Multi Commodity Exchange of India Limited (MCX) Q2 FY23 Earnings Concall Transcript

Multi Commodity Exchange of India Limited (NSE:MCX) Q2 FY23 Earnings Concall dated Oct. 25, 2022

Corporate Participants:

P. S. Reddy — Managing Director and Chief Executive Officer

Analysts:

Mohit Kumar — DAM Capital Advisors Limited — Analyst

Devesh Agarwal — IIFL Finance Limited — Analyst

Avinash Singh — Emkay Global Financial Services Ltd. — Analyst

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Satyajeet Bolar — Chief Financial Officer

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Amit Chandra — HDFC Securities Limited — Analyst

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Subramanian Iyer — Morgan Stanley — Analyst

Lavanya Tottala — UBS Group AG — Analyst

Anshuman Deb — ICICI Securities Limited — Analyst

Unidentified Participant — — Analyst

Unidentified Speaker —

Sanketh Godha — Spark Capital — Analyst

Chirag Maroo — Keynote Capitals Limited — Analyst

Presentation:

Operator

Ladies and, gentlemen, good day, and welcome to the Multi Commodity Exchange of India Limited Q2 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

On the call, we have Mr. P. S. Reddy, MD and, CEO; Mr. Manoj Jain, Chief Operating Officer; Mr Satyajeet Bolar, Chief Financial Officer; Mr. Praveen D G, Head Chief Risk Officer.

I now hand the conference over to Mr. P. S. Reddy. Thank you, and over to you, sir.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you, Mister — Hello? thank you, Mr. Faisal. Are you able to hear me?

Operator

Yes, sir, you are audible.

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. Thank you for the introduction. I think this quarter thanks to options we have done well. I must accept that. And although there is a small dip in the volumes of the futures, the options have picked up substantially well and I hope that we will be able to do better in the coming quarters. And maybe when we introduce more contracts also, that should help us to meet our expectations.

I think I’ll leave the floor open for question-answers. Please ask the people to ask questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital Advisors Limited — Analyst

Yeah. Good [Technical Issues] Congratulations on a very, very good quarter and excellent set of numbers. So my first question is the — on the delivery for TCS, [Technical Issues]

Operator

Mr. Kumar, the audio is breaking from your line, sir.

Mohit Kumar — DAM Capital Advisors Limited — Analyst

It’s better now? Can I — Hello? Am I audible?

Operator

Yes sir, please proceed.

Mohit Kumar — DAM Capital Advisors Limited — Analyst

The question is on the delivery platform of TCS. [Technical Issues]

Operator

Sorry to interrupt you Mr. Kumar, the audio is still breaking from your line. Request to you to please be in a network area.

Mohit Kumar — DAM Capital Advisors Limited — Analyst

Okay. I’ll get back in the queue. Sorry.

Operator

Thank you. We’ll take the next question from the line of Devesh Agarwal from IIFL. Please go ahead.

Devesh Agarwal — IIFL Finance Limited — Analyst

Good afternoon, sir, and congratulations on good set of numbers. Two questions from my side. Firstly, wanted to know the status on the transition to the new platform, so where are we on that?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. What is the next question?

Devesh Agarwal — IIFL Finance Limited — Analyst

And the second question is sir, we know that you have extended the contact with 63 Moons for a quarter, so what are the commercials around this, for the extension of the contract with 63 Moons?

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. As far as TCS platform is concerned, we have already started the what you call UAT and we are planning to launch next month, the mock as well as the parallel runs. And so hopefully — and that’s what our plan is, it’s what our desire is. By the end of this quarter, we should be able to go live is what our expectation is.

As regards to the the spent on the 63 Moons, I don’t think will be able to reveal the commercials, but it is exorbitant. That’s all I can say.

Devesh Agarwal — IIFL Finance Limited — Analyst

Okay, sir. And in terms of sir, the new additions to the platform be it your changes in the monthly option gold contracts that you were planning to do as well as a gold spot exchange, all of this will be post the transition to the new platform.

P. S. Reddy — Managing Director and Chief Executive Officer

Absolutely right, absolutely right. So all of this will be post go live. That’s correct. The impact of the extension will be felt in the next quarters, of course, that’s obviously.

Devesh Agarwal — IIFL Finance Limited — Analyst

Understood. Okay, sir. Thank you so much.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Avinash Singh — Emkay Global Financial Services Ltd. — Analyst

Yeah, hi. Good evening. Two questions from my end. Firstly, if you can give some breakup of the operating revenue in terms of your transaction charges on futures and options and other fee-related income, so if some — further breakup of this operating revenue, that number one.

Number two is if we see up closely, I mean a large part of growth has been driven by earlier a huge surge in options in energy and gas and crude. Now, how do you see this? I mean, how much of that is kind of structural signature or how much profit can we estimate to maybe increase volatility around energy in this — and in this geopolitical developments. Those will be my two questions. Thank you.

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. I will answer the second question first. In fact, volatility means — is deep thing which runs in a contract for that matter. Now whether sometimes it is the energy project, sometimes it is the gold, silver and still sometime maybe metals. So, I can’t say that whether there will be any structural weakness or strength in it. I mean it is characteristics of the market, we must accept it. Maybe currently it is energy which is substantially driving it, be that so, but it is the volatility which drives all commodity markets, so are we. So, I will not be able to say that quarter-to-quarter, is it a structural change? No, it’s not a structural change, that is the inherent characteristic of the market.

As regards to the contribution of futures versus options, we got about. In futures, we got about 40, sorry, INR62 crores in September quarter and options, we got about INR43 crores, that’s what it is.

Avinash Singh — Emkay Global Financial Services Ltd. — Analyst

Okay. And the rest of INR20 odd crores will be in membership fees and other fees?

P. S. Reddy — Managing Director and Chief Executive Officer

Membership fee, and if you are looking at a consolidated, also it — yeah, it includes Clearing Corporation part. If you are looking at the standalone, it includes membership and others.

Avinash Singh — Emkay Global Financial Services Ltd. — Analyst

Okay.

P. S. Reddy — Managing Director and Chief Executive Officer

And activity charges.

Avinash Singh — Emkay Global Financial Services Ltd. — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead. Nikhil Abhyankar, your line is in talk mode, please go ahead with your question.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Yeah. Can you hear me now?

Operator

Yes sir.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Yeah. Thanks a lot for the opportunity, sir. I would like to go back to the 63 Moons contracts. So, do you think that we do the same volumes as we did in this quarter? Can you just give an rough estimate as to what will be the impact on our EBITDA for the next quarter? And how confident are we…

P. S. Reddy — Managing Director and Chief Executive Officer

I will not be able…

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

How confident are we…

P. S. Reddy — Managing Director and Chief Executive Officer

I will not be able to do those numbers, please. I mean that is as good as telling me what the commercials are.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay. And sir, how confident are we of going live by end-of-quarter three with the new platform?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah, confidence level is high. God forbid if some unforeseen thing happens then I think we are on the path to make it live, that’s what we are fully determined to make it happen. That’s what our — all teams are working towards that.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay. Sir, my next question is about the higher other income as compared to the last quarter, it is somewhere around INR18 crores as compared to INR9 crores last quarter. So, do you think this level is sustainable going forward? And also, we have got lower tax expense this quarter, so any reason — specific reason for it and what will be the tax rate for the entire year?

P. S. Reddy — Managing Director and Chief Executive Officer

See we are moving more towards — our portfolio in the YTM yield to maturity kind of thing range, so we are moving more to this some of the perpetual bond, some of them into the state development loans of the category one kind of states, the Gujarat, Maharashtra kind of up things we are doing it. So, there it is — the returns are very high as compared to what the other money markets are, other short-term ones are yielding. So that is having you see that kind of what you call impact.

And if this — interest rate started yields, they have started going up in the last quarter, it was in the current quarter, from sometimes June, July it started. So we are accordingly taking advantage of the market.

Satyajeet Bolar — Chief Financial Officer

And the tax rate would be like this, taxes on the INDAs sits on the budget, so it should be on these levels. And once we go live with the CDP project, then we will also get the benefit of depreciation which we have not yet pacted that.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay. So should we estimate from around 20%, 22% tax rate?

Satyajeet Bolar — Chief Financial Officer

Yeah. Maybe around 23% would be right.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

23%. Okay. So, I’ve got just one more question. I was just going through the annual report. So over there, earlier you mentioned that we have got 20% stake in the new spot gold exchange in the GIFT City, but I think it has been reduced to around 14%, any specific reason for that?

P. S. Reddy — Managing Director and Chief Executive Officer

See, the investments are being made in tranches. Sometimes we have one get delayed and we got delayed and we made it up, in the sense it is that accounting entry. So by 31st March, we couldn’t make it but then in the April we have made it. So now, currently it is 20%.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay, sir. That’s all from my side. I’ll get back in the queue. Thank you.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you. Thank you.

Operator

Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Yeah. Good evening, everyone. First of all, wish everybody a very Happy Diwali and Happy New Year and secondly congratulations on great set of numbers. First question is on the crude oil part where in the previous quarter you had mentioned that the regulator is definitely considering something related to SGF and margin aspect. Sir, any further developments there?

P. S. Reddy — Managing Director and Chief Executive Officer

On the SGF one, no further developments because it is still — RMRC meeting in SEBI is yet to take place, unless that is done this issue will be kept pending, that’s how it is.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. Secondly on the EZR BSE has received an update, what the status with MCX?

P. S. Reddy — Managing Director and Chief Executive Officer

See, as I told you we are not competing with anyone. If they have gone ahead let them go ahead, and we have our own assessment of this market, our own assessment of it. As we said, the domestic spot exchange and gold exchange will start being better or well only there is a GST consideration for the first depositor. Now, just to launch and then make that we are the first, it’s fine, I have no problem. We’re the first or second is not important. Once we launch, it should be successfully, that’s what it is. So we will do it once our TCS platform is stable and once we goal our CDP then we will focus on the spot.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. Sir, third question is on the TCS again. In case if we are not able to implement the ETF platform by December, does the current extension of the [Indecipherable] loans allow you to further extend that for another quarter?

P. S. Reddy — Managing Director and Chief Executive Officer

We, don’t know. I don’t know because this is hypothetical at this point in time and no one should be telling. I mean all alternatives are possible, that’s the way I see that. I am not ruling out anything.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay, okay, okay. All right. Thanks. That’s all from me sir.

Operator

Thank you. The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead.

Amit Chandra — HDFC Securities Limited — Analyst

Yeah, hello. Yeah, sir, thanks for the opportunity. Sir my question is on the concentration that is there in the options trading, so 95% is from the crude and natural gas. So don’t you think that now as you have mentioned in the previous question also, around — don’t you think there is a risk wherein other contracts are not taking up or is it structural by any chance or is it enough structure in that with that we are now focusing more on these two contracts? And in terms of pipelines, which other contracts are in the pipeline which you have to launch?

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. Is it a risk? Obviously, concentration is a risk. That is true with other leading exchangers where they have only one single product maybe index options or something like that and maybe LGF exchange has got only the electricity. But that — I mean it comes with that structure itself. I mean, investors have accepted that yeah, it is like this. And I mean as I told you volatility drives the market. We have seen last year 2021, ’22 also, the gold and silver market have — those products have done exceedingly well and at this time it is doing NFG, sometimes it could be metals also. So, I think we are not worried on that.

There is no competition. The point is within India there is no competition. If somebody wants to trade in these projects may come to the exchange only. I can understand this concentration may be a risk if there is competition.

Amit Chandra — HDFC Securities Limited — Analyst

Okay. And sir in terms of this — the participants who are trading, so have you seen a substantial increase in the retail participation, especially in options or is it this — the structure is similar to what that is in futures or is it substantially different from what is in futures?

P. S. Reddy — Managing Director and Chief Executive Officer

No, see, we have seen a good — great number of investors participating in terms of trading UCCs. The — till this end of this quarter, in this current financial year, we have 3,74,000 UCCs have participated as against the corresponding period last year, 3,13,000 UCCs or 3,14,000 and less than 3,14,000 users last year. And so that’s the big number. And if you see Q2 to Q2 comparison, last year July-September it was 2,19,000 total up futures and options and this year in Q2, it’s 2,91,000. So, I mean that’s the way it is.

Amit Chandra — HDFC Securities Limited — Analyst

Okay. And sir, my last question is on the technology part. So, you mentioned that next month and we are going to start in more trading on the new platform, so it’s mostly end of November. So don’t — so you have only one month which is December to transition from old to new. So don’t you think that like one month is very less time to do all the testing and — because as you mentioned that we only have three months of extension, so like beyond that maybe, we have not thought of that or like there is no clarity on that at this point. So, your thoughts on that. And also, how is the attrition in the internal IT team has been over the last say like six months? Has it gone up significantly in the last six months?

P. S. Reddy — Managing Director and Chief Executive Officer

Well, coming back to the — I said next month doesn’t mean next month end, okay? So, you are presuming that it is next month end kind thing and then only one month is available. It could be well in the beginning of the first week of the next month also. So that is the way — we are conscious of the time limit that is why we are trying to make it live as early as possible and make it, I mean monochrome also as early as possible. And I mean this is the top most priority of the management, there is nothing else, let me tell you. And on the second question at attrition, I think it has tapered off now in the current — in this quarter, I would say. But yes, in the previous quarters, it was on the higher side but now it is tapered off.

Amit Chandra — HDFC Securities Limited — Analyst

Okay. Okay, sir, thank you and all the best.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Sumeet Rohra from Smartsun Capital. Please go ahead.

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Yeah. Hi, sir. Sir, thank you very much for giving me the opportunity. Sir, if you can just help me understand two things what’s the cash today we have on books firstly? Secondly sir, I am — just bare my ignorance but I am pretty new to you — that your company, so I will you a few things. So sir, basically, if you can help me understand that you said the operating revenue was about INR60 crores for futures and about INR40 crores for options and INR20 crores was the other, so can you please help me understand that this is the option is the new part, so how do you basically see this evolving because normally in options are very well traded all over the world in terms of volume. So how do you basically see this INR40 crore kind of options shaping up?

And sir, thirdly, I read somewhere that SEBI may soon allow FIIs to be — start trading commodities, so has that already been allowed or that has not been allowed yet sir?

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. I will take the second question, third question. How does the options will shape up, option revenue, because currently it is INR60 crores versus INR40

Crores kind of thing you’re saying it. What I understand is that the options are the future for that, for that matter for all products maybe. We are gradually introducing more and more products and which one will pick up fast and then which one will pick up trading as it is currently happening in the crude NLG. I think it all depends on the volatility and the margin system, and the margins are under the underlying futures of — underlying futures, the margins are very high whereas options it is very less. That is the reason why this is — why it is downing of the market.

And I think as we go along, we will see some kind of traction in other products and the options will also start picking up. And in the realization, rate is also good in the case of options better than what we are keep assuming is that — I keep saying that one-third of the — options give one-third revenue as we equal into the future, that’s what I say, but that is the realization is better than what we have been presuming it. And the third…

Satyajeet Bolar — Chief Financial Officer

Cash…

P. S. Reddy — Managing Director and Chief Executive Officer

Thing is the…

Satyajeet Bolar — Chief Financial Officer

Cash.

P. S. Reddy — Managing Director and Chief Executive Officer

That is first one. Second? FII participation, the regulations are out but still, I mean this is our understanding of it. If they want to participate without any delivery being taken or any kind of such thing, they should be able to participate well in time now itself. But if they want to participate in terms of cash-and-carry arbitrage opportunities they want to take advantage of probably been made GST registration etc. which again is a challenging thing for them. And then probably they need to have a custodian also in place if they want to trade with such kind of strategies. May be we have to wait and see. But again, as I said our focus this quarter is not acquisition of more clients it becomes fine but our focus is on technology. I mean, you want to make it live come what may at any cost, the CDP commodity derivatives platform live, that’s what our ambition is.

And as regards to the cash first one.

Satyajeet Bolar — Chief Financial Officer

Yeah. On cash in our books is around INR900 crores. This excludes all the margin money and other money that the Clearing Corporation gains. Now our net worth is INR900 crores which is represented in cash.

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Okay. Perfect. Okay. And one more thing if I may ask you. May I, sir? May I?

P. S. Reddy — Managing Director and Chief Executive Officer

Yes, please, please.

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Okay. Okay sir, so basically if you can help please understand that today how many products are we offering and after the revenue could you give the top 10 products I mean if by revenue we offer? And how many more products or commodities are we going to give going ahead?

P. S. Reddy — Managing Director and Chief Executive Officer

No, two energy stocks and then two, I mean — two of the bullion that’s four and then five base metals, these are the ones which accounts for the maximum, that’s the way it is.

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Okay, okay, fine. Okay. Thanks — thank you so much sir. And are we introducing more I mean products or commodities or whatever?

P. S. Reddy — Managing Director and Chief Executive Officer

Yes, we are — they are in the pipeline, we will do that. Electricity is one such project, yeah. Thank you.

Sumeet Rohra — Smartsun Capital Pte. Ltd. — Analyst

Okay, okay. Thank you sir.

Operator

Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead.

Subramanian Iyer — Morgan Stanley — Analyst

Yeah. Hi, everyone. Thanks for the opportunity and congrats on a good quarter. Sir, I had three questions. The first one is that, it’s more related to the operating revenue breakup. So, you mentioned about other revenues being about INR20 crores, so if you could give some more color here on what’s changing here? Because in the first three quarters of the last year, we had it — we had this number around INR13 crores-odd, the last two quarters it’s been around INR16 crores and now there has been a good jump to INR20 crores. So if you can provide some more color on this on what’s the composition and what’s moving here? That’s the first question.

The second question is about product dynamics. So we are seeing a good pick up in options with respect to crude oil but we have not seen a pick up in options with respect to gold and silver which are more dominant in futures, whereas basically crude is not doing that well in future. So, if you can explain some product dynamics here on why this differentiation? And if at all there can be something that can shift from futures to options in the future from — in the future come futures to options, why would that happen?

And the last question is more — it’s more about the investment book. So you mentioned that you are moving to the — to YTM investments. Do you have an option of essentially not marking to market instruments that are designated to be held till maturity so that by eliminating the volatility in your P&L? So, that’s the third one that I wanted to understand. Yeah.

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. See the second question I will answer first then — see you’re right that crude oil, the thanks to the high margins that have been imposed then investors formed an alternative way of taking advantage of the volatility in the product, so they moved over to the options. And in a single pay even though NGI has also picked up. But that’s not the true — well that’s not true with gold, okay, right with gold and silver, so we’re doing it.

Now my hunch is that it was the high-margin costs which have led to this kind of shift. But having got used to that shift whether they will move back to the futures if the margins have reduced, I’m not too sure about it, I will not be able to predict that. And if there is any other reason that could make them to take a decide, make them to move over to the futures, I think we have to wait and see on that part of it.

Now the other products obviously as we introduced, in the gold also we’re planning to introduce on a monthly options contract. Probably that will reduce the tenure of the contract also. You need to look at that part as well. If the tenure is also high and then the contract value itself is also very high, obviously that will keep participants out. And hopefully, if make it a monthly contract, that will be brought down by us. Premium will be brought down so that will make it attractive. So essentially it is a cost of trading whether it be the premium, be that margins which will price — made the people to change product.

Then the first one, of course, regarding the breakup of it, the other income breakup. We will tell you the second — the last question again related to the — whether HTM — I think that is we have changed the policy of our investment policy. There we mentioned that all these instruments can be kept under health maturity.

Satyajeet Bolar — Chief Financial Officer

As we explained in the earlier — in the July call, that we are moving into held to maturity category of investments of bonds so we are — so we’re amortizing this over the length of the instrument and we have invested a substantial amount into development loans as well as in perpetual bonds which — in primary as well as in the secondary market during this quarter. So all of these instruments are held under held-to-maturity. So, we won’t be — we will not be in capturing any impact of the mark-to-market.

On the second question with regard to other income, so other income includes mainly treasury. As well as during the quarter, we hadn’t I guess informed market that we have an arrangement with Chittagong Stock Exchange in which we give them — we have been providing technical services, so we have been able to book — booked — were provided services and they have booked certain income on the services that we provided to Chittagong Stock Exchange.

Subramanian Iyer — Morgan Stanley — Analyst

Understood. Thanks a lot and best wishes for future quarters.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Lavanya Tottala from UBS. Please go ahead.

Lavanya Tottala — UBS Group AG — Analyst

Hi. Thanks for the opportunity, sir, and congratulations on good set of numbers. And I just want to understand in contribution to earlier question that in options, is there any different in participants who trade gold and silver as compared to crude and natural gas? Because there the numbers are already comfortable with options but gold is not yet. So is there any different set of participants who trade in different products? And also, within crude, do you see higher preference for short-duration like one month contract over two months because the premium will be lower there?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. In crude, anyway it’s a monthly contract so access to the premium will be lower, okay? And — but now contracts is also not very big as compared to the gold. Today you have about INR50 lakhs of a piece, 1 kg we saw, so that’s really high. And so, yes, is there any difference in the participation? There are many common no doubt about it but as I told you for those ones who are day traders or some of them who want to take advantage of volatility, they look at deploying let’s say INR1 lakh in gold and how much money they can make versus deploying the same INR1 lakh in the crude oil how much more money or how much more contract they can take and then benefit it. So that is what the comparing they do it. Obviously, the fund requirement will increase when it comes to the gold and whereas when it comes to the crude oil and natural gas it is less. So it’s a pure economics of it, nothing beyond.

Lavanya Tottala — UBS Group AG — Analyst

Okay, okay. Got it. And just a clarification, sir. Crude we have only monthly contracts, there is no two-month contract?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. There is no bimonthly contract.

Lavanya Tottala — UBS Group AG — Analyst

Okay. Got it, got it. And can you help me with this revenue split for the last quarter in terms of options, futures and the membership region?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. During this quarter, the September quarter, we earned INR64 crores from futures, INR43 crores from options.

Lavanya Tottala — UBS Group AG — Analyst

I mean Q1, Q1 last Q1.

P. S. Reddy — Managing Director and Chief Executive Officer

Q1 was INR56 crores in futures, INR27 crores in options.

Lavanya Tottala — UBS Group AG — Analyst

Okay.

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. And then INR2 crores will be for the membership and another growth of connectivity.

Lavanya Tottala — UBS Group AG — Analyst

Got it. And lastly, sir, after launching the — after we shift to the new platform TCS how — which will be the timing that you will be looking at launching the new product? Like the monthly gold options which you are looking at, what would be the timeline after shifting to the TCS that you will be launching the new products?

P. S. Reddy — Managing Director and Chief Executive Officer

As far as possible, we would like to launch in the first quarter only.

Lavanya Tottala — UBS Group AG — Analyst

Okay. Within…

P. S. Reddy — Managing Director and Chief Executive Officer

That is between the three months of the launch. That’s right.

Lavanya Tottala — UBS Group AG — Analyst

Okay, okay. Got it, got it. Thank you so much, sir. Thank you so much for the answers.

Operator

Thank you. The next question is from the line of Anshuman Deb from ICICI Securities. Please go ahead.

Anshuman Deb — ICICI Securities Limited — Analyst

Yeah. Good evening and thanks for the opportunity. I have two questions. One is on the proportion of your UCCs who are using options. You kind of indicated that number, if you can share the penetration of options within your universe as of now? That is one. And secondly sir, I just wanted to understand that in your contract with TCS, is there any punitive cause of delay or any accountability in terms of from the TCS side in terms of being delayed or something like that?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. I think it’s already there, the penalty clause is there but every clause has got its own limitations. You can’t take out the entire contract value, isn’t it, in any contracts, you know that. So there is a penalty clause no doubt about it, okay? Now, this is one part of it. In terms of UCCs, you’re asking in futures you have a total of 2,36,000 are getting traded, 2,36,900 are trading and in options, about 2,13,000 are trading. Now the unique between the two are 3,74,000. Is it clear?

Anshuman Deb — ICICI Securities Limited — Analyst

Yeah. Again, just to be clear that the — so basically the entire universe who is trading futures is also trading more or less options as well?

P. S. Reddy — Managing Director and Chief Executive Officer

Not necessary, not necessary. That’s what I am saying. We can’t draw that number comparison and then deduct it and then you can’t trade it. That could be a separate set this could be a separate.

Anshuman Deb — ICICI Securities Limited — Analyst

Understood. Okay.

P. S. Reddy — Managing Director and Chief Executive Officer

That’s why, I’m saying 3,74,000 is the unique.

Anshuman Deb — ICICI Securities Limited — Analyst

Unique. Okay. Okay, sir, I’ll sort it out and try to figure it out, no problem. Thank you, sir.

Operator

Thank you. The next question is from the line of Parth Agarwal, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hi. Thank you for the opportunity and wishing you Happy Diwali. So I just had a question on to — in the revenue breakup that is income from margin money. Just wanted to have brief detail about the same line item.

P. S. Reddy — Managing Director and Chief Executive Officer

Income from margin money is essentially the cash deposited by them, we earn some interest, that’s all it is, and it will in a money market…

Satyajeet Bolar — Chief Financial Officer

Consolidated, which is managed by MCXCCL and the investments are made as per the SEBI guidelines so it’s only in liquid overnight and fixed deposits.

Unidentified Participant — — Analyst

And what would be the amount right now, the margin money amount?

Satyajeet Bolar — Chief Financial Officer

As of 30th September, we had around INR1,000 crores in cash.

Unidentified Participant — — Analyst

INR1,000 crore. Okay. And what is the payment that has been made to 63 Moons in H1 FY ’23 so far basically?

P. S. Reddy — Managing Director and Chief Executive Officer

H1 will be obviously as per the business contract agreement that was almost…

Satyajeet Bolar — Chief Financial Officer

Around INR28 crores.

Unidentified Participant — — Analyst

INR28 crores has been paid. Okay. And what’s the top 10 concentration right now?

P. S. Reddy — Managing Director and Chief Executive Officer

Sir?

Unidentified Participant — — Analyst

Top 10 concentration by traders.

P. S. Reddy — Managing Director and Chief Executive Officer

One minute.

Unidentified Participant — — Analyst

Volumes.

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. I think top 10 accounts for the same like last quarter with 66%.

Unidentified Participant — — Analyst

66%. Okay. Thank you for the answer, sir.

Operator

Thank you. The next question is from the line of Rajesh Mehta, an Individual investor. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Thank you, sir. Sir, my question is on the technology platform and two questions. Sir, the first one is on the — there is a lot of market speculation on the quantum of amount that you paid to 63 Moons is maybe multiple times of what our quarterly payout are. And if that is the case, sir, do you think that next quarter’s profit would be materially impacted all things equal? That’s the first one. And the second one is on the TCS delivery. Sir, as per the last conference call, if I’m right, it was supposed to deliver the entire product suite by end of September and then on only mock testing would have been pending but they have not yet delivered the entire product suite. So what is the confidence that they will be able to deliver it by November and then the testing can go ahead and then we will be able to launch on 1st January before 1st January? Thank you.

P. S. Reddy — Managing Director and Chief Executive Officer

Okay. No, the first question, first the — whether — as I’ve said, the charges were exorbitant. Whether it will impact the next quarter, I think if other things being equal, obviously it will be — it will impact. Now, the other part of it is what is the confidence level? As I said, we are already doing the UAT and it is progressing and we are keeping track of it and day by day we are able to see some good results out of it. And let’s see. As I said, these are all — all options are kept open and we must make it live and it is kind of management’s commitment of do or die kind of situation, we would like to make it go live. That is a commitment from all sides that’s awaiting at this point.

Unidentified Participant — — Analyst

Sir, just one follow-up. Sir, in the light of things, would it have been better to have a slightly longer extension than three bunch? I mean given that TCS has been at it for two years and hasn’t yet deliver the product suite for MCX. Just wanted to know your perspective on it.

P. S. Reddy — Managing Director and Chief Executive Officer

I think all dimensions have been discussed. I think the accordingly this was the best possible extension we could have under the circumstances.

Unidentified Participant — — Analyst

Thanks, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Harish Iyer, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, sir, and Happy Diwali to you and your team, sir. Sir, my question is again pertaining to TCS contract and sir, what we have seen even internationally when someone replaces the vendor they run the systems parallely for good amount of time so that exchange avoids any failure in the future. I completely get your intention, sir, that you want to move to new platform. But sir, doesn’t that risk MCX for any future failure since we will have a very short amount of time to move to a new platform and we don’t have running parallely so far even for a quarter?

P. S. Reddy — Managing Director and Chief Executive Officer

Well, we need to make an assessment risk versus the extent that we have to incur also. Of course, we are we will take a careful assessment of the situation as we go along and have stability. And obviously, TCS will be giving L1, L2, L3, all supports they are giving it. And we doing a proper assessment and we’ll be running the parallel loans also and depending on the quality of the parliament and the on quality of the mock run, we will take this call.

Unidentified Participant — — Analyst

Sir, thanks. And sir, one more question. I understand and what you said obviously you cannot appreciate the confidentiality terms and you cannot put it but sir — and also considering that you as you said you have to measure it risk versus everything, and if we have to extend this contract, would that mean that the FY ’23 profitability would materially get impacted, everything you remain sales, sir?

P. S. Reddy — Managing Director and Chief Executive Officer

We don’t know at what price they will extend our — I mean these are really critical question, isn’t it? I do not know what offer they will give and so how am I to say whether it will impact us does not impact.

Unidentified Participant — — Analyst

Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Thanks a lot for the opportunity again, sir. Sir, you mentioned that there is a penal clause associated with the TCS contract, so can you just mention the quantum of that contract, quantum of the penalty?

P. S. Reddy — Managing Director and Chief Executive Officer

No, I will not be able to. That’s what I’m saying, these are all confidential terms, how can we disclose it? It’s not.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay, sir. And if at all if you have any accrued revenue through it, so when will we start booking it?

P. S. Reddy — Managing Director and Chief Executive Officer

Come again?

Unidentified Speaker —

I didn’t get it — we didn’t get your…

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

These penalties, when will they start booking these penalties if there are any?

P. S. Reddy — Managing Director and Chief Executive Officer

You see probably instead of paying them — because the payments have not made to TCS as yet, they are all in tranches and depending on the milestones. So as and when milestone is achieved before releasing that payment, probably we will be deducting it. I mean I don’t know, that is — we have to look into the terms of the contract and then accordingly do it.

Nikhil Abhyankar — DAM Capital Advisors Limited — Analyst

Okay. That’s it, that’s it from me, sir. Thank you.

Operator

Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.

Sanketh Godha — Spark Capital — Analyst

Yeah. Thank you for the opportunity, sir. Sir, can you just give us the margin difference in options market and absolute process system, in options market versus the futures market for crude gold. And sir so, how — and within futures, sir, how the margins are different between crude and the other product? Just to understand how this huge differential is leading to crude volumes to do so well? That’s my first question, sir.

P. S. Reddy — Managing Director and Chief Executive Officer

Hello?

Sanketh Godha — Spark Capital — Analyst

Yes, hello.

P. S. Reddy — Managing Director and Chief Executive Officer

See in crude oil, for example, futures the underlying margin is currently about 30%, 35% and when the slots five days delivery comes, every day 5, 5 percentage points it will increase, so 30%, 35%, 40%, 45%, 50%, 55%, it can go up to 55%. Now in gold currently I think 12% or so — again on the last five days, it will — delivery period it will increase by another 25%. Now, these are all the futures loan activities. When it comes to options, the option writer will have a different — obviously, the same margins will be applicable for option writer because he’s taking exposure to deliver the underlying commodities. So but whereas option what you call buyer, we either put option or call option, his only option, so he will pay the premium. Now, how much premium he pays and it all depends on whether it is in-the-money or out-of-the-money or at-the-money kind of options. That is the way it is.

Sanketh Godha — Spark Capital — Analyst

Got it.

P. S. Reddy — Managing Director and Chief Executive Officer

I think that is from product to product.

Sanketh Godha — Spark Capital — Analyst

Got it, sir. Got it. And the second question just wanted to understand if I look at historical data as a premium to turnover ratio, if I want to calculate in options market, it used to hover in the range of 1%, 1.5% in ’21 and this number suddenly has gone up to 2.3% in FY ’22 now it is the range of 2.5%, 2.6%. Sir, I’m trying to understand the risk but this number if it goes back to 1.4%, 1.5% kind of a number, what likely impact it would be? Or what is leading to the number to be so high around 2.5%, 2.6% compared to historical cost around 1.4%, 1.5%, sir?

P. S. Reddy — Managing Director and Chief Executive Officer

See, if the options are traded out of, far away from out-of-the-money, obviously the premium will be less. If it is closer to the money or minimum money are around that then obviously premium has to be paid more. So since our charges, transaction charges are based on premium, the premium it is high, then obviously transaction charges will be high. Now, that’s where we said that earlier sometime ago, that we have estimated it to be getting us the revenue after the futures transactions. It is precisely based on that kind of conservative estimate 1%, 1.5%. But we were able to see better premiums so obviously our transactions options are more trading at at-the-money in-the-money, in-the-money or near-the-money the kind of thing but not far away from money. That’s the reason.

Sanketh Godha — Spark Capital — Analyst

Sir, you have clearly seen a structural shift among the participants previously when options are not charging but people used to trade from the contract and now they are trading closer to one contract and like a structural shift and therefore this number will remain around 2.5% or forever going ahead.

P. S. Reddy — Managing Director and Chief Executive Officer

I think it is too hasty for me to make that comment that we have made any structural shift. We have to wait and see. And it is just one year old in that sense, the option charging started last year September or October, and it is too early for me to say anything on that.

Sanketh Godha — Spark Capital — Analyst

Got it, sir. And the futures yield which is 2.07%, sir the option yield will be closer to INR24, INR30, sir?

P. S. Reddy — Managing Director and Chief Executive Officer

I didn’t understand. Options, we are charging, about average INR44, INR45 rupees for INR1 lakh of premium, that is the scene.

Sanketh Godha — Spark Capital — Analyst

Yeah. Okay, okay. Got it, sir. Got it. And last one, the investment book breakup if you can give how much you think HDL are held-to-maturity securities? You said that the cash on investments on the book is around INR900 crores and can you give the breakup of INR900 crores into IPM kind of bonds versus last year and whether there is furthermore scope to increase it to YTM once?

Satyajeet Bolar — Chief Financial Officer

So, as I mentioned, total cost is around INR900 crores, we have around 45% in perpetual bond and state development bond and we also have around 5% in ETF which are maturing in April ’23 BHARAT Bond. So the balance is short-term which we are reviewing on a regular basis and as and when we get opportunity, we are moving it into SDL.

Sanketh Godha — Spark Capital — Analyst

Sir, any cap you have, sir, this 45% can go up to 60% or 70% of the entire cash on cash you hold.

Unidentified Speaker —

Depends on our liquidity.

Sanketh Godha — Spark Capital — Analyst

Okay, okay, fine. And last one, sir. Given the mutual funds have started ETFs, the gold and silver ETF, have you seen any traction on the exchange because of these ETFs getting launched?

P. S. Reddy — Managing Director and Chief Executive Officer

Not as yet, not as yet.

Sanketh Godha — Spark Capital — Analyst

And what could lead to any increase in the traction, sir? Any reason why it did not picking up?

P. S. Reddy — Managing Director and Chief Executive Officer

Well, we are engaging actively with them. There are some structural issues which we have written to the IMC also to address those issues. They are taking up with SEBI and probably once they address those issues, probably they will be able to participate greater.

Sanketh Godha — Spark Capital — Analyst

Okay. Got it, sir. That’s it from me, sir. Thank you.

Operator

Thank you. The next question is from the line of Chirag Maroo from Keynote Capital. Please go ahead.

Chirag Maroo — Keynote Capitals Limited — Analyst

Yeah. Thank you for the opportunity. Most of my questions are answered. I just have two questions for now. The first one is could you please tell me what is the ballpark figure that we are spending on the software TCS yet and how much of that we have already spent? And the second question is like, we have a particular slabs for future contracts like up to INR350 crores of contract, we charge about INR175 and beyond INR350 crores we charge INR175 and up to INR550 crore, we charge up to INR260. So is there any kind of slabs in option contract too?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. Coming back to the second question first. Yes, there is a slab as I told you, it is about INR45, I mean INR40. INR40 and INR50 and the subject to — I mean how much is the premium, we have that. We have two slabs in that. One minute I’ll get you. And then — and the first question is on the pricing how much is the what you call the contract value on other things. I mean we have been advised strictly not to disclose any of those numbers but it will be substantially lower than what we have been incurring so far. That’s the way it is.

Up to INR5 crores, it is INR50. Up to INR5 crores of premium it is INR50 per lakh and beyond INR5 crores of premium it is INR40. These are the two slabs.

Chirag Maroo — Keynote Capitals Limited — Analyst

Thank you. Thank you, sir.

Operator

Thank you. The next question is from the line of Prayesh Jain from Motilal Oswal Financial Services. Please go ahead.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Yeah, hi. Firstly, you all had mentioned about launching steel contract, what is the focus, have you have the approvals and we are waiting for TCS, where are the — where are we stuck right now?

P. S. Reddy — Managing Director and Chief Executive Officer

Yeah. The approval is not in-place as yet that’s where we are waiting for. I think we should be able to get that, let us see.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay. And just extending the previous questions with regards to the spend on the TCS. So, if I look at the balance sheet and your intangible asset under development is INR75 crores. Is that pertaining to TCS and how much of or what portion of it would have been good? So INR75 crore is a number that we have it till September.

Unidentified Speaker —

See, that’s a aggregate amount of what we’re spending on our intangible under development.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

That includes the hardware also?

Unidentified Speaker —

No, only intangible. But it won’t be fair, I mean we are asking Christians left right in different ways, I think it’s important to mention.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Okay, okay. Got it. Thank you, sir.

Unidentified Speaker —

Yeah.

Prayesh Jain — Motilal Oswal Financial Services Ltd. — Analyst

Thank you, sir.

Operator

Thank you. We’ll take one last question from the line of Harish Iyer, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Sir, just want to understand what would be, we should take as an annualized figure for the other income considering now we have changed our policy? Because otherwise, every quarter it moves up and down. So, is it possible for you to guide that what is this change in policy and shift to our portfolio, what would be our annualized other income, sir?

P. S. Reddy — Managing Director and Chief Executive Officer

It won’t be appropriate for me to give you an…

Unidentified Participant — — Analyst

Any indication…

P. S. Reddy — Managing Director and Chief Executive Officer

No, we have — as we have mentioned in the call, we are moving towards wherever we can, mostly will be moving to held-to-maturity. But remember, in held-to-maturity only get good in the accrual so that’s a downside, right? If the interest rates start falling in the fourth quarter then there is nothing that we can — that will be able to record because we will need accruals, so that is something that we have to keep in mind.

Unidentified Participant — — Analyst

Okay, okay, sir.

P. S. Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. P. S. Reddy for closing comments.

P. S. Reddy — Managing Director and Chief Executive Officer

So, thanks to all of you and I think we have done well in terms of numbers but my top most priority at this point, the entire team at MCX is to make the commodity derivatives platform live and that’s what our single most important target for this quarter. And hopefully, we will be able to make it, let’s see. Thank you. Thanks to all of you.

Operator

[Operator Closing Remarks]