ISECNSEOctober 19, 2023

ICICI Securities Limited

5,396words

68turns

8analyst exchanges

9executives

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Management on call

Vijay Chandok

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Harvinder Jaspal

CHIEF FINANCIAL OFFICER

Vishal Gulecha

HEAD (RETAIL EQUITIES)

Kedar Deshpande

HEAD (RETAIL DISTRIBUTION

Anupam Guha

HEAD (PRIVATE WEALTH

Ketan Karkhanis

HEAD (DIGITAL CLIENT

Nilotpal Gupta

HEAD (DATA SCIENCE UNIT)

R. Balaji

CHIEF TECHNOLOGY OFFICER

Nidhi Kajaria

HEAD (HUMAN RESOURCES)

Key numbers — 40 extracted

34%

d that amongst the volume giving parameters for our company, the retail equity ADTO grew by about 34% for the industry sequentially. Retail derivative ADTO grew by about 18% sequentially. The momentu

18%

equity ADTO grew by about 34% for the industry sequentially. Retail derivative ADTO grew by about 18% sequentially. The momentum on systematic investment plans and mutual fund continued during this q

50%

concerned, it continued to show improvement resulting in growth in new client acquisition by over 50%, both on a Y-o-Y as well as sequential basis. The primary market mobilization also grew significa

44%

nued improvement in our own performance and revenue. Our Quarter 2 FY24 revenue grew by 44% on a Y-o-Y basis, 34% on a sequential quarter basis and came in at about Rs. 1,250 crores. The pr

Rs. 1,250 crore

FY24 revenue grew by 44% on a Y-o-Y basis, 34% on a sequential quarter basis and came in at about Rs. 1,250 crores. The profit after tax for the quarter also grew by about 41% on a Y-o-Y basis and sequentially b

41%

and came in at about Rs. 1,250 crores. The profit after tax for the quarter also grew by about 41% on a Y-o-Y basis and sequentially by about 56% on a quarter-on-quarter basis and came in at about

56%

rofit after tax for the quarter also grew by about 41% on a Y-o-Y basis and sequentially by about 56% on a quarter-on-quarter basis and came in at about Rs. 424 crores. The other notable point that

Rs. 424 crore

on a Y-o-Y basis and sequentially by about 56% on a quarter-on-quarter basis and came in at about Rs. 424 crores. The other notable point that I would like to highlight about our “Financial Performance” is tha

Rs. 12

l Performance” is that the Board of Directors of the Company have approved an interim dividend of Rs. 12 per share. This compares to Rs. 9.75 per share that was declared as an interim dividend last year.

Rs. 9.75

Directors of the Company have approved an interim dividend of Rs. 12 per share. This compares to Rs. 9.75 per share that was declared as an interim dividend last year. Amongst the key highlights: 1. The

58 basis point

ou quickly one by one: • As far as cash equity is concerned, our market share improved by about 58 basis points. We improved our market share sequentially on a quarter-on- quarter basis to about 12.8%. • On

12.8%

basis points. We improved our market share sequentially on a quarter-on- quarter basis to about 12.8%. • On retail derivatives, we saw a small increase in market share roughly close to a little und

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Guidance — 9 items

Amongst the key highlights

opening

“Keeping all this in view, some short-term headwinds for the domestic markets could be anticipated, but we believe that we are very well placed to harness the medium-term strategy of growing and harnessing the opportunity in the market and we will continue to make investments in the key focus areas that we have been talking about in the past.”

Harvinder Jaspal

“We expect it could be a quarter or two from here to completion of the process.”

Vijay Chandok

“Personally, I already highlighted in my commentary that from a viewpoint of the future, I would be more guarded because it is reasonable to expect that not all the parameters and engines that fired in quarter two in the market from a market point of view are going to fire with the same measure and this data is available for you to see on a daily basis virtually in the market.”

Vijay Chandok

“So, I would expect that Quarter 3 rather to be a little subdued if I were to go by early trends of Quarter 3.”

Harvinder Jaspal

“Added with this 40, it will be about 60%.”

Aejas Lakhani

“So, can we expect that by 4th Quarter we will sort of hit the market or could it still taking to spill over into the next year?”

Vijay Chandok

“At this stage, we just like to hold any further guidance on this.”

Santosh Keshri

“But after two quarters, as you said earlier, the securities Company would be a closely held Company and the public shareholders who are holding the share for so long will be losing out all the benefits they would have expected to gain when they invested in the shares right at the time of IPO.”

Vijay Chandok

“In case there are any follow up questions, our IR team and the CFO team is always available, please reach out directly and we will be happy to set up separate calls for addressing any afterthoughts that has come.”

Risks & concerns — 2 flagged

Geopolitical factors are added headwind which will come in this quarter, which was probably not so much there in quarter two.

— Vijay Chandok

And on your distribution business, I see that life insurance business has kind of actually been flattish on a sequential basis and a decline on a Y-o-Y basis.

— Prayesh Jain

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Q&A — 8 exchanges

Firstly, just your thoughts on where are we at with regards to the delisting. I think that is one and also, we look at it going ahead, that is the first one before I delve into business question.

Vijay Chandok

Yes, I'm just going to request Harvinder, our CFO to jump in on the first one. Prayesh, so with respect to delisting, the process is on, we are in midst of the process. The first stage of approval is exchange approval. So, the scheme which is already available on our website as well as exchanges is currently being considered by exchanges. Once they give us their approval, then as per process it goes up to NCLT shareholder approval, etc. So, we are right now waiting for the exchange approval. We expect it could be a quarter or two from here to completion of the process. Vijay, splendid set of n

I just want to know that on page 9 of the investor presentation, we have this retail derivative broking revenue given at as Rs. 1.37 billion. So, can you please share the breakup of this Rs. 1.37 billion into equity from equity derivatives and from commodity derivatives?

Vijay Chandok

To the derivative revenue of Rs. 137 crores, primarily a large portion of that would be from the derivative and not the commodity derivative. We have not disclosed the split, but you may assume that more than 80% would be, in fact even 90%, I would say would be from derivatives. Equity derivatives, correct, I got that. Yes, thanks so much again. Last question is as far as commodity derivatives revenues are concerned, do you see any prospect from the surge that we're seeing in Options and Futures trading volume in crude oil and natural gas on the MCX, is that going to aid you in your revenues f

I just wanted to ask you a few of your strong competitors are coming in with zero brokerage fee product, how do you see itself as a competition amongst your numbers in future?

Vijay Chandok

Yes, thanks. I think they've been in the market for a long time, almost 10 years we've been dealing with discount brokers now, 8 years at least. We've been gaining market share. We've differentiated on many parameters, which include offering unique propositions. So, I think there is space for all types of players. It's not a new development actually, the discount broking, zero broking story has been something that we've been bracing for, for the last 7-8 years. So, we've done a bunch of things over the years to deal with that competition and we managed to increase market share on revenue givin

Mr. Chandok, my first question is on the MTF book. So, I think last quarter about of the 250- bps interest increase, you had passed on about 40, so about 35%-40%. So, today how much pass through has happened?

Harvinder Jaspal

So, I'd say about 60% because recently we did increase another 40 basis points. So, I'd say somewhere between 50% to 60% is what we have already passed on. So, 250 basis points or 260 basis points was the total increase. Added with this 40, it will be about 60%. Perfect. Are you still on course to keep increasing the MTF rates as the quarter progress or have you reached some sort of saturation here? So, as we said last time also, see it's a very tactical call that we take with the help of what is happening in terms of demand and what is it that we can absorb. So, right now, if you look at it,

The numbers have obviously been excellent. The only question I have is the process of the delisting and there's been no price discovery made available to the shareholders. So, I speak on behalf of a lot of shareholders I've been talking to, and they are of the view that it's been 5- 6 years and we've got our 20%-25% upside on the share since IPO, while the profits have doubled. And even now, with these kinds of beautiful numbers, I think the price seems a bit unjustified. My question is, is it possible for us to have a price discovery or is that even an option?

Vijay Chandok

Yes. So, actually, we followed a process which is approved by the regulators, which is fair, which is applicable for a firm like ours and under that process, the offer that has been made is what is something which is available for all the investors to see. The process does not permit for any kind of a further discussion on the pricing other than what has been offered. So, it will go through its own mechanism, and we do hope that we are able to make the best outcome for the Company and the investors as a result of this process. Yes sir, I won't go into the PE ratios and comparables with the oth

Sir, my question is that the swap ratio is just 0.67x and don't you think it is not in the favor of retail investors. And any possibility on revision of the swap ratio?

Harvinder Jaspal

Hi Gaurav, Harvinder here. So, as I think Vijay just answered, it's a part of a process which is under regulation 37. It's a scheme of arrangement. The scheme documents are what we have already published and submitted to exchanges. In that, the ratio has been arrived at by following the prescribed process, the shareholders would obviously have an opportunity to vote on the scheme and exchanges, NCLT, etc., there are various authorities which will consider the scheme. And with the requisite majority, which is two-thirds approve the scheme or exercise their vote. But at this stage, it would not

I have two questions. One is that what is the net cash position as of 30th September 23 and after that, I'll put my second question, which you can answer this.

Harvinder Jaspal

So, there are two ways of looking at it. One is if you look at the cash and cash equivalent, that's about Rs. 9,200 crores. It's there on our balance sheet. It basically represents the cash in hand as well as cash equivalents, which will also include the fixed deposits that we have placed with exchanges as a lien. The number two, our own cash which is a net worth is about a little under Rs. 3,000 crores. And secondly, the dividend that you declared is Rs. 12 per share, so which is historically similar to the historical pattern? My apologies, it is Rs. 3,100 crores in my earlier question. Sorry

Yes. Thank you very much all our dear investors for taking time and attending this conference call. In case there are any follow up questions, our IR team and the CFO team is always available, please reach out directly and we will be happy to set up separate calls for addressing any afterthoughts that has come. We understand that the results post declaration had given you very little time to go through, so we can understand the need for you to go through our numbers with greater detail and come back with whatever questions. Thank you very much and once again for all the support and the affecti

Management

Speaking time

Vijay Chandok

Moderator

Harvinder Jaspal

Aejas Lakhani

Santosh Keshri

Prayesh Jain

Rajesh Gajra

Vishal Gulechha

Aditya

Amongst the key highlights

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Opening remarks

Vijay Chandok

Thank you very much. A very good evening, ladies and gentlemen. First and foremost, let me apologize for starting this 15 minute behind schedule. We were actually just winding up our Board Meeting which took a little longer than we thought. Everything got delayed as a result. Really apologize for this and sorry to keep you all waiting. Really appreciate the fact that you've all taken the effort to join us for today's earnings call. You will find our earnings presentation on the exchange website. You all probably would have got a chance to see it, although the time I confess was quite short. Let me take you through our Quarter 2 “Performance Highlights”: First, a few comments from me on the industry: I think this is an industry in which most of the parameters continued an upward momentum. You would have already noted that amongst the volume giving parameters for our company, the retail equity ADTO grew by about 34% for the industry sequentially. Retail derivative ADTO grew by about 18%

Amongst the key highlights

1. The first point I would bring out is that this improvement in revenue that I spoke about was on account of revenue increases across all our businesses without an exception on a both Y-o-Y as well as sequential basis. And we continue our thrust on growing businesses and maximizing the revenue opportunity, keeping in view the customer at the heart and center as we play out our strategy for the rest of this year. 2. What has also been an important highlight for this quarter is that we witnessed a steady improvement in market share across almost all the revenue giving parameters and I'll take you quickly one by one: • As far as cash equity is concerned, our market share improved by about 58 basis points. We improved our market share sequentially on a quarter-on- quarter basis to about 12.8%. • On retail derivatives, we saw a small increase in market share roughly close to a little under 10 basis points, came in at about 3.7%. • Commodities, we saw an improvement in market share by about

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