5paisa Capital Limited (5PAISA) Q3 FY23 Earnings Concall Transcript

5paisa Capital Limited (NSE: 5PAISA) Q3 FY23 earnings concall dated Jan. 12, 2023

Corporate Participants:

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Gourav Munjal — Whole-Time Director and Chief Financial Officer

Analysts:

Rishikesh Oza — RoboCapital.in — Analyst

Manish Ostwal — Nirmal Bang — Analyst

Kajal Gandhi — ICICI Securities — Analyst

Deepak Sonawane — Haitong Securities — Analyst

Alok Kumar — UTI — Analyst

Deepak Poddar — Sapphire Capital — Analyst

Sumit Jankar — Motilal Oswal — Analyst

Tushar Sarda — Athena Investments — Analyst

Krishnendu Saha — Quantum AMC — Analyst

Sarvesh Gupta — Maximal Capital — Analyst

Dev Shah — Haitong Securities — Analyst

Anurag Mantri — East Bridge Advisors Private Limited — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. I’m Toshiya, moderator for the conference call. Welcome to 5paisa Capital Q3 FY23 Earnings Conference Call. We have with us today the management of the company. As a reminder, all participants will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note this conference is recorded.

I would now like to hand over the call to the management. Thank you and over to you.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Very good afternoon, everyone. Myself Prakarsh Gagdani, CEO and Whole-Time Director of 5paisa, along with my colleague, CFO, Mr. Gourav Munjal, welcome you all for our Q3 FY23 conference call. At the outset. I would like to wish you all a very, very Happy New Year. I wish that 2023 may be much better than 2022.

Quarter three FY23 was more of a mixed bag if you look at the overall market. On one-hand, Nifty touched an all-time high of INR18,847 on December 1. But on the other hand, the new demat account growth slowed down. We are seeing some fatigue in last two quarters, two to three quarters. As an industry, we opened almost 55 lakh demat accounts, which is 10% less than what we opened previous quarter. On derivatives, turnover improved by almost 19% quarter-on-quarter, but our cash market turnover at an industry level was down by around 1.5%. We also saw some regulatory implementations this quarter like the running account settlement of clients that started in the first week of every quarter now. We did our first part in the — first pay-off on October 7 and the second happened just now in January. But as a company, we have fared well. In Q3, also on an overall nine-month ended December 2022 basis.

Our revenues for the nine months ended December 2022 stood at around INR248 crores with a growth of 18% year-on year, with a PAT of INR29.1 crore, a growth of 212% year-on year. Even on a quarterly number, for Q3 FY23, our revenue grew sequentially by 4% to INR83.8 crores and PAT grew by 2.6% to INR11 crores. In our expenses for this quarter, we also had a one-time expense of INR7.09 crores towards margin penalty reversion, a regulatory requirement. But that is a one-time expense and we did that in this quarter. Despite all this, we have maintained a profit margin of 13%. Our growth in profits is on the back of improvement in our acquisition quality, superior trading experience and a further reduction in CAC of around 9%. We’ve not just improved our ADTO by around 36% from INR1.69 lakh crore to INR2.05 lakh crores, but we have also improved our market share. Our strategy of focusing on revenue and profitability by acquiring good quality customers has started to pay dividends.

Talking about our product, in my last investor call I had mentioned that we were launching a dedicated trading terminal for derivative traders, we call it FnO 360. I’m happy to report that our product, which is right now still in the beta phase is getting good traction and reviews from our customers. This terminal, along with our other initiatives have helped us to improve our derivative market shares.

Apart from our regular business, our boards of both 5paisa Capital Limited and IIFL Securities Limited approved acquisition of online retail business of IIFL Securities by 5paisa Capital. With this, we will acquire close to 1.5 million customers who were a part of our online retail business of IIFL Securities. This customer base will boost our overall client base by around 40%. We expect good revenue growth and also profitability with this acquisition. The acquisition will be effective April 1, 2023 and right now we are undergoing the procedural and regulatory process which we hope to complete in eight to 12 months of time from the time we filed to the exchanges and the other regulatory authorities.

For now I have this as my opening speech. I request everyone to have — if you have any questions, you can go ahead and ask. May I request operator to open the Q&A session.

Questions and Answers:

Operator

Sure sir. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from Rishikesh Oza from RoboCapital. Please go ahead.

Rishikesh Oza — RoboCapital.in — Analyst

Hi sir, thank you for the opportunity. Sir, my first question is, average daily turnover. If you see, it has actually doubled year-on year, but our revenue is flat year-on year. So if you could please explain this.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. So ADTO not necessarily mean completely transforming into the number of orders. As an organization — as a discount broker, we charge on per order basis. Now when you attract good quality customers, they also come with a high-ticket size and also their, the per order value is also more, but then we because only charge on a per order, you may not see the same amount of revenue increase as the ADTO increase. So broadly, that’s the reason. So I would say that typically if you see that why large traders are attracted towards discount broker is because of the cost benefit. So that’s why you see a difference between the revenue growth and also the ADTO growth.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. And sir, my second question is about ARPU. If you could [Indecipherable] ARPU for the customer, that at total customers also and for active customers.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So currently we have — so around INR83.8 crore is our revenue, if you can and our customer-base is approximately 33 lakhs. So you can do your math and get the ARPU. On the NSE active, we are approximately 10.75 lakhs, 11 lakhs active customers. So again, you can look at the ARPU for the quarter and analyze it.

Rishikesh Oza — RoboCapital.in — Analyst

Okay, that is noted. Okay sir. And sir, what is our total employee count.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

We are in the range of around 700 to 735 employees as of now.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. And what is the marketing cost for this quarter versus previous quarter.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

It is available in presentation. For the last quarter it was INR12.3 crores and in this quarter it has come at INR11.6 crores.

Rishikesh Oza — RoboCapital.in — Analyst

Okay, thank you very much, sir. Thank you.

Operator

Thank you. Next question comes from Manish Ostwal from Nirmal Bang. Please go ahead.

Manish Ostwal — Nirmal Bang — Analyst

Yes sir, thank you for the opportunity. I have a question on our cost of acquisition of customer. So that has declined very sharply from quarter one to quarter three. So how much cost is — current — the cost level customer done or do you see again the seasonal pickup.

And the second question related to this. Of our total operating cost structure, what proportion of cost is [Indecipherable] cost.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Just talking about the CAC, we were last quarter, approximately INR574 and this quarter we are at INR525. But I have said in my previous presentation that we were optimizing on the acquisition cost and more or less that exercise is over. I see the cost hovering between INR500 to INR600. On a higher side, it would be approximately INR600, but we see this range to be maintained in the coming quarters and I don’t see a significant downside or upside beyond this.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

Answer to second question, [Indecipherable] as a revenue, our cost of acquisition is 10% and rest 90%, I mean 15% is around PBT and rest 75% is other expenditure.

Manish Ostwal — Nirmal Bang — Analyst

Okay. And secondly, you said in your commentary, the industry level, demat account acquisition slowdown in this quarter. And secondly, the [Indecipherable] volume also down quarter-to-quarter. So what I read in the media reports that the discount brokerage gained in this space in [Indecipherable] market. So what is your comment on that please.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

See, if you look at last 2.5 years, there has been a phenomenal rally in terms of the opening of demat accounts. Now as a country as a whole, we are almost at 11 crore demat accounts. So a bit of fatigue was bound to happen and it is not just in this entire year if you see that there is — from Q3 last year, there has been a drop-in terms of new demat account. So at one-time we had opened around 4 million demat accounts in a month. And now we are in the range of around 1.5 to 2 million demat accounts in month as an industry. So I think that fatigue was bound to come and that is the reason you see a bit of a demat account almost slowdown.

Secondly, as compared to the cash market turnover, see, cash market turnover broadly is an indicative of how the overall markets are performing in terms of return. Now if you look at the entire year of 2022, the index has gone up by 4%. Even in the current quarter, though we have felt an all-time high, but if you look at overall indices, they have gone up by 5.8% which was lesser than what it was last quarter. And if you look at overall year, it is more or less 4% kind of a growth. So when you have market stagnating in terms of return, the retail participation slows down, and that automatically has an effect on the cash market turnover. So that is the reason why it has gone.

Manish Ostwal — Nirmal Bang — Analyst

Yeah. And secondly, in terms of customer acquisition runway, so currently the run rate is 1,62,000. So where this trend is stabilizing in your assessment.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So for us, because we are anyways not acquiring as many accounts as the industry does and we are focusing in terms of quality, I see that our acquisition run-rate will be in this range of around 1.5 to 2.5 lakh accounted on a quarterly basis. So we would be in this range, but it is difficult to actually say, whether there will be a significant upside or a narrow range of acquisition because it also depends on the market. Secondly, we also are rather have initiated our branding exercise to cater to a quality audience and quality customers across the country. So I’m sure our branding exercise, our partnerships and also our acquisition channel will help us to acquire more customers. So though I feel it would been broadening, but I would be — you would be happily surprised if it surpassed our original numbers also — last two, three quarters number also.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

Though there are various parameters, but typically what we look at is that am I able to, one is that whether the customers who are coming are actually trading. So what percentage of my trading acquisition customers are trading. Second is approximate, what is the margin with which they come and third is the paybacks. So acquisition costs that I’m incurring, to what extent we are — how soon we are able to recover that acquisition costs. I think these are two, three parameters basis which you decide in terms of the quality of customer.

Manish Ostwal — Nirmal Bang — Analyst

Thank you sir for answering all the questions. Thank you.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you.

Operator

Thank you. Next question comes from Kajal G from ICICI. Please go head.

Kajal Gandhi — ICICI Securities — Analyst

Hello. Hi sir.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Hi Kajal, good afternoon.

Kajal Gandhi — ICICI Securities — Analyst

Good afternoon. Sir, one question was on the declines in the active clients, which is right now the industry trend also. How did we see tackling them because the decline in effect has been quite sharp last maybe six months. So how do we tackle that or are you okay with whatever you have shared at this point in time and any reasons.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. So Kajal, I feel that the active client was anyways not a great matrix to see because that’s the only industry publicly available data. That’s why it’s obvious that we draw a reference to that. But I think it is not right number to look at. What we should look at is the income growth, the turnover growth and the profitability growth. Now if you look at and also one of the biggest factor for active client is the markets. So because if you look at, there has been a negative overall at an industry level, the active customer-base is degrowing for last two, three quarters. But is it translating into a de-growth of revenue? Not. Why? Because a significant portion of the revenue even for most of the brokers, including us, comes from derivative segment. Derivatives segment, if you look at the turnover at the exchange level is going up. So even in volatility even in a bad market or good market, derivative traders are able to make themselves active, they are able to trade, find opportunity, so that is translating into revenue. So I think a good way to look at, if there is the revenue growth and a profitability growth.

Kajal Gandhi — ICICI Securities — Analyst

So whoever clients which you had and were trading, continue to stay and whichever was not is getting out of the system basically —

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah. So what we’ve seen is that, obviously. I mean that’s the normal cycle of people who are coming to derivatives and people who end-up making losses, they go out. But the good trend is that we are seeing an increment in the number of customers who are trading on derivatives and this number is increasing quarter-on-quarter. So despite the entire year, the indices were flat and there were [Indecipherable] even during the year in terms of the market participation. But if you look at one metric, which is that ADTO in the derivative segment had exchange. That barring maybe a month or two, which was stable, not degrowth, moreover it has grown. So we’re seeing both increment in the ADTO, increment in the number of customers trading in derivatives.

Kajal Gandhi — ICICI Securities — Analyst

Okay, yeah. For you, incrementally even if the active clients have not grown, you have been able to be there on the same brokerage revenue and other income. So what will be interest income component for you in this quarter.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Interest income component [Technical Issues] other operating income.

Kajal Gandhi — ICICI Securities — Analyst

So the entire other operating income is interest income?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Are you asking about the treasury income or you’re asking about the [Speech Overlap].

Kajal Gandhi — ICICI Securities — Analyst

Margin funding.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

Margin funding income [Technical Issues] it is coming in allied booking income. So our allied booking income total is INR27 crores, also [Technical Issues] INR15.3 crore.

Kajal Gandhi — ICICI Securities — Analyst

INR15.3 crore, that is the margin number. And what will be that number in the previous quarter.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

That was INR30.3 crores.

Kajal Gandhi — ICICI Securities — Analyst

It is Q2?

Gourav Munjal — Whole-Time Director and Chief Financial Officer

Yeah, mainly because client funding book has gone up by INR26 crores to INR280 crores and hence you can see the growth in income in [Technical Issues].

Kajal Gandhi — ICICI Securities — Analyst

And do you see the pressure of rising cost of funds, because [Technical Issues] may not have changed your lending [Technical Issues].

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So there is a slight increase had been made by banker, but up to the [Technical Issues] INR300 crores where you are are well-versed with the INR200 crores or INR250 crores with our internal network. And so it will not impact to that. But going forward, yes, it will may impact our [Technical Issues] has gone up from this level.

Kajal Gandhi — ICICI Securities — Analyst

Okay. And you said your cash turnover has been 5% decline quarter-on-quarter, right, or 3%.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Broadly it is around 3% to 4%, yeah.

Kajal Gandhi — ICICI Securities — Analyst

Okay, thank you very much.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you.

Operator

Thank you. Next question comes from Deepak Sonawane from Haitong Securities. Please go head.

Deepak Sonawane — Haitong Securities — Analyst

Yes, thank you for the opportunity sir.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah. Hi.

Deepak Sonawane — Haitong Securities — Analyst

[Technical Issues]

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Deepak, we are not able to hear you. If you can be a bit louder.

Deepak Sonawane — Haitong Securities — Analyst

Hello. Am I audible?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah. Deepak, we are not able to hear you. If can be a bit louder.

Deepak Sonawane — Haitong Securities — Analyst

Am I audible now?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Not actually.

Deepak Sonawane — Haitong Securities — Analyst

Hello.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah, much better.

Deepak Sonawane — Haitong Securities — Analyst

Yeah. So my first question is regarding cost of acquisition. As you reported, I mean ad spend and ad and marketing spend for the quarter, I mean it has declined by 5% quarter-on-quarter. But as it is our cost of acquisition only for marketing, we have seen kind of very sharp decline, right, so it is around 25%. So am I missing something, I mean in that degrowth for the CEC only for marketing.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. So our customer acquisition cost does not include the branding expenditure. Because — so that’s the reason. So if you look at our overall advertising and marketing costs in our P&L table, that includes market branding, but CA doesn’t, that’s why there is.

Deepak Sonawane — Haitong Securities — Analyst

Yeah. And the branding, I mean, within our marketing costs that we reported for the quarter, how much percentage is for branding of INR11.6 crores.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So if you just multiply the number of customer into the CAC, the branding costs that will be the actual advertising, the balance would be branding.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

So the actual — for the last quarter branding was INR4.3 crores and for this quarter it is coming INR7.5 crores.

Deepak Sonawane — Haitong Securities — Analyst

And that branding is mainly digital, right. And nothing in.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah, broadly, yes.

Deepak Sonawane — Haitong Securities — Analyst

Okay. Sir and [Indecipherable] that you have said that majority of interest income on NPAs. And do we include interest income on float in the same allied income or in other operating.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

That’s the part of our other operating income.

Deepak Sonawane — Haitong Securities — Analyst

And what we do about quantum format.

Gourav Munjal — Whole-Time Director and Chief Financial Officer

So, other operating income approximately 90% income in other operating income is pertaining to interest income.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yeah. And we’ve mentioned that INR15.8 crores for this quarter.

Deepak Sonawane — Haitong Securities — Analyst

Yeah, got it. So this is one-off, right. INR17.9 million that you reported for the quarter, the reversal of margins in effect.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Correct.

Deepak Sonawane — Haitong Securities — Analyst

So do you see that, there could be impact in coming quarters as well.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No. Because these were the penalties which were required to be refunded from October 2021 to September 2022, so that’s the reason it was a one-time effect. Post that, these numbers will not come back and that is just one-time.

Deepak Sonawane — Haitong Securities — Analyst

Okay. And sir, [Indecipherable] means other OpEx I’m talking about. So that has gone [Indecipherable] and that should mainly include the on-boarding team salary, right that you mentioned the PPT as well.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. But if I see our employee cost, right. So that is kind of really flat at INR146 million to INR149 million, so is there any other parameters that is driving this OpEx cost of equation other than marketing.

Deepak Sonawane — Haitong Securities — Analyst

Yes. But if I see our employee cost, right. So that is kind of really flat at INR146 million to INR149 million, so is there any other parameters that is driving this OpEx cost of equation other than marketing.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No, actually not because what happens is that marketing, CAC always comes down first and that is followed by the OpEx cost because OpEx is more or less people. So you sometimes with the acquisition is down, we can’t remove the people and if the acquisition is good we can’t again hire the people. So that is a small difference you will always find in the OpEx, which is a non marketing, that’s on the one-side. Secondly, on the employee cost, obviously that includes now a significant part of our employee cost is towards the product and technology team. So that’s a bigger chunk and that’s why you might see a small increase here and there because of the hiring in the technology and the products space. Broadly, the reasons, the answer to your question of why it has increased is because obviously people were there in Q2 and Q3. It’s just that the number has gone down, so that has an impact on the CAC.

Deepak Sonawane — Haitong Securities — Analyst

Okay, yeah. I mean that is highly linked to your new client acquisition, right.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Absolutely.

Deepak Sonawane — Haitong Securities — Analyst

Yeah. So my last question on CAC is, earlier we reported that our payback period is around 12, 13 months. So we are holding this a metric even in Q3 as well.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No, actually our payback period was not 12 to 13, it was always in the range of around eight to nine months. Now, it has improved a bit, now we are in the range of around 7, 7.5 months.7, 7.5 months. So that improvement is for the nine months or for the quarter.

Deepak Sonawane — Haitong Securities — Analyst

7, 7.5 months. So that improvement is for the nine months or for the quarter.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

It is for the quarter.

Deepak Sonawane — Haitong Securities — Analyst

Okay. And you see that we CAC hovering around 500, 600 per new client acquired. And if you see that the market [Indecipherable] that means our broker income could remain flat, right. So do you see that — the payback period holding up in the next three months as well, 7 to 7.5 per month.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Our internal expectation is that the payback period should reduce further. Target is that we should be in the range of around five to six months as a payback period. So we are working towards that. From eight to nine, we’ve come to 7, 7.5, it will come down further. But that will be by improving the quality of customer in terms of revenue and not by reducing the acquisition cost further.

Deepak Sonawane — Haitong Securities — Analyst

All right. My last question is on —

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

I would request if you can come back, because there are other people also asking questions.

Deepak Sonawane — Haitong Securities — Analyst

Sure.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thanks a lot.

Operator

Thank you. Next question comes from Alok Kumar [Phonetic] from UTI. Please go ahead.

Alok Kumar — UTI — Analyst

Congratulations, sir. Just wanted to know your market share in the derivative market.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So right now we’re in the range of around 3.2%.

Alok Kumar — UTI — Analyst

Okay. And what was it last quarter.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

We were somewhere down 3.12% to 3.14%.

Alok Kumar — UTI — Analyst

Okay. And isn’t there a possibility of increasing the broking leads in the coming quarter probably in the coming financial year.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

That’s a good question. See, the kind of regulatory changes that we’re seeing is pushing cost of operating business higher with every quarter. And now with the changes, I see the rates for the discount brokers at some point will definitely increase. What will happen in the next two quarters or maybe by end of next year, that’s something that we need to see how the changes go, but compliance costs, regulatory costs, other costs have significantly gone up. And with the acquisition growth getting stagnating and markets also now in not very high-growth trajectory, I think that we put more pressure on the cost. So there I see a very-high chance of brokerage rate going upward in near future.

Alok Kumar — UTI — Analyst

How much is expected to increase like, from 20% to what are you expecting.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

It’s actually difficult. It’s really difficult to comment whether it will be a 10% increase or a 20% increase. It all depends that — what kind of regulation — regulatory changes will come in and what part of the income will get impacted.

I mean we have seen that when the markets turn bad, a 20% to 30% revenue impact is normal because we are a cyclical business. Plus, if there are other changes, which may tomorrow impact our treasury income. So we’ll have to see that what is the impact? And accordingly, it has to be factored in the cost — in the brokerage rates.

Alok Kumar — UTI — Analyst

Sure, sir. And sir, my last question is to what is the growth trajectory like in terms of the customer acquisition for the coming year or like, say, coming quarters? So is it expected to go down or is it expected to increase or like remain constant?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So as I said, that our — we are expecting our acquisition number to be in the same range. So we are acquiring close to INR1.5 lakhs, INR2.25 lakhs. That’s a broad number. So all, give-and-take, close to — from maybe around 7.5, 8 lakhs customers to 1 million customers. So that is a range of acquisitions that we are looking at. And I see that we will continue to do that. We’ll continue to acquire in this range. And this is something that are not factoring the 1.5 million customers that we will acquire from the acquisition. That’s separate. I’m talking about our normal acquisition.

Alok Kumar — UTI — Analyst

Got it. Okay. Thank you. Thank you for your time.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you very much.

Operator

Thank you. Next question comes from Deepak Poddar from Sapphire Capital. Please go ahead.

Deepak Poddar — Sapphire Capital — Analyst

Hello.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. Hi, Deepak. Good afternoon.

Deepak Poddar — Sapphire Capital — Analyst

Yes. Hi, sir. Thank you very much, sir, for the opportunity. Sir, I just wanted to understand, you mentioned that about INR7 crores odd was a onetime expense in third quarter, right, because of the margin penalty?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Sir, if we adjust that, I mean, our EBITDA stands at about 35%. I mean EBITDA margin, if we adjust that INR7 crores onetime expense in this quarter?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Actually, I need to check. So actually, EBITDA is it not a right measure to calculate in our business because our interest cost — I mean, we are using interest costs for the funding book. So our income and expense growth are coming. So our finance cost is not for the — I mean, other operating covers. It is just for the other purpose. So the best way you look at our PAT margins.

Deepak Poddar — Sapphire Capital — Analyst

That’s right. I mean, let’s say, PBT. So PBT, which is about INR14.7 crores, adjusted PBT is around…?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

That would be around 26% and not 36%, around 26%.

Deepak Poddar — Sapphire Capital — Analyst

No, no. So I got confused. 26% is what?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So if you remove the onetime expenditure of INR7.09 crores towards the margin penalty, if you exclude that, then our PBT margin would be around 26%.

Deepak Poddar — Sapphire Capital — Analyst

Which is about INR21 crores, INR22 crores. That’s right. But that’s a very sharp jump from what we have been seeing last three, four quarters. I think our PBT margin went up from 7% to 12%, and been 18% now, 26%. So how do we see that? I mean is that a sustainable PBT margin that one should look at going forward, I mean, given the kind of business? I mean, how do you see that?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

See, I mean — see, digital businesses across always command a high PBT margin in a steady state. And right now, we are not into an early start-up kind of a phase where we would have been to losses that we’ve just come out of a loss. So in a steady state, my target for a foreseeable future is to be in the range of around 35% to 40% PBT margin. So that is what our aim is. And if you look at our quarter, we are in the right direction to achieve that number.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Fair enough. So steady-state we are looking at 35% to 40%? This quarter was about 26% on an adjusted basis.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes.

Deepak Poddar — Sapphire Capital — Analyst

Hello.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. Yes.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Okay. Great. And I mean, the steady-state, how many quarters we are looking at to achieve that kind of, I mean, steady-state margins?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

See, what we are — how this 35% to 40% of PBT margin will be achieved is, obviously, we are working on improving the quality of customer that will increase our ARPU. We are working on reducing the CAC, which we have already seen. Then what happens is that your technology costs and your other fixed costs do not go up in tandem with the revenue growth. So that is how it will take at least three to four quarters or five quarters to reach to that number. And in last year, we had also completed — and more or less by last quarter, we have completed our — the investments that we wanted to do in technology.

So as far as cost is concerned, we are more or less there in terms of fixed cost. I don’t see a much increment in the cost. And now it is only revenue growth. So the moment — the revenue growth happens and the ARPU grows, our PBT margins will grow. So I look at around four to five quarters to achieve that number.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Okay. Fair enough. But you spoke about the revenue growth part as well, but I think last four, five quarters our revenue has been quite stagnant in the range of 80 plus/minus, right? I mean somewhere around INR80 crores is what we have been seeing in the last five quarters.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Correct.

Deepak Poddar — Sapphire Capital — Analyst

Now when we say four to five quarters to achieve that kind of PBT margin, what is the revenue assumption you are taking there?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

If you look at — I agree that the last four quarters, our revenue has been stable, but there was a reason to it. There are a couple of reasons. One is, in 2021, if you look at our acquisition trajectory, that was at a very high number. But we realized that this acquisition, just for the sake of acquisition, is not enough because a lot of customers are not trading. So we changed gear. Now whenever you change your gear from a very high acquisition trajectory to a low acquisition trajectory, it has an impact on your revenue because it’s a run rate at which you are growing.

Second, that coupled with the market scenario. So this put together is the impact that you see on the revenue. But now with the kind of acquisition that we are doing, we focus more on the quality of customers and derivatives business as a whole, I see that the number will increase. But right now, for me, to give you an exact number in terms of what will be my revenue four quarters down the line, won’t be a right way to look at it.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Fair enough. Understood. And my last question is like our active to gross client ratio. I mean it had been stable at around 60% plus/minus, right? But lately, I think for last couple of quarters, we have seen a sharp decline, I mean, from 60% to maybe, what, 33% right now?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Absolutely.

Deepak Poddar — Sapphire Capital — Analyst

Is there any efforts we are doing there to kind of improve that particular ratio? I mean — and do we see that as an important parameter for us to track, right? I mean higher ratio means more business and more orders, right?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Absolutely. Absolutely. So definitely, we do our internal — internally, we run our analytics and we do a lot of effort in terms of reaching out to customers and activating them. But when you see this — the degrowth in the active clients, again, that’s a factor of acquisition that you do because this is — this number is basically clients who have traded in 12 months. So if I acquired for 2020 and 2021, that — the acquisition number and suddenly from 2021 last quarter, Q3 calendar to Q4 of 2022, we saw a net reduction in our acquisition. Now that also, on a rolling basis, has an impact on the active clients.

So that is why I was telling to one of the also in the call, the analyst that we should right now not look at active client as the right metrics. So obviously, on an overall base, it is important that how many clients are trading. But market acquisition change has also impacted the active clients. So maybe for a quarter more, that won’t be right, but then it will then stabilize and you’ll see an increase after two, three months, and that’s pure statistics — statistical exercise that you can do.

Deepak Poddar — Sapphire Capital — Analyst

Okay. Fair enough. I understood. That’s it from my side, sir. All the very best.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you. Thank you very much.

Operator

Thank you. [Operator Instructions] Next question comes from Sumit Jankar from Motilal Oswal. Please go ahead.

Sumit Jankar — Motilal Oswal — Analyst

Thank you for providing the opportunity. My question [Technical Issues]

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sumit, I think we lost you.

Sumit Jankar — Motilal Oswal — Analyst

Am I audible?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No, we lost you. If you can repeat your question?

Sumit Jankar — Motilal Oswal — Analyst

Okay. So my question is, what is current cash market share? And what is the proportion of cash and derivatives in terms of revenue?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So our cash market share is approximately in the range of around 2.7 to 2.8 and our derivative is around 3.2. So that’s broadly our revenue share. But in terms of our revenue break up, broadly, 65% to 70% of our revenue comes from derivative and the balance from cash.

Sumit Jankar — Motilal Oswal — Analyst

Okay. So you mentioned that you are launching FnO 360 app, so it’s a very good initiative to add maximum proportion of revenue is coming from derivatives. So how do you differentiate like the current brands are also trading in derivatives. So how does this FnO 360 app differentiates from current trading experience for clients?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So as far as platform is concerned, the reason why we created this entire terminal is that people were — we have seen that people who trade in derivatives are broadly trading only in that segment, rarely in a very less number of times they come on a normal terminal. So we wanted to give a different experience. There are a lot of data points.

So as far as customer is concerned, there is no difference between the customer trading on our normal platform and FnO 360, but the experience on that terminal is much better than the normal because there are a lot of data points that we provide. There are a lot of pretty defined strategies and a lot of types of orders, which typically are used by derivative traders. So it is basically to improve the experience.

Sumit Jankar — Motilal Oswal — Analyst

Got it. Thank you, sir. Thank you for providing the opportunity.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you very much.

Operator

Thank you. [Operator Instructions] Next question comes from Tushar Sarda from Athena Investments. Please go ahead.

Tushar Sarda — Athena Investments — Analyst

Yes. Thank you for the opportunity. This is the first time I’m attending the call. So I’m just trying to understand the business. You talked about quality of clients. And when I divide your broking revenue by the total customer, it comes to INR100 per quarter, per client. So I’m just trying to understand what kind of clients are this? And if a client is paying only INR100, why do you have to spend so much money to acquire a client?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

This is an absolutely right question, and that is exactly the reason why we moved away last year from acquiring broad customers to acquiring quality customers. As I said, we started that journey from Jan, Feb this last 2022, and then it takes some time to change your course. But it’s — but if you look at that — if you divide purely the revenue by the number of customers, it has many factors associated with that. One is that you’re looking at just one quarter revenue, which also — or rather last two, three quarters, which has a market impact.

Secondly, it also is a factor of a large customer acquisition that we have done in 2020 and 2021 with — and most of these customers were millennials and young people in the range of 18, 20, 25. Now when the markets become choppy or they turn sideways, typically, the kind of money that these people have to invest is very less and they shy away from coming to market. And that’s the reason when you divide it by the customer base, you will see a very small number. But that is made — that may not be right because if you take the active customers only, then the number will be significantly better. And that’s one more reason —

Tushar Sarda — Athena Investments — Analyst

It doesn’t mention active customer, right? I will look at the numbers that you reported and you reported total —

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes, absolutely. Absolutely. But yes, that’s the reason I’m giving you the explanation for this.

Tushar Sarda — Athena Investments — Analyst

Yes. But then maybe you should include that in your presentation, the parameter that one should look at?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. Sure.

Tushar Sarda — Athena Investments — Analyst

Okay. Thank you.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. Thank you.

Operator

Thank you. Next question comes from Krishnendu Saha from Quantum AMC. Please go ahead.

Krishnendu Saha — Quantum AMC — Analyst

Yes. Thanks for taking my questions. So this is the first time for me also. Just sir, I understand the merger with IIFL Securities, the rationale behind that? Do you, first, demerged realize from IIFL Holding and then IIFL Securities? So just could you just explain what are we — why are we doing this merger? What is it for us?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. 5paisa Capital was demerged from IIFL Holdings because then — in the group, this new entity was created because to cater to the digital side of the discount broking side of the broking business, and that’s how 5paisa Capital started its journey in 2015, ’16. But over the years, what we realized that a lot of things changed, and both the companies were ending up targeting the same set of customers digitally. We were 100% predominant digital, but IIFL Securities had one vertical, which was the digital trading customers. And they also had other customers, which are typically a relationship-based.

So that was — that’s the reason we decided that, one, there should be a dedicated focus for one business area or one target segment. And that’s how it made sense for us to acquire the online retail trading business of IIFL because that is a customer set which suits our business also, because all of them are — most of them are millennials and all of them are trading digitally on app. So that is the reason. That is the rationale behind acquiring that set of business.

Krishnendu Saha — Quantum AMC — Analyst

Anything on the business front, sir, which will enable us to operate our revenue? Can you talk about that too?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. So as I said, we are acquiring close to 1.5 million customers, which will boost our base by around 40%. In terms of revenue, we are looking at close to around maybe 18% to 20% growth in revenues at the current revenue —

Krishnendu Saha — Quantum AMC — Analyst

Sorry, let me rephrase the question. Sorry to interrupt you. In your diversification, the revenue trend, I suppose it’s the same. Is it?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No, I’m not — I’m right now not able to hear your question properly. If you can…

Krishnendu Saha — Quantum AMC — Analyst

In your diversification, so is there a chance that you will be able to sell more products? I mean, from — we get the broking point of view and the margin pending, but is there anything else we’re getting more is the diversification point of view on the revenue stream or is the same thing? I’m not aware of IIFL as much. Is it allowing us to sell more products to a customer or something like that?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So absolutely, we are — what we are acquiring is customer and the broking revenue, but it also opens up an opportunity to sell multiple products to these customers. So answer to your question is right, there’s going to be an opening up of opportunity to serve the customers. But what we are acquiring are customers and the broking business, the broking revenue.

Krishnendu Saha — Quantum AMC — Analyst

I see. And the promoter shareholding post the merger bills just — could you just let me know what was the promoter shareholding percentage be?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So it will not impact that much. It was — I mean, it was 32.69% pre-holding. And after this, it will be 32.45%, slightly 0.24% decline.

Krishnendu Saha — Quantum AMC — Analyst

Thank you. Thank you for your time.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you.

Operator

Thank you. Next question comes from Sarvesh Gupta from Maximal Capital. Please go ahead.

Sarvesh Gupta — Maximal Capital — Analyst

Sir, one question I wanted to understand is, from an industry perspective, we are seeing a variety of changes. Number one is, as you mentioned, that the industry itself is acquiring 10% less clients in this quarter. And I think in our case, we are focusing on higher value. So we have probably degrown our acquisition rate at a much lower number — at a much higher number. So in terms of the competition, how is it shaping up? Because we have also seen some of the other discount brokers are sort of unable to acquire in the same pace as earlier. So if you can throw some light on — within the discount brokerage space. How are things shaping up?

And second question is on this regulatory possibility that we hear about wherein the transactions can be carried out from the bank account, which can have an impact on the margin book that you have. So if you can throw some light on that and how it will affect your business if it is implemented?

Third question is on this IIFL acquisition. So you mentioned that it will increase your customer base by 40%, but any sense of the various financial parameters of this acquisition that you can give like how much you are paying and what’s the sort of revenue and EBITDA or that increase that it can cost to your consolidated financials after a year?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Sure. So talking about your first question, see, if you look at the competitive landscape, the consolidation in the acquisition has already taken place. Broadly, if you look at — obviously, because of the fatigue and the prolonged great acquisition numbers, obviously, at some point of time, there was fatigued — have to come in terms of acquisition, which is right now. But largely, if you see that more all the acquisition is consolidated and between four to five discount brokers, a large number, almost 80%, 90% of the acquisition, which is happening in the discount broking space, is happening between the top four or five players. But over a period of time, what has happened is, it is important that are you looking at only acquisition as a metric in terms of competition or you’re looking at driving more revenue and value out of this. So our positioning is extremely important, and that’s why — that’s how we differentiate ourselves where we position not just as a broker who’s acquiring any and every customer, we want to acquire a high intent-driven customer.

So though there is competition, but there is a consolidation. And that consolidation helps us to provide — and helps us actually grow further in terms of growing our customer base and revenue. As far as regulatory is concerned, definitely, there are a lot of changes which are happening, and there’s obviously a white paper and consultation happening in terms of how the client funds can move directly from customer bank account to the clearing population. That wouldn’t impact our margin funding book or the brokerage, but that will have an impact on our treasury income. But I think as someone also asked that with all these regulatory changes, what exactly will happen? And obviously, the cost — when cost goes up, it has to be factored in the brokerage rate.

So we will — we might or we will see an increase in the brokerage rate from the flat INR20 that most of us are charging. So it has to go upwards if we want to run our business. And with every quarter, our compliance and our operations and other costs are going up. So it will definitely have an impact, but that will also mean that our — the brokerage rates and the charges that we charge to customers will go up.

Lastly, on your question of the acquisition, we are — as I said, we are acquiring close to 1.5 million customers. Our expectation is that on — if you look at our current annualized revenue, that would have a positive impact of close to 18% to 20% in terms of income growth.

As far as cost is concerned, we have already created an infrastructure, which can take care of more than 2 to 2.5 times of the customer trade rate and the people logging in and all the other parameters for our tech infrastructure. So we’ve already created that. And as I mentioned earlier also that I don’t see a cost increment from here, even if we acquire. So with an 18% to 20% income, we see a good translation of that income directly into profitability once this entire scheme comes into play.

Sarvesh Gupta — Maximal Capital — Analyst

And how much are you paying for this acquisition?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So it’s an all-equity deal. And we are — the ratio that we are paying to shareholders is in the range of 50:1. So for every 50 shares of IIFL Securities, the shareholder will get 1 share of 5paisa. And if you just convert that, it’s broadly on our total equity base around 60 lakh shares will be issued.

Sarvesh Gupta — Maximal Capital — Analyst

Understood, sir. Thank you.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. Thank you very much.

Operator

Thank you. Next question comes from Dev Shah from Haitong Securities. Please go ahead.

Dev Shah — Haitong Securities — Analyst

Hello. Hi. Am I audible?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. Sure.

Dev Shah — Haitong Securities — Analyst

So my question to you was regarding the total number of orders that you have received during this quarter. And if possible, could you give me the equity segment orders also for this quarter and the previous quarter?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

I’m sorry, but we don’t share the number of order information for any of our segments.

Dev Shah — Haitong Securities — Analyst

Okay. Okay. All right. So I have one more question relating to that time. So for example, do you have any metric that shows the time it takes for a newly acquired customer to be an active client? Is there anything like that?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So broadly, what we have seen from our past experiences that it takes not more than 30 to 45 days for a customer to get active. So if you’re acquiring customers, most of them, almost 95% of people who want to trade will end up trading between — within the first 30 to 45 days. And if people do not trade in first 45 days, it is very, very unlikely that they will trade ever or they’ll compare. That is like only 0.5%, 1% people will come after 45 days. But maximum this is the time.

Dev Shah — Haitong Securities — Analyst

Okay. Okay. Got it. Got it. And last question, out of these 1.5 million new customers that are going to be coming in through the merger — through the acquisition, sorry, could you give me a sense on how many of them will be active customers — are currently active customers?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Right now, it will be difficult for me to share the information because as I said that we have just filed it to the exchanges. We are expecting approvals. So once the approvals and the shareholder approval, the exchange and also NCLT, post that, we will be able to share that information. But for now, we won’t be.

Dev Shah — Haitong Securities — Analyst

Okay. Got it. Got it. Okay. No issues. No issues. Thank you so much.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you very much. I think we can take two more questions. Operator, the last two questions?

Operator

Sure, sir. Next question comes from Anurag Mantri from East Bridge Advisors Private Limited. Please go ahead.

Anurag Mantri — East Bridge Advisors Private Limited — Analyst

Yes. Thanks for the opportunity. I have two questions. One, on the F&O side, basically, you mentioned that your market share is about 3.2%. Any sort of indication as to what you’re targeting this number to maybe go up to? And what sort of initiatives that you’re taking? I heard about your FnO 360, but is there anything else that you’re sort of focusing on to drive this market share? Like is there a cohort of customers sitting in the overall broking industry, which you can sort of target the pure pricing and your offering, et cetera, from where you’re gaining market share? That’s one part.

And the other part is that if you can just help us understand the — qualitatively, if you can give us the color of the F&O segment in the sense of what percent of your clients may be doing F&O? So within the F&O brokering ADTO or the revenue, what percent comes from these good quality, so to say, that you defined as of now? Or what percent is kind of H&I versus retail? What type of customers — like how many customers make money? Any correlative steps will be useful.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

So answer to your first question, obviously, there is no number in terms of what kind of growth I’m looking for in derivative market share because we put our effort. And once you are into acquiring high-end derivative traders or the good quality customers, sometimes you immediately get a market share rate. But that’s why it would be difficult for me to put a number in terms of market share. But having said that, we have done a lot of things for attracting good quality customers and derivative traders. FnO 360 terminal is one. We introduced a product called margins plus, where in that product we provide 100% collateral benefit for customers who want to trade in derivatives. The 50% component of cash is something which is funded by us on which we charge a meager interest rate of 0.03% per day on overnight and intra-data is absolutely free. Then we have introduced a lot of order types, which the traders like. We have tied up with the fintechs, which provide a lot of tools and a lot of data. We have an open API architecture, where the algo traders or the derivative traders can use our API to trade.

We also have a subscription product. And there, we charge the lowest brokerage in the industry, where we charge only INR10 as a part of our add-on packs, which is our ultra trader pack, where you just pay INR1,100 on a monthly basis or around INR10,000 on an annualized basis. And you get brokerage rate of INR10 and you also get 100 orders free.

So from charges to platform to product to experience, we have done a lot of things to attract these kind of customers. And that’s how you see a steady growth in terms of market share over the last three, four quarters.

Lastly, I think your question was on the qualitative aspect. See, it’s — again, I won’t be able to share in terms of how many people make losses or how many people trade. But broadly, as I was saying earlier also in last four quarters, what I’ve seen is there is a consistent increase of number of customers trading into derivative segment. And though the percentage of customers who are trading in derivatives compared to my overall is not much, it is in the range of around 10%, 15%. But those are the ones who are — that overall absolute number is increasing quarter-on-quarter. So it is not just the turnover which increases, but also the customers traded, which is increasing.

Anurag Mantri — East Bridge Advisors Private Limited — Analyst

Sure. Thanks.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Thank you very much.

Operator

Thank you. We have a follow-up question from Tushar Sarda from Athena Investments. Please go ahead.

Tushar Sarda — Athena Investments — Analyst

Yes. Thank you for the opportunity again. A couple of times you mentioned that you expect the brokerage rates to go up, but if we look at the big players like Zerodha or Angel, they are minting money. So would they not actually reduce the rates to drive out other players on the market because the competitive intensity is increasing in this space?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

No, I don’t see that brokerage rates are headed south at all. See, there are profitable players in the business. But we all have to understand one — a couple of facts. One is broking is a cyclical business. So last two, two-and-half years have been good for markets. And we have seen in the past, and I’m in broking business for last decades. I’ve seen that overnight with any change in the market, you can lose almost 30%, 35% of your revenues. So if you are profitable now, doesn’t mean that you will be profitable ever just by reducing the rate. That is one.

Secondly, there are regulatory changes. Now treasury income definitely forms a significant part of rather less of top line, but a significant portion of bottom line. Now if there is any change, which leads to erosion of the treasury income, automatically have an impact on the profitability. So I think us — and overall, the large brokers understand the gravity of the business and the cyclical nature of the business.

So I don’t see despite so many players coming into it, the rates will go down. There might be marketing ways through which you bundle the product and you’re trying to position as the cheapest by giving a lifetime something or maybe you reduce the rate in the new part, but it’s more of a marketing. But all put together, I don’t see the rates going down.

Tushar Sarda — Athena Investments — Analyst

But they won’t go up also, right? These players are hugely profitable and everybody is fighting for market share. So it’s like a telecom battle, which happened between the biggies, and the smaller players just won’t survive the price war, right? I mean you’ve been mentioning that the rates would go up, but I seriously doubt if they’ll go up [Speech Overlap] and they’ll make so much money?

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

See, right now, it’s more of a hypothetical situation. But obviously, when we look at a lot of parameters of business, I mean that’s my call. I may be wrong, I’ll be happy to prove wrong that if we are able to maintain or rather increase our margins and ARPU by keeping the rate same, I’ll be more than happy. But we are into a very dynamic business. So anything can change. And my response was to the answer in terms of what if there are changes. But in a steady state, I don’t see a change in the last two years and even now.

Tushar Sarda — Athena Investments — Analyst

Okay. Thank you very much. Thank you for answering my questions.

Operator

Thank you. There are no further questions. Now I hand over the floor to the management for closing comments.

Prakarsh Gagdani — Whole-Time Director and Chief Executive Officer

Yes. So thank you very much all for attending our conference call. If there are any questions, you can write to us at ir@5paisa.com. I, again, wish you a very, very happy new year. And may you have a great year ahead. Thank you very much. Have a good day.

Operator

[Operator Closing Remarks]