Good evening, ladies and gentlemen, welcome to the earnings conference call of ICICI Securities Limited for the quarter ended March 31st, 2023. We have with us today on the call Mr. Vijay Chandok, Managing Director and Chief Executive Officer. Mr. Ajay Saraf. I'm sorry. It's Mr. Ajay Saraf, Executive Director. Mr. Harvinder Jaspal, Chief Financial Officer. Mr. Vishal Gulechha, Head Retail Equities. Mr. Kedar Deshpande, Head Retail Distribution, Product and Services Group. Mr. Anupam Guha, Head Private Wealth Management. Mr. Ketan Karkhanis, Head Digital Client Acquisition and Co-Head New Solutions Group. Mr. Nilotpal Gupta, Head Data Science Unit. Ms. Nidhi Kajaria, Head Human Resources, and Mr. Sangeet Sinha, SVP Business Technology. For the duration of this presentation, all participant lines will be in the listen-only mode. I will be standing by for the Q&A session. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. The business presentation can be found on the company's corporate website, icicisecurities.com, under Investor Relations. I now hand the conference over to Mr. Vijay Chandok, MD and CEO, ICICI Securities. Over to you, sir. Thank you. A very good evening to all of you, and welcome to the ICICI Securities quarter four as well as the full year earning call for fiscal 2023. I'm sure, and I certainly hope that by now you would have seen through our investor presentation, which was, as mentioned, uploaded on our website. Let me start with industry highlights and then take you through some of the key aspects of our performance. I'm gonna keep this whole commentary very brief. When I look at the financial performance of FY 2023, I think it's fair to say that after a strong 2021, a strong 2022 across parameters, FY 2023 was a mixed bag because the industry experienced headwinds led by the increase in interest rates globally on account of high inflation and also geopolitical issues that we are all aware of. The positives of FY 2023 as far as the industry is concerned, were fundamentally 2, I would say continued growth in the derivative volume and continued momentum on systematic investment plan flows in the mutual fund. On the flip side, 3 standout points, the euphoria and the retail market participation as well as activities moderated, new client additions, NSE active, all of these numbers declined in the industry. Cash volumes were also in a downward trajectory throughout the year. Equity capital markets, the fundraising markets were all muted in FY 23 as compared to FY 22. As far as quarter four is concerned, the environment of the business remained very similar to the full-year trends that I just explained about. In addition to all these developments in the industry, there was several new regulations that were announced during the years, which we believe will eventually benefit the industry in the medium term, because behind the skin of all these regulations, you are basically safeguarding retail investors' interests as well as ensuring that you reduce systemic risk. All these, we believe, are very good for the industry in the medium term. In the backdrop of this operating environment, I'm gonna focus on the key high points of the performance for the quarter that just ended. The first point I want to highlight is that our efforts towards diversification of revenue continued. This diversification has helped us reduce dependence on cyclical components, which essentially is cash equity broking. Now, when you look at the quarter, the proportion of cash equity broking in the overall revenue decreased to 20%. If you recollect a few years back, this was more than 50% of our total revenue. Derivative broking revenue has now been increasing for the last 7 quarters and currently stands at about 15% of the total revenue stack. Allied revenue stands in at about 26%. Distribution revenue has crossed 20%, now at 22%. Overall, the revenue has diversified. As a result of this diversification, despite a very weak cash equity market, our retail revenue actually grew by about 5% on a YoY basis and 4% on a quarter-on-quarter basis. The revenue for the quarter, however, remains flat, primarily because of a weak institutional side of the business. The second high point I want to bring to your attention is the story on market share. I think, we witnessed a steady growth in retail market share. 1% on the cash equity side during the year, it stood at nearly about 11%. The retail derivative market share increased by 30 basis points on a YoY basis, standing at, in the region of around 3.6%. Commodity market share increased by 2%, 200 basis points on a YoY basis. It crossed 6%. It's at about 6.1%. MTF and mutual fund market shares remained broadly stable at about 23% and 1.7% respectively. MTF remained in the ballpark of 23% and mutual fund in the ballpark of around 1.7%. We continue to focus on quality clients and that is what has helped us either grow or maintain our market share on all parameters which are at least revenue impacting. This is despite all the headwinds that we have seen in the industry during the year that has ended and the quarter that has ended. The third standout point for us was that the customer assets continued to witness growth. This is again a testimony of our relationship and ability to get clients to, you know, commit funds into the market. The AUM as a result of this grew by about 4% on a YoY basis to about INR 5.9 trillion. We spoke in the last call about the growth levers of the company. I will now talk about each one of these growth levers that we had highlighted in brief. The first growth lever was the wealth management business. Here I would bring out the fact that the total number of clients now has increased, stands at about 78,000 customers who qualify as a wealth in the wealth segment, which means that at least INR 1 crore of AUM is being placed with us. During the quarter, we added 2,000 new clients, and during the whole year, we added 10,000 new clients. The assets of these customers now stand at about INR 3.2 trillion, increasing by about 13% on a YoY basis. Revenue from this segment during the quarter grew by a percentage on a YoY basis to about INR 255 crores and revenue for the full year now crossed INR 1,000 crores and stood at about INR 10.1 billion, increasing by about 9%. What was also noteworthy is that in the wealth segment, the proportion of re-recurring income now has become two-thirds, as against 60% compared to the quarter four of last year. Growth lever number two was derivatives. Derivatives, as I just mentioned, the segment has seen a revenue increase now for seven continuous quarters, and for this quarter, the revenue came in at about INR 117 crores, registering a growth of 37% on a YoY basis. Market share increased by about 30 basis points, and this was accompanied by improvement in underlying parameters of number of customers, number of orders, number of lots. Some of the new launches in this segment, which includes Flash Trade, Algos, APIs, Options Plus, all these products and tools that we launched during the course of the year are clearly seeing traction since their launch, and we do believe that as we increase communication, as we increase promotion of these tools, these products, we will continue to see greater traction in times forward. The third growth lever was identified as the distribution of loans. We distributed a total of about INR 3,750 crores of loans for FY23, recording a 66% growth on a YoY basis. A loan distributed in Q4, the loan stood at about INR 1,250 crores, which is the highest that we have done in any quarter so far. During this quarter, we forged and executed the partnership with Tata Capital, and this arrangement with Tata Capital went live for loan against shares as well as personal loans towards the last part of the quarter. We should start seeing some traction on loan against shares and securities as well as personal loans in the current quarter onwards. As far as the fourth growth lever is concerned, it was identified as insurance business, distribution of insurance. In this insurance business, the revenue for the full year crossed INR 100 crores for the first time, and it came in at about INR 101.8 crores. This was up 45% on a YoY basis, and quarter four revenue was up by about 85%, coming in at about INR 48.2 crores. During the quarter, the premium number of policies, all of them grew. Premium grew by 46%, number of policies by 60%. This is, and we've seen growth across not just the life business but also the non-life business. With the general insurance business now getting digitized and gaining traction, we expect further growth specifically in this segment in the year that has just started. The recent regulatory developments from the IRDAI side, which you might have been aware of, will be favorable to us, increasing the revenue. I would say that as a result of the diversification that I spoke about, as a result of the market share gains I spoke about, as a result of increase in customer assets that I spoke about, and also as a result of traction on the growth levers that we had identified and I just spoke about. Our revenue for the quarter remained stable at about INR 880 crores. This is despite a decline in the cash equity segment, which used to be a major proportion of our revenue, you know, traditionally and historically. As well as, in this specific quarter, there was a decline in the ECM business, both in the quarter as well as the year. Therefore for the quarter, PAT came in lower at about INR 263 crore for the quarter. Despite a flat revenue, a decrease in PAT is attributable to 3 fundamental reasons. Reason number 1 is that there is a one-time INR 16.1 crore cost pertaining to a provision made towards the, you know, penalties which were passed on to the client from October 2021. It's a past period item to November 2022 on account of margin shortfall. The second reason is that the cost of funds for our margin finance book went up, and we decided not to pass on entirely the cost increase. That, to an extent, had an impact on the PAT. The third reason is that there was some increase in spends on what we believe are franchise-enhancing spends, specifically in the domain of technology to harness the growth opportunities. When I look at the full year, revenue remained stable at INR 3,430 crores, and PAT came in at slight lower than last year at about INR 1,118 crores. The reasons for the decline is already explained about precisely for the same reasons. The return on equity came in at about 42%. The board of directors also approved a final dividend of INR 9.25 per share for taking the full year dividend to about INR 19 per share. The dividend rate payout ratio came in at about 55% for the full year. In conclusion, I would reiterate the continued diversification that we've been driving, which has now taken root in the company's business model. As this is happening, we are becoming more of a structural play on the India opportunity. As we look back and look ahead, we see that we are on track to achieve our stated aspirations that we have shared with you in the past. We continue to strongly believe that the medium and the long-term story of the industry remains intact, and we are very well-positioned, very well-placed to harness this opportunity, and we continue to make relevant investments in key focus areas for growth. I'm going to end my commentary and throw it open for questions that you may have. Thank you very much. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, you are requested to please restrict your questions to two per participant. You may rejoin the queue for follow-up questions. We will now wait for a moment while the question queue assembles. The first question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead. Hi, sir. Thank you for the opportunity. Two, three questions from my side. First one, wanted to understand on the derivatives market share. Sequentially, there has been a slight decrease. What led to that? You know, what would be the steps that we take to get that back in the subsequent quarters? That would be the first question, sir. My second question would be in terms of the client acquisition side of the story. Basically, this quarter, haven't seen client acquisition rates go up very materially. Still the OpEx number looks has gone up actually quite a bit. What would be the reason for that? Also the Prime customer number is very marginally down. What has happened there? These are the first two questions, sir, and I also have a couple of more. Maybe I'll ask you after you answer this question. Hi, Swarnabha. This is Harvinder here. Let me take the first question. First question was pertaining to derivatives market share. There are two parts to this. One is for the quarter, yes, we did see a bit of a decline that was primarily attributable to some outages that we faced in the month of Feb. They have been fixed, and we've seen a recoup in the month of March. Yes, we did see a impact for a couple of days, which did impact our market share in Feb and for the quarter. On an overall basis, if you would follow what we are trying to do over here is that we have worked, as Vijay also explained in his opening remarks, on a variety of products and experiences for the customer. We believe that we have a product which is comparable and even better than what is available in the street. What we are now wanting to do, and you'll see that more of in the coming quarters, is a more communication drive towards these features and bringing more familiarity. We expect that, with that, we should be able to increase traction. Although even in the current phase over the last 7 quarters, we have seen revenues going up. Over the last 6 quarters we have seen the number of customers and the activity levels when measured by way of either number of orders, lots, or whatever metric you put at it, they have been going up every sequential quarter. We have to start growing at a rate ahead of the market, and these are the things which we believe will help us. That was the first part. Your second? Yeah. I'll just add to what Harvinder stated. You know, when we look at the Q4 market share, the two important parameters which are guiding factors in terms of number of orders, number of active customers, volume, revenue, I think all parameters were better than the last month. The only exception was the Feb month market share. Otherwise, for Jan and Feb, we were almost, you know, at par with what we did previously. I mean, we have seized all those issues, and going forward, I mean, we see much more stability on the platform side also. I'll come to the Prime- Just a follow-up on that, sir. If I understand correctly, then in the month of March, our market share in the derivatives space would be better than what we have done in January or, say, in the Q3 quarter. Would that be a right assumption, sir? We were kind of at par with what we did in Q3 because we were regaining some grounds which we lost in the month of Feb. However, we are pretty comfortable in terms of number of orders, the revenue, unique customers participating. It's a little drag, but we are very much in line with what we did in Q3 any of the months. Sure, sir. Yeah. Now, coming to the Prime, I think the overall count will sit at about 11 and half lac customers. Your observation is correct that, you know, there are fewer subscriptions in Q4, and that is largely because of the dropouts which are happening in the INR 299 plan. The focus, company's focus has been to promote with high intensity the high-value Prime. I'm happy to share that we clocked ever highest high-value Prime subscription in a quarter, and it's higher than, I mean, it's considerably higher than what we have done previously. This number is of tremendous significance now because in high-value Prime, which is a lifetime Prime, the resubscriptions are not happening. It's only the new customers which we are bringing in the system or few of the old customers who, I mean, who still were in the older plan, they have now subscribed to the new plan. The large part of the lifetime subscription has now come from the new customers. That way, even the Prime fee which we collected is very much in line with what we have been doing for the previous quarter and before that. The lifetime benefit is directly seen. You know, we see the quality of the customer and there are many other opportunities beyond collecting Prime fee from customers. That is what our objective is. All right, sir. Just to clarify, your, I mean, INR 299 plan customers have renewed to higher value plan. I mean, if that was the case, then the number should have been same or even with new customers signing up should increase slightly. I just wanted to understand, you know, the very marginal dropout that has happened. Where have those customers gone? Yeah. Not many have moved from 299 to higher value Prime. Largely, you know, the focus is to get lifetime customers or the higher value Prime customers from a newer set of customers. Few dropouts, I mean, in a retail business, few customers will take a pause because it has a resubscription condition. I mean, they come back eventually. We keep track of such dropouts and we reach out to them. In most of the cases, we find that customers, you know, they come back as and when they start taking interest in the market. Sure, sir. Sir, regarding. Sir, sorry to interrupt. We request you to please return to the question queue if you have further. Actually, one question has not yet been answered. I was just asking on that. Yeah. quickly I'll take that. I just request maybe 2 questions per participant. Just quickly to answer the question. If I understand correctly, you're asking that the client additions have been slow, but the operating expenses have gone up sequentially. Have I got your question right? Right. Yeah, yeah. That's it. The increase in operating expense is what Vijay explained. It is not because of increase or on account of client additions. It is on account of the one-time provision of about INR 16 crore that we have taken a margin. That sits in operating expenses. That is the reason of INR 70 crore-INR 84 crore. The marketing expenses which are pertaining to client addition, that has been flattish quarter-on-quarter. Okay, sir. Thank you. Thank you for the explanation. I'll join back in the queue. Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Hello. Good evening, everyone. Couple of questions. Firstly is on wealth management business. The INR 250 crore revenue run rate in the quarter or the full year basis, whatever. If you can split it up for us in terms of how much is from broking, how much is from mutual fund distribution, how much is from interest income, and what of these are recurring in nature and how much of these are transactional? That is question number 1. Second is on the insurance premium, could you break it down between how much is from life and how much is from general? Generally, if you also could highlight the procedure in terms of getting this insurance premium, whether it's a, you know, how do you kind of go about doing this, whether, you know, you call up the customers, how many? Just the entire process, you know, how does the sale of insurance products happen at your end? Yes, hi, this is Ankur here. I'll take the financial questions. Ankur, could you be a bit louder? We can barely hear you. Yeah. Is it better now? Yeah. Is it now better? Much better, much better. Thank you so much. Okay. Yeah. Perfect. In terms of the overall revenue numbers, we clocked INR 255 crores for the quarter. For the year, you know, for the first time we've crossed the INR 1,000 crore mark. That's been a big milestone for us. On the split of revenue, it is currently 66% on recurring income and 34% of the revenue is from transactional income. Equity broking would be a part, sub-part of the 34%. Okay. Can you quantify the? Yeah. I will. Yeah. maybe I'll just bring some more granularity in terms of. What would recurring income and transactional income be? The transactional income would include equity broking. It would have fixed income. It would have products which do not give trail income like, you know, some part of AIF Cat II and some other unlisted transactions that, you know, one typically does in private banking. Okay. On the recurring side, we would have all the trail giving, AUM, which could include mutual funds. It could include portfolio management services. We have Cat III, which are trail giving, ESOP, MTF. This is basically recurring. Okay. Okay. Got that, got that. Our focus has been, yeah, to kind of continue to grow the recurring pie more, which over a, you know, quarter and quarter we've been able to demonstrate. Got it. Thanks. That's helpful. I just come in for the insurance piece. Insurance, largely the premium pertains to life insurance. General insurance is relatively new, but picking up. In terms of number of policies, it will be almost half of, but in terms of premium, it is predominantly life insurance. Also the manner of sourcing insurance, we have primarily two modes where we source. One is our relationship managers, wealth managers, they have a deep engagement with clients. As a part of their financial portfolio, insurance, whether it be it on the protection side or retirement planning side or saving side, is a fundamental part of their overall portfolio. That's point number one. We have about 1,300 odd RMs on ground. They engage with the customer. That's method 1. Method 2, specifically, for general insurance and health insurance, we have launched a fully digital journey where we do digital end-to-end fulfillment with the help of a technical partner as well. That has started seeing traction. Part 3, we also have a low touch model, whereby with the help of a calling setup, we do reach out to customers based on an analytics-driven profile. We have a base of about 8 million customers. With the help of our analytics, we reach out to customers who have high propensity of buying any of these insurance products, and those are channelized into, let's say, e- or a low touch relationship manager over call, for digitally enabled products. These are predominantly the three methods that we follow. Great. Thank you. Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead. Thank you for the opportunity. Sir, in your distribution revenue, loan distribution revenue, what would be the yield that you earn on home loans, and what would be the yield on non-home loans that you earn? That's my question. On the loans bit, we act as a referral, and we work on an open architecture model. Currently the way our loans are distributed, we have almost 65% of loans which are mortgages. Typically in mortgages you have two parts. One is home loans, the other is, you know, LRD or loan against property. Mortgages, typically in the market is broadly, you know, close to 1% and LAP, et cetera, is at 1.4%. Then you have the other part. The other part of business will constitute of two parts. One would be business loan where we engage with promoters, MSME owners, et cetera, on their, you know, borrowing needs. It also has a component of digital loan, which is typically on a loan against shares, loan against mutual funds. We are now setting up the entire stack on personal loan, et cetera, which is really not yet started. On a blended basis, you know, because a personal loan has not kicked in, our average would be close to 65 odd basis points. 65 bips on other loans, right? Other than home loans. On the overall fees. On the overall. Okay. Okay. Once personal loan kicks in, the yields will improve further. Got it. Got it. Thanks. That's it. Thank you. The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead. Hi, good evening. Firstly, on this new regulation, on the upstreaming of client funds, the impact of lower margin availability to a broker on bank guarantees. Will this also impact our finance costs even for bank-based broker, the finance cost is expected to shoot up once these regulations kick in? First was that. No, Sahej. Not for us. We don't do bank guarantees. This regulation largely is not expected to have any material impact on us. Right. Right. One clarification on employee expense. Employee expense looks a bit lower in the last quarter. Have you already recorded variable pay provisions in fourth quarter, or is it expected to be recorded in Q1? Because, I mean, last to last year in Q4 FY20 and Q4 FY21, fourth quarter was a soft quarter, whereas in Q1, employee costs really shoot up. How are you expecting this time the run rate? Yeah. We have recorded the variable pay for the year. Normally, in Q4 it always gets screwed up to whatever is the year-end assessment. It's not in Q1. It will be in Q4. Q1 sometimes is relatively higher because obviously you'll have increments, et cetera, which will come through. Therefore Q1 is slightly higher than Q4. Right now we have recorded it in Q4 as always, and it is also lower on account of lower variable pay provisions. The run rate, for the next year, would be maybe 5%, 5%-10% higher, fair assumption? Sahej, we do expect some bit of expansion next year. As we've been continuously guiding that we do want to invest in some opportunities that we are seeing, specifically. We'll be expanding our digital team? I mean, on the employee side, I'm trying to understand. Yeah. There are a couple of areas that we are investing in. One is in our relationship management units, wealth, street on street, et cetera. Second is technology and digital. Yes. That's another area that we are looking at. Third is the no touch connect that I spoke about, whereby a combination of analytics, cross-sell and a calling kind of a relationship manager is helping us deep mine our customer base. These are the three areas of investments. On the loan distribution front. Sorry to interrupt, sir. We request you to please rejoin the queue for further questions. Sure. The next question is from the line of Zenia Garg from Nevat Investments. Please go ahead. Hello. Good evening all. Thank you for the opportunity. My first question is, what is the perspective on the interest rate hike and its impact on the finance cost? The second question would be like, what is the projected MTF loan book growth perspective for the five years? Yeah. Interest cost, I mean, it's a call that we'll have to together kind of conjecture. If we believe that we are at a peak of interest rate hikes, then we have had, let's say if I take a last 4, 5 quarter journey, we have had an increase of about 272 basis points. That's the increase in cost of funding that we have witnessed. Of which, going forward, I mean, if it is flat, then this is where from this year's base, this is where it is expected to be. We have passed on about one third of that to our customers consciously. Going forward, MTF, we do enjoy a healthy market share of upwards of 22%. Our network balance sheet and financial capability allows us to grow this book. This, we do not have any target in mind, but we do have capacity to go up to at least INR 15,000 crores from a financial capability and borrowing limit perspective that our shareholders have approved for us. Not giving a target number, but, we do want to increase penetration because it's a good, great pull product that we have seen and our customers like it. Okay, sir. Thank you. Thank you. We have the next question from the line of Aejas Lakhani from Unifi Capital. Please go ahead. Hi, team. I have 3 questions. My first one is on, you know, brokerage rates, both retail and institutional. The question is really that, you know, compliance costs, given all the new regulations in FY23 have really gone up significantly on the retail side. The question is that, is there scope for increasing rates from where they are? Because we're at rock bottom. Also, on the institutional side, you know, the SEBI regulation states that, you know, the brokerages, the brokerage charges can be inserted into TER. If that regulation comes through, could that put pressure on institutional yields? This is the first question. Thanks. Hi, Aejas. Thanks for your question. This is Vijay. On the first part, you know, whether there is scope, we certainly believe that there is scope, but the question is whether, you know, the people who are supposed to increase rates will increase or not. You know, we do believe that there is a scope because it is going to certainly put pressure on margins, as you correctly said, given the deregulatory developments, as well as, the fact that many of them, are dependent on E-funding, which is also becoming difficult to come by. You have a dual pressure. There are every indications or I would say the fabric is set for a, you know, sort of a potential rate increase, but whether it'll happen or no is anybody's sort of guess. You know, the right people will be the people who would hike the rate. The second part, you know, of your question was on the institutional side, right? Yeah, the TER. Yes. yeah. The TER, indeed if TER, is still in discussion stage, so we don't know in what form, shape and amount it will come out. We have seen that whenever there is a TER increase, it does have a near-term impact in terms of impairing or depressing the revenue flow. There is an experience and maybe, you know, yeah. Over a period of time, this tends to sort of catch up as volumes go up. There could be a near-term impact. How much is the impact? We don't know because it will depend on finally what the regulations and extent of it comes because there are still ongoing discussions. We don't know whether it will come, not come, if it will come, in what shape and form. Got it. These we'll have to keep watching. Got it. My second question is on, you know, the Prime fees and other charges. This is more from a reflective standpoint of how we should look at it in the year ahead. One of the pivots we've made in the Prime fees has been from during the year that we've made is from charging it on an annual basis to a lifetime fee basis. There will be, you know, some customers who are transitioning. How should we be thinking about, you know, the entire cohort of Prime fees going forward? How should we also think about the block of other fees and charges which you've really been able to hold up very well in FY23? Yeah. See, as far as Prime fee is concerned, as I said that there are two components. There are two plans where the renewals are still happening and more than 50% customers are there in those plans, right? Where on every year basis they come and they pay the fee. Largely, I mean, we would see the stability in this book. We don't see a much reduction. However, on the high-value Prime, as I stated earlier, the focus is largely on getting new customers. As far as the migration from the lower value plan to higher plan, high-value plan is concerned, I mean, I would say that largely it has happened. Now the proportion is much lesser than the new customers who are joining and taking the high-value plan. The focus will continue to be on getting new customers and keeping the existing set of customers in a lower value plan intact so that the re-subscription can happen. Aejas, just to add to what Vishal has said, that, you know, the base is stable. The extent of growth will depend on, you know, how the market is going to move. We've seen a very weak market last year. If we believe that the market will sort of start getting better from here and participation in equities from the retail segment and the HNI segment is going to increase, then, of course we will be a beneficiary there. If it continues to remain similar, then, you know, it will be more stable with marginal improvement, directional. It'll really depend on how the, you know, newcomer participation is playing out in the current year, coming year. Got it, sir. Sir, just finally, Mr. Ankur, you mentioned that, you know, last quarter we didn't pass on the interest rate increase to, you know, clients to cushion them from the impact. We were probably considering to, you know, defer it a little slightly and ensure that there's no knee-jerk reaction so that the book doesn't run off. The pass-through seems to be much lower. I just wanted to know your thinking and thoughts regarding the same element. Also, I appreciate the additional information that you started to disclose on the NIMS. The NIMS at 3% for the quarter, I think historically you had slightly higher NIMS. How should we really be thinking about NIMS for 2024? Two things have happened in quarter four as far as the MTF book is concerned. There have been 2 rate hikes that we have passed on. This is together about 50 basis points and because it's happened in quarter four, you would appreciate that the impact, the financial impact doesn't really get visible in matter of days. It'll, you know, it needs that period of time to play out in a quarter. That is 1 development of quarter four. The second development again towards the far end of quarter four is that our cost of funds has started showing the kind of a flattening to a declining trend. These two we... As we enter into Q1, we are entering with two sort of actions of quarter four, reducing cost of funds and then, 50 basis points increase in the yield which was implemented in quarter four. We are also, because of this approach we have taken, we are ending this quarter with higher number of clients than what we had at the beginning of the year and beginning of the quarter. So base is bigger. Rates have gone up on the lending side, and the cost has flattened to start coming down in the sort of borrowing side. That's the color with which we have entered Q1. Got it. On the NIM side for 2024? It is a kind of gives you a direction. It's already stabilizing at 3% that we've seen now. Our strategy has been to give a bit of cushion and not pass on the volatility to our clients. I think that is working. We are expecting a stabler regime on the factors that Vijay spoke about. Difficult to give a number. We'll be pretty agile in our thinking as we have been. But our feeling is that, I mean, it's stabilizing right now at 3% and with a possible upward bias. Got it. That's clear. Harvinder, the provisioning on the penalty is that going to be, like, collected from the clients in the subsequent quarters? No. It is, it's already collected and it's an industry-wide aspect which is getting discussed at regulatory level of whether any kind of a refund is required. We have right now on a conservative basis made a provision should a refund be required in future. Engagement is on, and the events of whether a regulatory clarification, et cetera, would need to be watched for, to see whether this, how would the provision materialize. We do not have to have any more collection from the customer. Got it. Adequate clear. When does the new portal go live? I mean, the new sub-brand of ours? Sometime during this year, Aejas. Okay, sir. Thanks so much. Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead. Yeah, hi. Thanks for taking my question. Firstly, 65% of our retail revenues are coming from Prime. Is it fair to say that bulk of the others is coming from Neo or is there a significant proportion of revenue still coming from non-Prime, non-Neo customers? Yeah. just clarifying, the 65% is within the broking setup, that they are coming from Prime customers. Piran, I'll just place it in context. It's not the total revenue, it is only the broking revenue. broking revenue- The INR 265 crore. The INR 265 crore number, right? Yeah. Which is about 35%. Of it, straightaway 15% can be taken out for F&O. You, you're effectively left with 20%. 20% of our income is what we are having a discussion. With that context then, you know, Harvinder will elaborate. Piran, the remaining within equity. I hope that is clear that 35% of the overall company's revenue is coming from any kind of retail brokerage, of which 15% is coming from F&O brokerage, 20% is coming from cash brokerage. Prime is a product which is relevant for cash brokerage. Of that 20%, two-thirds is coming from Prime customers and the remaining one-third is coming from non-Prime regular plan. That has been the mix which is quite stable for the last at least four quarters. Neo is sitting on the other side, which is the F&O segment. There again, in terms of volume it's about 75% contribution and in terms of revenue it's about 30%-35%, 30% contribution of the 15%. I hope that's clear. Yeah. Okay. If I come to think of it, if I just do the math, the non-Prime customers are paying a meaningful amount in, it'll come to like INR 500-600 per quarter in broking charges. Why don't they just take a Prime plan, switch to the Prime plan and, you know, lower their own charges? Yeah. We keep sending them messages to do that, but they still choose to stick on. There is a tendency to remain sticky. You know, it's, it's a customer sort of a trait. There are a bunch of customers who just don't want to change anything. They just say that we are okay with whatever we are doing. We keep sending them periodic, you know, sort of nudges to change, upgrade, et cetera, but they remain where they are. Okay. It's fair to say that, you know, if they remain where they are, next year our revenue growth will largely be in line with, you know, the cash and F&O ADTO growth. This year, you know, while ADTO growth has been better, our revenue growth has lagged in both cash and F&O due to lower yields. Last time we spoke, it was due to migration to Neo and Prime plans. Now that that is over or hopefully over, would we see, you know, you know, both revenue and ADTO growth similar? You know, from company's approach to putting focus on growth drivers, we have said that there are four growth drivers. One important growth driver is FNO. Clearly, FNO is an engine that we will press the pedal both from a market share point of view as well as, you know, the market growth in ADTO, which has been happening virtually on a secular basis for the last decade now or probably even longer. That is growth engine number one. The second growth engine would be all distribution, you know, pack off revenue, which we've spoken about the insurance loans specifically. The third growth engine would be Rather the fourth growth engine would be the wealth management growth engine. As far as cash equity is concerned, I think we've sort of in a sense hitting a market share of about 11%. Our endeavor and attempt would be to ride the market swing as and when and if it happens. I think we will definitely get an advantage. Whether the market swing will happen, not happen, I cannot speculate. We'll have to wait and watch. I think the firm is very well positioned, and we have historically seen whenever the, you know, the swing happens in terms of market growth, we become beneficiaries because we are, we are revenue salient on volume. Some of the other discount players are indifferent, but that's not the case for us. We are revenue salient on volume. If there is an improvement, certainly that will be an added swing. From our mind, those are things we cannot control, so we focus on what we can control, which is market share and growing the businesses which I just mentioned about. Growth, our management focus will be on these four areas. Got it. That answers it. My second question is on, you know, risk to the MTF book. You know, now that the market has also been like the indices have been largely range bound in the last 1.5 years. I'm sure customers who are borrowing at 10%, 12%, 15% are losing money on their investments. What kind of risk do you foresee to this INR 7,000 crore, INR 6,500-7,000 crore MTF book? Assuming the market stays where it is. If you really see what has happened, this whole of this last year, market has been actually quite weak. When you look at what happened to the MTF book, it has actually increased from, I think, INR four and a half thousand at the beginning of the year to about INR six and a half thousand, INR 6,400 currently. It is one of the reasons why that is happened is, some improvements are there in market share. The second I would say, it has also been our considered strategy not to insulate the customers from, you know, market rate movements, interest rate movements. Anyway, there are uncertainties with the capital markets. We didn't want to add another dimension of uncertainty and pain in form of rates. It was very deliberate. As a result of it, two things we have played out. In the most difficult last quarter, we did not lose volume. 6,400 remained 6,400. That was one. Number of customers actually increased. The story is becoming broad-based because penetration is still very, very low, in terms of the number of customers who are doing this. If you ask me, as a strategy, we do not pursue a target on MTF. It is not a push product, it is a pull product. We do not believe that it should be, you know, aggressively pushed. It is dependent on the customer's view on the market. We fortunately have not received a single mis-selling complaint on this, which I think we value a lot. We want customers to be happy and eventually make money because that's the way, you know, everyone wins in the market. What are the risks? I think we have been very conscious about the risks and therefore not used it as a push product. We'll continue to, you know, keep it that way. We are backing our MTF book with a research support, you know, so that customers are actually taking considered calls to try and minimize the risk. Will it, you know, sort of come down? I think the answer in some sense, if you could impute to what happened in quarter four, despite tough quarter, it didn't come down. It is to be seen. The recent behavior seems to suggest otherwise. Okay. Okay. That answers it. Can I squeeze in one data question? Yeah, sure. Go ahead. Yeah. Okay. Thanks. No, just, you know, the other revenue which, you know, used to be INR 40-50 crores has like suddenly gone up to or not suddenly, but steadily in the last 3 quarter gone up to INR 90 crores. Just wondering if there are one-off, simply because if overall volume activity has not really increased, why would margin money and consequently interest income on fixed deposits go up so much? If I have got your question right, you're talking about other fees and charges, right? Within Allied, you're talking about that. I'm talking about the INR 92.4 crore other revenue number. Which a year back was just 52.7, so it's almost doubled. Yeah, yeah. This is largely pertaining to only the fixed deposits and what we have with exchanges and the interest from that. One of this is also yield expansion because one year back we were having FDs at about 4.75%. Now we are having FDs at 7%, that also is one of the factors. Second is obviously the volume FD, volume et cetera has also gone up. It's a mix of all that. Got it. There are no trade-offs over here. It's primarily yield, increase and, the quantum increase. Got it. Got it. Thank you so much. All the best. Thanks. Thank you. The next question is from the line of Dipanjan Ghosh from Citi. Please go ahead. Hi. I hope I'm audible. Yes, sir, you are audible. Just two questions from my side. first, you know, on the cost bit, if you can give some color on how prolonged do you think this period of elevated investments or investments in franchise expansions or these things, you know, will continue? From what I understand from all the other players in the market, your competitors are also, you know, focusing on expanding their product bouquet or client acquisition. In particular, how do you see the competitive dynamic shaping up and your own cost ratios or investments, shaping or move from a medium-term perspective? Second, if I look at your cross-sell ratio number, that seems to be on a declining trend. If I look at it on a, you know, let's say 4-8 quarter lagged basis, I just wanted to get some sense of how the lifetime value of customer quality of the new customers that have been acquired in the let's say the last 12-24 months or 30 months are really looking like, since you're trying to, you know, gradually scale up the product distribution and the wealth business. From a 3-5 year perspective, how do you see this new client acquisitions really shaping up? Last, if you can just, you know, mention why the yields in the insurance business for Q were high. Some color on the mix maybe within the life segment. You've asked 6 questions. We'll go 1 by 1. Hi, Dipanjan. Yeah, let me attempt to answer one by one. Your first question was. On the cost bit. The expenses and the color of that, right? How long is the expense investment going to last? We have guided that we need about a year, which is four quarters more. FY 2024 we expect it to be elevated and we have guided that over a period of FY 2025 we do want to come to a lower cost to income ratio. In fact, there is a slide that we have included in our presentation on our aspiration. These are very conscious investments, and it has been our continuous guidance for almost about five, six quarters now, that we expect about 8 quarters then and now four quarters. Four quarters, that's the answer. Competitive landscape, yes, it is a slightly difficult market right now with what Vijay made a reference to a declining customer additions. Actually, more than competition, it is actually market condition. Competition in a way, I think has probably peaked off. In fact, competition is under relative pressure compared to the past. It is more the market condition that one is watching rather than competition right now. On the second one you spoke about cross-sell ratio and why is that declining. I'll just give you 2 separate metric. One is the cross-sell ratio, which is the number of customers holding 2 products. This is a function of growth of new client adds. The proportion of new client adds has been higher as compared to, let's say, 3 years back. A proportion of clients which are still in their first and second year is relatively higher as compared to what it was about 2 years back. It is a bit difficult to kind of engage the clients in the first few years. Over a period of time, we have seen that with the vintage, the cross-sell ratio improves to almost 3 with, let's say, a 10-year vintage. That's the kind of improvement that we have experienced in the past. We'll have to see how do we engage these customers and get to that. I would also point you to another metric that we do measure internally, which is basically how many customers from our base of, let's say, 8 million-9 million customers, how many customers are holding 2 or more product relationships. When we say product relationships, it's not product variants, it's a fundamentally new product category. If an equity investing customer has taken a mutual fund or an insurance, he has engaged with us for a new need of his financial need. If we take all of these as distinct product categories, then we have about 1.22 million customers who have 2 and more. When I say more, actually there is a cohort of customers which go up to even 3 or 4 such relationships, and that also keeps on increasing with vintage. This number, which is a more representative number on the entire base, has been growing, although at a lower rate because it's on the entire base. And it stands at about 1.22 million customers. Yeah. On the question on at NCA or acquisition of customers on the wealth management side. See, our fundamental model is that we believe that this entire business of private wealth is all about getting good quality clients and growing their AUM. These are the two metrics where we believe that we will continue to grow significantly. This financial year, we've added some 10,000 odd customers, and we believe that we will intensify this, you know, with more focus on wealth as Vijay also mentioned, wealth being our focus area. In terms of acquisition, we have two broad models of acquisition. One is, we have our existing base of customers of ICICI Direct and through smart data analytics today, we are able to, you know, kind of find out through what we call it as wealth markers, who are customers with high potential. There we are able to target, sharply, through smarter data analytics and the team that we have. A large part of our client acquisition happens through, you know, this base which are high potential but haven't really given us, you know, the AUM or do business with us. The second bit of, you know, clients is through open market sources. Both in terms of AUM and in terms of, clients, you know, we would see, kind of acceleration and more effort. There was one. Last was on the insurance yields. That answer is basically a higher proportion of new business premium in Q4 that we have got. As you would know that new business premium has higher yield compared to renewal. The proportion of new business was higher in Q4 partly because of also some of the income tax changes that were announced. There was relatively higher traction than we would mention in Q4 ramping up the new business for insurance and therefore the yields. Sure. Thanks for patiently answering the questions and all the best. Thank you, Dipanjan. Thank you. The next question is from the line of Vinod Chandra Agrawal, an individual investor. Please go ahead. Hi. Thank you for the opportunity, sir. Are you able to hear me? Sir, you are audible. You may proceed with your question. Yes. Thank you for the opportunity, sir. My question is with regards to the, like, F&O brokerage side. Can you share, like, some sort of the insight, like how many customer or how many% of the customers are profitable, like, I mean, year-on-year wide? I mean, I just want to get a sense of that, how long they would be able to stick and, like, would give us a continued revenue for the F&O segment? You'll have to refer to the SEBI report on that. I'm sorry, we'll not be able to share any further data beyond what is reported by the SEBI report. Okay. Okay, thanks. That's all my question. Thank you. Thank you. Ladies and gentlemen, to ask a question, you may press star and one. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yes. We just wanted to again, know on this, on the MTF book, you know, I mean, what would be, like, I understand about the market share, but what would be our targets for next year when on this book? No, as I mentioned, you know, you cannot, you should not run with an MTF target because you'll land up misselling it. It is a pull product. Customers have an idea, we make MTF available to them. We make it very simple. We make it available literally while he's buying a stock. That's how we've grown the business. That's how we've gained market share. Like I said earlier, I'm saying again, there is no real market there is no real target we have set for MTF. Would there be a target of a percentage of the total, you know, clients, how many can be brought to an MTF or, you know, on that side? No, we are not running with a target in mind. We do want. No. Actually, again and again, I'm saying there is no target on MTF. There is no target on number of customers. It is a consequence of what customers want. Right. We are focused more on making products available, making it easy, and getting more customers onto our platform. Yeah. Secondly, on the wealth management side, like, you mentioned about the increase in RMs and, you know, the INR 1 crore-INR 5 crore bucket is what you're targeting. Would that be a cross-sell to some ICICI Bank customers or how, I mean, how does that work? Our wealth management practice is, you know, if I were to just give you our model. Our model on wealth management is really targeting the grown rich Indian. You know, if you see the opportunity, there are some 800,000 Indians with more than $1 million. For us, we believe that if we build a strong proposition and a platform with a strong brand that we are supported by the relationship team, you know, we can build a business of scale. You know, from our perspective, any customer, the definition of an HNI customer for us is any customer who's, you know, given us INR 1 crore and above. While our sweet spot is, typically between INR 5 crore-INR 25 crore client, we have the entire spectrum of products and services to really cater to an HNI, including the family office. Right. Right. Got it. Yeah. Thank you. Thank you. The next question is from the line of Sanketh Godha from Avendus Spark. Please go ahead. Yeah, thanks for the opportunity. Most of my questions are answered. Actually, I just need a data keeping question. Given you clearly highlighted that, the growth is giving the number of MTF customers, it will be great if you can quantify that number. I believe that number last quarter was somewhere between 80,000-90,000 people taking MTF loans. So that number, what it would be, currently. Approximately 3%-4% growth on that. Okay. Okay. Okay. That's it. Thank you. Thank you for answering my question. Yeah. Thank you. Ladies and gentlemen, we will be taking two more questions. The first from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead. Yeah. Thank you for the opportunity, sir, for the follow-up. I just had one question on the borrowing side. While our MTF side of the business has remained stable, the book size, but borrowing has increased, and it also mentions that, you know, the borrowing has been done from other than debt securities. If you could provide some color on what was the reason for this borrowing and the choice of instruments. Thank you. That will be my only question. No. Our borrowing is primarily and only on account of commercial paper. It, from the balance sheet perspective, Swarnab, it goes to point two things. One is the growth in MTF, which as you rightly said, has been flattish. The second is, with the increasing trading volume, we need to keep higher FDs with exchanges, so part of that gets funded through borrowing. These are primarily the two reasons. On a balance sheet to balance sheet, you'll see a INR 1,000 crore increase from INR 7,900 to INR 8,800 crore. This is broadly the reason. Sure, sir. Sure. very helpful. Thank you so much, sir. Thank you. Okay. Permission. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Hi. Thanks for the opportunity again. Just a couple of questions. First, could you react as to, you know, how do you kind of amortize the lifetime plan Prime in terms of revenue? It's not amortized. It's on cash. It is accounted as income because it is lifetime. Oh, okay. Okay. The quarter in which they kind of give you the license fees... Subscribe. Yeah. they subscribe As the income. as the income. That's right. Okay. That's right. Okay. Second is, could you also give some insight on, you know, what is the share of variable pay in the employee benefit expenses? roughly 70/30. 70 will be fixed and 30 will be variable. Yeah. Yeah. That's right. Okay. Okay. Thank you so much. Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Yeah. Thank you very much. Thank you, gentlemen, for taking time and asking us questions. I'm sure there could be follow-up and after thoughts and after questions. Please don't hesitate. Call in, and we'll be happy to respond to all your questions. Looking forward to continued interaction and support. Good night, and good luck. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.