what we've got now and we've got a few business people. And that's the place where we will hire the most to make sure we're getting more business driven people, we're getting more strategic people and we're getting more operations people in the business. If I can also ask a question on real time. So I understand DSM is the obvious mode or obvious shift we should expect. But don't you think that we need some kind of a stringent guidelines again for DISCOMS to move away from DSM? So my understanding is like the since there was RTM was not available. Hello? Sir, we proceed to the next question. It's from the line of Abhishek Puri from Axis Capital. Please go ahead. Thanks for the opportunity. So just wanted to check-in terms of renewables, it's green grid that you were talking about, the green market that you talked about as well as on the cross border, what are the updates on those plans? And secondly, in terms of any change in strategy for COVID crisis that we have seen, obviously, open access volumes will take a hit and some of the products that we are launching may take more time to stabilize or reach the targets or budgets that we had estimated. So any change in strategy to that effect? Okay. So we got 2 questions. In the green for the green market, Avishal, we expect the launch to happen sometime in Q2. We are awaiting amendments from we are just issuing the regulations or issue of the regulations from CRC other. And we are getting extremely positive feedback on the whole requirement of the green market. Very keen interest from participants with surplus high energy available states like Tamil Nadu, Kurdistan. And also the recent change in the transmission regulation, which puts exchange on par with the interstate transmission. So I think that's the other thing which is helping us. From a sizing perspective, only to provide the guidance, but I think it should the whole green trading should become a reality over the course of Q2 in our opinion. So that's kind of a very positive thing from a deal perspective. Your second question was on cross border, is it? Yes. Yes. Look, cross border is waiting final regulations from the Ministry of Power. A huge amount of work, the regulations were drafted, then there's a bit of a back and forth because we wanted some clarifications. And because it is cross border, it needs a bit of a vetting by the Minister of Commerce as well. So between Ministry of Power and Ministry of Commerce, in my opinion, I think they are dotting the horizon crossing the fees. It is almost at the last leg and we should cut off it very, very, very soon. And just in terms of any change in strategy due to the COVID disruption that you have? A lot, a lot. Look, we do COVID is just the way it is going to force us to a lot of companies have changed. You will see us also getting a huge amount of change on account of product. And a few things. Let me just give you a few things. One is, I think the way in which you engage and interact with the customers are going to change. So the customers were used to coming to your office and dealing or you were used to go to your office and dealing with the customers and telling them and showing them a few things, I think that needs to change. And that has a very profound impact on what we do. If the customers are not going to be engaging with you physically in their premises or in our premises, then your tech has to have a step up to make sure that you are able to handle the customers remotely in an extremely seamless way and in a very user friendly manner. So that's a one big change. And I talked to you about how IES is taking this whole point up. So we are doing whatever is possible to make sure that our infrastructure is absolutely pretty much the best in class in the world. And we don't from a tech perspective, we'll never count India alone because tech has no boundaries. We want to make sure that the tech tells your infrastructure of technology is the best in the world. That is one thing that we are very, very keen in terms of doing. The second thing that we are very, very focused upon is from our so there is one external aspect. The second is the internal aspect. Internal aspect is 1 technology. 2nd internal aspect is about our own employees. We got to make sure that the safety and security and the safety and health of our employees absolutely managed. But we also realize that when you do a huge amount of work from home, there is a need to engage with your employees in a very different manner. The social aspect is missing in our lives right now, but we've got to make sure that whatever we can do to engage with the employees is done absolutely, absolutely in a good way. So we are carrying out many such activities, including trainings of people, including just fun and games with them, including all kinds of regular webinars and engagement outreach, so that our employees are motivated and taken care of and we continue to do with the regular engagement with them. The 3rd piece, which is beyond tech and beyond employee engagement is a huge range of new products that we need to enhance with. Because post COVID world will make it almost imperative for customers who will start to come back and demand different kinds of features and functionalities, which we believe will be absolutely the right thing to do from their perspective, but it makes sense for us to make sure that we're providing that. So that will be the other thing that our investment in product development people and new product initiatives has to go that much notch higher. So there is got to be a very strong pillar in the company now of innovation and innovation around creating new products, developing new products, which makes the sense for the customers. Now earlier, we were typecast to do a broad based release of new products. So you do a product release which really makes sense for a range of customers, right, for a whole range of percent. But I think that strategy has got to change. Instead of trying to bypass yourself across a broad range of customers, you know, just one or a few require a new feature functionality or a product, I think we have to be alive and agile enough. We have to be agile enough and sharp enough to make sure we're providing that. So there's a bit of innovation angle which is coming in. So there is an excellent angle of customer user interface and customer sensitivity or making sure that you can deal with them remotely in a very secure manner, very user friendly manner. There is an element of internal technology readiness. There is an element of new product innovation and new product development. And the 4th element is the element of employee engagement. We are very, very focused across these four dimensions to make sure that our outreach is very or our sort of company is rearranging itself to make the best of this post COVID scenario. And then there are other things. I mean, we know that as in the industry, there will be a liquidity challenge and there will be liquidity crunch. And so how can we help to step up that? That is part of my regular business because what we do is we provide energy at the cheapest cost, right, in the most flexible manner. So people who want to buy through us at the shortest duration of time today, tomorrow, whenever they have to over the course of next 11 days And then that's one. So we provide them the flexibility and we provide them the cheapest cost. So their financial distress can be relieved by buying through the thing right now, through the exchange right now because a lot of customers are a lot of states are doing replacement buying right now. So they're retiring or they are putting to sleep their costly generation and they're coming to the exchange and by virtue of that they're saving money. And I can tell you one DISCOM in South, they have INR 60 crores by doing such a thing with the exchange for the month of April. So I think that's a great story. So those are the things in which the financial liquidity is the operational excellence of financial liquidity is the other thing that we are helping with. And our communication, so and the last piece maybe I should have emphasized a little bit more, Our communication has stepped up. We are engaging a lot more from a communication perspective, written communication besides verbal with our customers and our partners to let them know what's happening with Exchange on a daily basis. So exposing them to liquidity availability, exposing them to savings that they can get through buying through the exchange on the price front because prices are at an all time low and just assuring them that don't worry, whatever and whenever you require, IEX is standing behind you absolutely solidly to give you anything that is in our media. Okay? So long question, long answer, but there's about 5 or 6 dimensions on which we believe are post COVID survival, very, very into that. Thank you. That's quite the subject in terms of understanding how you're taking it forward. Being a finance professional, I'll just follow-up with sorry, just understanding on the numbers, whether your budget has gone up or gone down versus your internal assessment after COVID? That's not a follow on question though right now, right? It's later. No. So for this, I think we're just trying to understand as a financial question, I mean, would your budget would have gone up or gone down in terms of internal assessment of how the market would shape up? Look, Abhishek, I answered that question earlier as well because there was a question on what do we how do we assess the market and how we are trying to see the market and is there are we willing to give a prognosis for the future. And we said, look, right now, providing our guidance is tough right now at the moment because the situation is evolving. If things go the way 1st 12 days of May have gone, surely, most certainly, there will be an absolutely, absolutely huge increment in what we will take on as a task for the year. But we are not certain. This is an uncertain situation. And so we need to calibrate ourselves almost weekly, if not daily. May is better than April, the industrial activity has to start to show up. And like I said, the volume on the supply chain, in my opinion, is some distance away. So we got to calibrate angles on many dimensions before we come back and let you know how it goes. But we are very closely working and we are putting all and look, we can do what we can do. We can't really control the way and where the external situation will continue to evolve or how the industry will come back on track from a completely well oiled supply chain. But we can do what we can do. And what we can do is exactly what I told you, focus on technology, focus on new product development, focus on employee engagement, focus on user customer user experience, all of those elements you could do. I can tell you one thing, Abhishek, you will be maximizing the situation more than anybody else can ever think of that. And that's our state of readiness. That's what we want to play ourselves to. Thank you and all the very best. I think we've overshot on the time. Thanks for taking time for this call. And apologies, there are few questions which are pending in the pipeline, but due to time, possibly, I think we'll have to cut this short. Hey, look, thanks so much. And I really want to share with you, Stan. There's a huge number of people join on this call. My apologies that we will make some of you a little dissatisfied because we'll not be able to answer and handle all the questions. We can go on forever. But if you have specific questions, Aparna is our Investor Relations lady. You can reach out to us, send your questions to us and I can make sure we can make sure that you will get all the answers that you want. So nothing will be left unanswered, whatever the question might be and reach out to us. But thanks so much for taking the time to join on this call. Thank you so much and have a great time. Stay safe and stay healthy. Thank you very much. On behalf of Axis Capital Limited, we conclude today's conference. Thank you for joining. You may now disconnect your lines.