BSE Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from BSE Limited (BSE) Q4 FY23 Earnings Concall

Management Update:

• [00:06:49] BSE delivered a record year in terms of revenues, with total revenue reaching INR 954 crores for FY 2023, a 10% growth compared to FY 2022.

Q&A Highlights:

• [00:19:39] Prayesh Jain of Motilal Oswal asked about the drivers of jump in other security services, other operating income and other income line-items. Sundararaman Ramamurthy MD replied that the increase in other security services income is due to revenue from other group companies and clearing activity. Other operating income increased due to BSE Technologies’ better year. The other income hike is due to an income tax refund and a minor reversal of expenses.

• [00:23:47] Prayesh Jain of Motilal Oswal enquired how should one think about employee expense and technology costs for FY24. Sundararaman Ramamurthy MD answered that for FY24, employee costs will have upward pressure to retain and hire new talent. Technology costs will have normal escalations and upgradations. Costs cannot be the same as the previous year.

• [00:26:28] Amit Chandra at HDFC Securities asked how confident is BSE in gaining back market-share in the cash segment with the initiatives it’s taking. Sundararaman Ramamurthy MD answered that market-share is a function of market participation and multiple interventions are required. BSE is confident that its efforts will fructify and it will gain back market-share.

• [00:27:04] Amit Chandra at HDFC Securities asked about thoughts on other BSE segments after spending on LES schemes and trying to regain market-share on the derivative side. Sundararaman Ramamurthy MD replied that LES was discontinued but is being re-launched. BSE is trying changes with rejuvenated energy and taking market participants into confidence. BSE has confidence and expectation that what did not work in the past may work now.

• [00:33:38] Amit Chandra at HDFC Securities enquired about the reason for the negative operating cash flows this year. Nayan Mehta CFO answered that this year was bad for Capital Markets globally and had a cascading effect on revenues. An additional INR26 crores contribution to the Settlement Guarantee Fund resulted in a dip in operating income.

• [00:35:11] Divesh Agarwal from IIFL Securities asked about any thought process around starting to charge on some segments where it’s not charging after discontinuing PPD enhancement schemes for FY24. Nayan Mehta CFO replied that the company’s objectives are improving liquidity in market segments and making revenue. BSE is trying to increase its presence in services given for free and will charge once it gets traction to serve shareholder interests.

• [00:39:43] Pankaj Rawal from Ace Lansdowne asked if BSE has noticed any traction in volumes due to changes in tick size for equities and currency options in the last quarter. Sundararaman Ramamurthy MD said that after changing the tick size for securities up to INR100, BSE found a better market-share, delivery percentages and impact costs. In currency options, 65% of trading is happening in $0.10 strike rate intervals. These are early indicators of making a meaningful difference.

• [00:42:44] Pankaj Rawal at Ace Lansdowne asked what can be the possible impact on BSE’s treasury revenue with ASBA implementation in the secondary market. Sundararaman Ramamurthy MD clarified that it is too early to comment on the impact of ASBA implementation in the secondary market as the contours of the regulatory change are not clear. The exercise is for improving investor protection, not increasing MII revenue.

• [00:44:51] Rishab asked about the fee structure in the StAR MF platform. Nayan Mehta CFO replied that BSE recovers transaction charges and costs incurred in processing transactions from the agency towards services. The overall recovery is about INR4 per transaction. There is no cost to retail investors or intermediaries and the recovery is made from AMCs for services rendered to them.

• [00:49:43] Vikram Kotak from Ace Lansdowne asked if the year was good, does BSE see a huge operating leverage to play out in all the areas of changes brought in the last three months. Sundararaman Ramamurthy MD replied that BSE is re-launching Sensex and banking derivatives in a modified form based on market feedback. These contracts have multiple benefits and BSE believes it will change operational capability. The vision is to provide new products, broad-base the market and provide protection from concentration risk.

• [00:53:56] Rahul Kumar from New India enquired about the future of gold exchange and future exchange. Sundararaman Ramamurthy MD answered that social exchange is not a revenue-making exercise but a contribution to society. Gold bullion exchange has great potential in India and is expected to grow well. EGR is another effort for onshore participants and BSE hopes to serve the market better with some changes.