Central Depository Services (India) Ltd (CENA) Q4 FY23 Earnings Concall Transcript

Central Depository Services (India) Ltd (NSE:CENA) Q4 FY23 Earnings Concall dated May. 03, 2023.

Corporate Participants:

Nehal Vora — Managing Director & Chief Executive Officer

Girish Amesara — Chief Financial Officer

Sunil Alavares — Managing Director & Chief Executive Officer

Analysts:

Praveen Agarwal — Axis Capital Limited — Analyst

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Swarnab Mukherjee — B&K Securities — Analyst

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Prithvish Uppal — AMSEC — Analyst

Parimal Mithani — Credential Investments — Analyst

Vivek Sethia — HDFC Securities — Analyst

Sanketh Godha — Avendus Spark — Analyst

Unidentified Participant — — Analyst

Rajesh Gajra — Informist Media Pvt Ltd — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Central Depository Services India Limited Q4 FY’ 23 Earnings Conference Call, hosted by Axis Capital Limited. [Operator Instructions]

Ladies and gentlemen, please note that CDSL does not provide specific revenue or earnings guidance. Anything said on this call, which reflects CDSL’s outlook for the future, all of which could be construed as forward-looking statement must be reviewed in conjunction with the risks that the Company faces.

I now hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you.

Praveen Agarwal — Axis Capital Limited — Analyst

Thank you, Rohan. Good afternoon, everyone, and welcome to this earnings call of CDSL. We have the entire Management team of CDSL with us led by Mr. Nehal Vora, MD & CEO. We’ll start with a brief on the results from Mr. Nehal, and then we’ll move on to Q&A.

Over to you sir, for the opening remarks, please.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you. Thank you, Praveen. Good afternoon, and welcome, everyone. I hope each of you and your loved ones are safe and healthy. Thank you for joining us today to discuss CDSL’s financial results for the fourth quarter and full year financial year ended March 31, 2023. As in the previous quarters, we’ve posted a detailed financial presentation on our website for your reference.

I’m joined by the CDSL Group’s Leadership team. Let me start with the industry highlights and then state — and then take you through some of the key aspects of our performance. To begin, let me highlight that — the industry trends and then discuss some of our key performance aspects.

During the financial year 2023, the capital market industry experienced a mixed performance. While certain sections continued to show our growth momentum, retail market participation remained muted as compared to the financial year 2022. The business environment in the Q4 was similar to the full-year trends described above.

In addition to these industry developments, several new regulations were introduced during the year. We believe that these regulations will benefit the industry in the medium term as they aim to protect the interests of the retail investors as well as investors at large, and reduce systemic risk. Overall, we view these regulatory measures as positive for the industry’s long-term growth.

This quarter, India further strengthened its retail participation in Indian capital markets. The total number of demat account investors in India touched a new milestone of more than 11.3 crores in Quarter 4 of FY 2023, of which 8.3 crores demat account investors at registered with CDSL. The registered investors as on March 31, 2022 were 6.3 crores. It shows an increase of 32% over the last year.

We are harnessing the benefits of that digital innovation and the presence carved out across years, especially in the Tier 2 and Tier 3 cities. The availability of digital services such as EDIs, margin pledge and re-pledge mechanism, e-AGM and e-voting and online account opening has had a significant impact on the growth of Indian retail investors. However, this is just the beginning, and our primary goal is to continuously enhance the financial ecosystem by making it more efficient and transparent.

In terms of the performance, our strategy focuses on accelerating the core annuity income, simplifying the set emerging investors and fostering new developments in the Indian securities market. CDSL is committed to growing its business sustainably by diversifying its revenue, investing in advanced technology and cultivating its people. As we celebrate our 25th year of operations, our focus remains on improving the financial ecosystem by enhancing its efficiency and transparency. We would like to prioritize and focus our Atmanirbhar Niveshak approach while striving for innovation, resulting in consistent and a healthy financial performance. We are dedicated in curating a secure financial ecosystem and providing a differentiated experiences that create value to our investors and stakeholders.

Before, I hand it over to Shri Shri Girish Amesara, our Chief Financial Officer, I’d like to say that the growth of the Indian securities market is an extremely encouraging sign of India’s potential. I also want to place our appreciation gratitude to all our stakeholders, our regulators, depository participants, investors, issuers and other market participants and employees who have constant faith in us.

With this, I would like to hand it over to our CFO, Shri Girish Amesara.

Girish Amesara — Chief Financial Officer

Thank you, Nehal. Good afternoon to everyone. Speaking on the yearly performance, total standalone income has increased by 13% for the year ended March 31, ’23 at INR544 crores as compared to INR480 crores from the previous year. The net profit on a standalone basis is up by 3% to INR272 crores as compared to INR264 crores during last previous year. On a consolidated basis, the total income has increased by INR15 crores to INR620 crores for the year ended March 31, ’23, as compared to INR606 crores for the previous year. The net profit on a consolidated basis is down by 11% to INR276 crores as compared to INR312 crores.

Speaking on quarterly performance, the standalone total income for the March quarter — March ’23 has increased by 3% to INR112 crores as against the previous — same quarter previous year of INR109 crores. The standalone net profit on a quarterly basis for the March quarter is at INR52 crores as against INR58 crores for the previous year same quarter.

On a consolidated basis, the total income for the March quarter has decreased by 3% to INR144 crores as against INR148 crores for the same quarter previous year. The consolidated net profit on a consolidated basis. Is that INR64 crores for the March quarter ’23 as against INR78 crores for the same quarter previous year.

Now, I shall request Shri Sunil Alavares to give an update about the operations of the wholly owned subsidiary CDSL Ventures Limited.

Thank you. Over to you, Sunil.

Sunil Alavares — Managing Director & Chief Executive Officer

I would request that in case — I think the numbers are already shared. So, that in case there are — we can start off with the Q&A session directly.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Yeah. Couple of questions from my end. If I look at CDSL Ventures, we’ve seen a revenue de-growth for almost all quarters during the year. So, can you explain what is happening at a time when SIP flows are strong, new demat accounts are strong. So, is there pricing pressure, is there some change in the business model, is it competition, what is leading to this fall in revenues?

Nehal Vora — Managing Director & Chief Executive Officer

So, you want to finish both your questions?

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Yeah, sure. Yeah, and of the employee cost we’ve seen a 60% increase in ’23, So, if you can share the fixed or variable nature of this to understand how would this move forward on going-forward basis.

And lastly, what is the capex and technology spends done in ’23? These were my questions.

Nehal Vora — Managing Director & Chief Executive Officer

Okay, first one, I’ll ask Sunil to answer, and the remaining two, I’ll ask the CFO, Girish, to answer.

Sunil Alavares — Managing Director & Chief Executive Officer

Sure. Yeah, if you see the KYC business, there are two major sources of income. One, the creation side, and the second is on the Fed set. Now, the KYC business, a lot depends on the condition — state of the primary as well as the secondary market. If you see last year, the number of IPOs reduced substantially as compared to the previous year. So, it’s had an impact on the number of new accounts being opened, that is demat accounts and broking accounts. So, if you see overall stats, I think around the demat accounts was impacted by about 35%. So, to that extent I would disagree with you that, though the money is coming in SIPs, but those are accounts which have already opened and so the KYC is already done.

So, to that extent, the KYC part would have not got impacted, but so far as new accounts are concerned, yes, definitely it has got impacted, because the number of broking and demat accounts has…

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

So, we’re saying the pace has slowed down, Sunil. What you’re saying is if they were growing at x percent…

Sunil Alavares — Managing Director & Chief Executive Officer

I think what I’m saying is if the demat accounts have gone down by about 30%, 35%, then the broking — the KYC also has got impacted by about 25% — 25% to 35%. So, it goes hand in hand. So, you can have more KYCs and less demat account opening. So, it’s directly function of the demat account or the broking accounts which have opened. So, that has impacted the number of KYCs and that has impacted the overall revenue.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Okay, and this fetch thing, because incrementally, you are saying the flows are coming in the same full-years in mutual fund and full-year addition is not so strong. So, the fetched business also, that’s affected?

Sunil Alavares — Managing Director & Chief Executive Officer

Absolutely, because we charge only a one-time on the fetched side. So, once the recorded is fetched, it is free for the lifetime. So, even if you’re doing an — then even if you fetch it a say 12 times a year or 24 times a year, I’ve already charged you once and that is the end of it.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Okay. So, there is no real pricing change or competitive intensity which is leading to this fall? It is just the…

Sunil Alavares — Managing Director & Chief Executive Officer

There are pricing pressures on the creation side because so long as there is competition, they will try to pull your customers by offering lower charges. So, that’s the part of the market competition. So, that will go on anyway.

Girish Amesara — Chief Financial Officer

So, in terms of employee cost, if you if you look at historically, CDSL’s employee cost was in single-digit if you compare previous year’s expenditure to total revenue. And now, it was 8% last year. This year it is 13%. If you recall, previously two yeas were high growth and our operations has almost increased compared to what it was prior to two years. And in terms of that we had to we had make plans to increase manpower base. So, current year we have net — on a net basis, there is a increase in the employee strength of roughly 35 people. And typically, if you look at the SEBI regulations also, the bonus is one-third of — so, basically that’s how the categorization of the combination works.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

RIght.

Girish Amesara — Chief Financial Officer

We did an addition of 33 employees during this quarter…

Nehal Vora — Managing Director & Chief Executive Officer

And to add — yeah, and to add to what Girish said, the regulations don’t allow any ESOPs to be…

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Rright.

Nehal Vora — Managing Director & Chief Executive Officer

Planted. So, obviously to retain talent, you need to kind of appropriately compensate them to get the best people and to retain them. As compared to our comparison of employee cost as a percentage of revenue to other market infrastructure institutions, we are one of the lowest. So, I think that continues even after this, but we need to continue to retain talent to ensure that we get the best-in-class as a part of our structure.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Yeah, sure. And Girish, you mentioned employee cost, I think if I look at consolidated, they are almost 15% of sales. So, is it some operating deleverage, because subsidiary have not grown. So, that is why also on a consolidated base, it looks higher than the standalone basis… is that right?

Girish Amesara — Chief Financial Officer

I gave you the details of consolidated basis only. We always speak on consolidated basis.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

But on a INR551 crores — INR555 crores revenue employee was INR80 crores. So, that’s 15% or not 12% or 13%, which I think you mentioned.

Girish Amesara — Chief Financial Officer

No, no. See, turnover at that consolidated basis is INR620 crores.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Okay, I think you are adding other income. I’m just taking income from operations. Maybe that’s why…

Girish Amesara — Chief Financial Officer

When I’m comparing, I will always compel with total revenue. I will not compare it with operating revenue.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Okay, okay, okay, good. And on the last question on the capex side, if you could give idea. What has been the capex trend in ’23?

Girish Amesara — Chief Financial Officer

The capex expenditure that we have incurred is in line with the implementation strategy that we have implemented, and it is also driven by the Regulator. We have…

Nehal Vora — Managing Director & Chief Executive Officer

No, I’ll take that question. I think it’s driven more with the new-age regulatory reforms which we are bringing into place that is the — basically, the authorization absence that depository and directly with the customer. And also bringing in sync with new hardware, servers and the new tech infrastructure. As our volumes are growing, it has to kind of be in sync with that, the new age technology. And also as our people are growing, they need more space. So, this is the two broad areas in which we are going to be spending money.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Right. And if you could quantify that amount, what we’ve spent in ’23?

Girish Amesara — Chief Financial Officer

I’ll come back on that during the call.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Yeah, sure. I’ll join back if I have more questions. Thank you.

Operator

Thank you. Our next question comes from the line of Swarnab Mukherjee from B&K Securities. Please go ahead.

Swarnab Mukherjee — B&K Securities — Analyst

Hi, sir, thank you for the opportunity. So, three, four questions from my side. Firstly, on the employee expense the discussion just happened, so wanted to understand that this bonus costs that you have mentioned, which is around about a third of the fixed cost, so is this going to — is this prorated or provisioned over the years over the four quarter or will it come disproportionately in the first quarter, because I think last year first quarter also, there seems to be a bump in employee cost. So, that is the first question.

Secondly, I wanted to understand, so in the KYC business, what proportion of it will be coming from the demat account opening and what proportion will be coming from say, KYC for other financial products?

Thirdly, if I were to understand — if I had a mix on — color on how would be the number of folios say, at the end of FY ’23 on an average of over FY ’23 vis-a-vis what is was over ’22 in the demat accounts. Just to have an understanding of what — how the annual issuance at this could move. Not looking for a forward-looking statement but since the year is over, you must be having the details about number of folios that you have. So, some ballpark number about growth will also be good. That is the third question.

And tech expenses sped, are we kind of reaching the peak or should we see kind of continued increase here also? So, these are the four questions.

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, so I’ll answer the first and fourth question first. On the employee cost, last year it was done and one quarter, additional bonus which the Board had recommendation. This year, quarter-wise, it has been lower rated. So, that is how it is done.

On the tech cost, it is a constant — because, see, we are in the business of providing infrastructure. And technology is key driving force, and it will be the differentiator. So, and technology is something which needs to constantly evolve as we move forward. So, based on that, this will be a process which we will continuously kind of assess and see as and when it’s required, we will be putting in place. There is an entire structure in place before we kind of go into play, but there will be continuous focus on ensuring that our technology is really up to speed with the latest and — so that the ease of doing business and basically the efficiencies of business continue to remain with CDSL.

I’ll ask — the second question on the KYC, I don’t think we give that detail between the mutual fund folios as well as that, because it’s kind of a consolidated number and kind of difficult because there could be a single investor doing both in terms of direct equity and mutual funds.

As regards the folio, I’ll ask the CFO what has been the increase over the last year as compared to this year. It’s part of the presentation, but I think he’ll just pull it out and…

Girish Amesara — Chief Financial Officer

So, the number of folios, previous year, it was 7.68 crores, and this year, it is 13.72 crores. I’m saying ’21-’22 compared to ’22-’23.

Swarnab Mukherjee — B&K Securities — Analyst

Okay. And sir, this growth, is it fair to understand that if I only way to look at the listed corporates, this growth would be fairly similar, what we have seen vis-a-vis…

Nehal Vora — Managing Director & Chief Executive Officer

No, no, this is kind of a combination of both listed as well as unlisted space. So, — that we’ll continue to embark upon as we move forward. The listed space are new kind of investors, and unlisted space, the companies are coming into the portfolio.

Swarnab Mukherjee — B&K Securities — Analyst

See, but in terms of overall, say, the share, would listed — so number of folios in the listed space dominated the number of folios in the early stage part of the Company because I think their number of shareholders will be limited…

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, folios obviously would dominate in the listed space because the number of investors by its very definition is — has to be more than 250. In — unlisted is lower than 250 in investors. So, obviously by that very definition, the domination would be in the listed space.

Swarnab Mukherjee — B&K Securities — Analyst

Sure, sir. So, just, again, quick follow-up on the KYC numbers. I understand that you don’t give a gross detail, but it would be — would it be fair to — I mean, some kind of ballpark, say, 80% or 90% coming from demat so that we can understand and then…

Nehal Vora — Managing Director & Chief Executive Officer

That will be kind of difficult to assess because there are lot of common ones which could be across both the asset classes. So, it’d be difficult to come to a ballpark number on that.

Sunil Alavares — Managing Director & Chief Executive Officer

Yeah, I can — can I take that question? See, what happens is when somebody fetches, they only tag that intermediary. Now, that intermediary maybe opening and fetching it for a demat account or for a broking account or for what do you say, the investors having some mutual fund investments. We only have a tag of the intermediary. So, it’s very difficult for us to figure out for what particular purpose, the KYC has been fetched.

Swarnab Mukherjee — B&K Securities — Analyst

Got it, sir. Very helpful. Thank you so much, sir, and all the best.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Senthilkumar from Joindre Capital Services Limited. Please go ahead.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

So, good afternoon. I could see capital work in progress of INR173 crores. Can you please elaborate on that? What kind of investment is…

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, so I’ll ask our CFO to answer that.

Girish Amesara — Chief Financial Officer

So, last year, we have purchased two floors at the Marathon Futurex building. That represents the capital work in progress.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

The whole INR173 crores, am I right?

Nehal Vora — Managing Director & Chief Executive Officer

Yes, yes.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Okay. And my second question is [Indecipherable] And that has been very — compared to last year, even though the last year’s con call, the Management aid like, we are in the early stage of implementation. So, any strategies to improve again market share in that?

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, so, there is move towards — we have already recruited an professional MD and CEO. He is in the process of joining. And there’ll be a Management team which will get created, but however the regulatory changes are also add up cost of change, it’s yet on a voluntary basis and yet not been converted into a mandatory basis. But there is definitely a value proposition, both from an investor as well as some an insurance company point of view.

So, as the market evolves and matures we will understand key benefits to it and that will move towards that. Also — because the regulator is also looking at it very closely, and he is going to come out with necessary policies formulations as soon as it is required.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

So, any timeline for that? When can we expect?

Nehal Vora — Managing Director & Chief Executive Officer

I can’t predict how that the regulator will come out with a policy formulation, but we are in constant touch. Whatever inputs they need, we are giving them, but that is up to them to finalize when they will come.

Senthilkumar Natarajan — Joindre Capital Services Limited — Analyst

Okay, sir. Thank you, sir. That’s it from my side. Thank you.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Karthik Chellappa from Indus Capital Advisors (Hong Kong) Limited. Please go ahead.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Thank you very much for the opportunity, sir. I have three questions. The first one is, despite the strong growth in our depository accounts, the revenue growth still seems to be challenged, especially on the transaction charges side. Apart from lower retail participation, which you alluded to at the beginning of the call, are there any other factors at play which is impacting revenue growth?

Nehal Vora — Managing Director & Chief Executive Officer

Yeah. So, it’s basically the delivery volumes of the exchanges which drives the market base in transaction. And over the last financial year, there has been a reduction at about 33% of the delivery rates volumes on the exchanges. And that kind of explains the reduced charges or the revenue for depository because it’s only when it culminates into a delivery, that is when the charges are paid through for the deposits.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Got it. So, apart from that, there is really no rate reduction or any sort of competitive pressures which are at play which is causing this. It’s just purely volume driven?

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, yeah, it’s purely volume-drive. Exactly.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Okay. Excellent. The second question is on the technology spend which you alluded to where you are saying you are continuously you need to assess the volume and the requirement and enhance the spend. If you were to bifurcate the spends between those which are directly related to higher volumes versus a different kind of technology, what would the split be if you were to do that for your total expense?

Nehal Vora — Managing Director & Chief Executive Officer

So, we kind of — we have already created that framework which makes the infrastructure really scalable. And it is done with exponential growth, which we have seen in the number of demat accounts over the last two to three years. So, from that, spend is more or less done. But however, there is a constant assessment done in bringing in value proposition more at really the application stage on how basically, the transactions are getting really processed. So, that, there is a throughput time comes down, it can handle scale.

So, there is a complex web of various kind of technological inputs which are put into play which kind of really assess that where we need to spend on the application side, on the hardware side, depending, so that the — really, the stakeholders will continue to enjoy ease of doing business and value propositio remaining with CDSL.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Or to ask it in a different way, if I just look at the fourth quarter [Indecipherable] number of about INR10 crores to INR11 crores of computer related opex, would annualized, it had been more or less in line with let’s say, what you’re thinking subject to volume changes?

Nehal Vora — Managing Director & Chief Executive Officer

Future I’ll be — it will be difficult for me to predict that, but I can assure you that there is a very robust process of spend which is done in terms of what is absolutely essential is getting spent. And there is a framework. As a company, we don’t give future kind of guidance. So, I’ll have to kind of not be able to answer that question.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Got it. Last question, sir. You mentioned that you’ve now about 83 million accounts out of let’s say, about 113 million which implies an market share of somewhere close to 72%, 73%, which means on an incremental market share basis, it’s even higher. Would it be fair to say that with the growth more or less moderating or normalizing, the market shares have more or less peaked for you?

Nehal Vora — Managing Director & Chief Executive Officer

Difficult to again say about the future, because three years ago, we were at 46%. And at that time also, somebody could have said that this is kind of an optimum level at which both — if the market will function. But there has been a surge, which has happened. So, again, market is a dynamic place. Difficult to really predict whether you’ve reached or not. My intent is — and I think overall the ecosystem is about 6% to 7% of the population is only in the securities market. So, the market at large is — has a huge potential to grow. Whether that growth happens in the next 1 year, 2 year, 3 years, 5 years, 10 years, that is for — something which we will have to see, but there is a potential. And I’m not looking at what is the current trend, it’s more of the potential which has yet not come into the market. India is a young population, and we are adding youngsters and large middle class into our population every year. There is a huge potential, which is there.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

Just one follow-up, sir, based on the response that you gave. If you were to look at unique accounts, at household level, what will it be on a household penetration level?

Nehal Vora — Managing Director & Chief Executive Officer

That again will be a little difficult to answer, because people have — sometimes have more than one account also, which is permissible under the law. And sometimes they are basically — they are in joined holder with the family members. So, again, each household is depending on how many people are there also. So, it’s difficult to really assess how much will be the penetration from a household level, but I can say that today, CDSL is about 98% of the PIN codes of the country where the demat accounts is there. So, there is a fairly comprehensive spread in where the CDSL demat accounts are.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Ltd. — Analyst

All right. That’s all from my side, sir. Wish you and the team all the very best.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of the Prithvish Uppal from AMSEC. Please go ahead.

Prithvish Uppal — AMSEC — Analyst

I mean, yeah, so, hi. Thank you for taking my question. The first question I had was just a follow-up on the transaction income that we report. So, again for this quarter, we’ve seen that for demat account realization has — it was roughly averaging close to about INR24, but it has gone down substantially. So, I mean, I understand, one is — one reason you’ve mentioned is the fact that there have been lower retail market participation. But despite a higher increment in terms — especially in this quarter in incremental demat accounts, so is it fair to assess that the amount of per demat account transaction has also reduced substantially, and do we expect this kind of, I mean, number sort of be the kind of new normal because last two years, the per account number of transactions would have obviously peaked for us. So, have you seen that this has come back to sort of pre-COVID level? That would be my first question.

Second question is in terms of the uses of cash, so apart from the investments that we make and the dividend that we’ve been declaring, any other cash uses that you see in terms of, from a growth perspective? Any color on that that you could give?

And third, this has been talked about on previous calls, which is the pricing on issuer charges from INR11. So, any discussion there — from the regulated where this is — how the conversation is? So, just these are my questions.

Nehal Vora — Managing Director & Chief Executive Officer

On the first one, it’s not only as I said in my earlier — reply to an earlier question, it’s a delivery-based volume. If you see, the delivery based volumes has seen a reduction of about 31% over last year. And that is really, this is a key reason. Whether we have reached a peak or not is very difficult to assess because it’s your market functions as to what is the volumes which are going to — it’s very difficult to predict volumes in the coming years. And therefore, the important thing is, create the right toolkits, right value proposition so that it is there to support any [Technical Issues] as we move forward.

Your second question was — I’m sorry, could you repeat your second question?

Prithvish Uppal — AMSEC — Analyst

Yes. So, it was do with the operating cash flow that we’re generating…

Nehal Vora — Managing Director & Chief Executive Officer

Yeah…

Prithvish Uppal — AMSEC — Analyst

So…

Nehal Vora — Managing Director & Chief Executive Officer

Yeah…

Prithvish Uppal — AMSEC — Analyst

Yeah, so on that.

Nehal Vora — Managing Director & Chief Executive Officer

Operating cash flow is — we are finding infrastructure company. So, the strength of the balance sheet becomes very critical as more and more assets and more and more demat accounts are added to your fold. It kind of gives that comfort factor. There are areas of growth, both in the securities market and in the other markets where we have our subsidiaries. There is a constant endeavor as India embarks upon a journey of digitization. More and more products and platforms are going to come into the fore, which will require that kind of investment both in terms of systems, technology and people to ensure that we are kind of, basically in sync with what the reforms are getting in this.

Also, we have just added our — basically, the account aggregator model where we have gone live as a financial information provider. That’s a new line of business which CDSL has recently entered, the first depository to go live. So, that’s one. Second is also the other sectors, like the commodities repository and the insurance sector. So, this is something which we continuously kind of would need to assess as we move forward. And we have had a consistent dividend payout which has been consistent over the year, 60% of — about 60% of the operating profits which gets — of — which is the net profit, which gets paid out as dividend.

Prithvish Uppal — AMSEC — Analyst

Yeah. And sir, just on the last question, about the pricing.

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, that will be difficult to comment because normally we don’t disclose the SEBI conversations. It’s kind of confidential. But that’s the kind of process which we will follow and as and when and in whichever form it gets approved, that will get promptly communicated to the market.

Prithvish Uppal — AMSEC — Analyst

Okay. And so, just last, just a data driven question. You’ve mentioned the folio number to an earlier participants. So, I just missed the number. So, could you just — if you could just repeat that?

Nehal Vora — Managing Director & Chief Executive Officer

It’s part of the presentation that is uploaded on our website. It will become easier, we can repeat it, but I think it will be easier for you to just look at that.

Girish Amesara — Chief Financial Officer

So, in finance — in last — in financial year ’21-’22, we had a folio account of 7,68,00,000 and for financial year ’22-’23, we had an account of 13.72 crores.

Prithvish Uppal — AMSEC — Analyst

Okay. Thank you. Thank you, sir. That’s it from my side. All the best.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Parimal Mithani from Credential Investments. Please go ahead.

Parimal Mithani — Credential Investments — Analyst

Hello? Yeah, can you hear me?

Nehal Vora — Managing Director & Chief Executive Officer

Yes, we can hear you.

Parimal Mithani — Credential Investments — Analyst

Sir, I just wanted to know, recently you came out and you mentioned in your previous statement about the account aggregator model. Can you explain in detail how do you plan to go — and how does it benefit CDSL?

Nehal Vora — Managing Director & Chief Executive Officer

No. So, the account aggregate model is where basically the information flow from various sectors, be it banking, insurance, securities market can be accessed based on client consent and given to an information user who can curate the data and give it to him in a structured format. There is — so, this is — and there are various components which are expected to be added to it, be it basically the income tax, GST, et cetera. So, it’s a common information flow framework, which is client consent-based. And that’s where we are part of the larger ecosystem.

Parimal Mithani — Credential Investments — Analyst

And does have a asset — is this data monetizable or it — how it is — how does it help us in the pieces?

Nehal Vora — Managing Director & Chief Executive Officer

It’s kind of really early days as to how commercials will get factored in, but there will be some amount of commercials which will come in at some stage.

Parimal Mithani — Credential Investments — Analyst

Okay, sir/. So, thank you. Thanks a lot.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Vivek Sethia from HDFC Securities. Please go ahead.

Vivek Sethia — HDFC Securities — Analyst

Hi, thanks for the opportunity. So, in our last call, you had mentioned some numbers about CDSL Ventures, their financials, the creation of fetches. So, if you could just help me with those numbers for Q4 or FY.

Girish Amesara — Chief Financial Officer

So, total income — annual issuer income that we have clocked during this financial year is INR183 crores as against previous year income of INR115 crores…

Nehal Vora — Managing Director & Chief Executive Officer

CVL.

Girish Amesara — Chief Financial Officer

So, in case of CVL, we have clocked an income of INR87 crores during this financial year as compared to INR120 crores of previous financial year.

Vivek Sethia — HDFC Securities — Analyst

And the profitability?

Nehal Vora — Managing Director & Chief Executive Officer

It’s actually all there on our website. You may — if you look at…

Girish Amesara — Chief Financial Officer

We have put all the numbers on the presentation also.

Vivek Sethia — HDFC Securities — Analyst

But presentation, I don’t think there are these numbers in the presentation, neither creation nor fetches. I have been looking at the presentation.

Girish Amesara — Chief Financial Officer

In terms of presentation, we have…

Nehal Vora — Managing Director & Chief Executive Officer

Creation, fetch, normally we just give as a broad trend. Finally, it has to culminate into a revenue. And that is more critical. So, from again a financial disclosure point of view, we are more focused on how it culminates into the revenue. So, I think that would be a fair reply to your question.

Vivek Sethia — HDFC Securities — Analyst

Okay. And so, on the other components of other income, like e-cash, e-voting, if you could give a — give out the number of those?

Nehal Vora — Managing Director & Chief Executive Officer

It’s there in the presentaton.

Girish Amesara — Chief Financial Officer

Yeah, but we’ll still repeat. Do you want on quarterly basis or you want the full year?

Vivek Sethia — HDFC Securities — Analyst

Anything would do.

Girish Amesara — Chief Financial Officer

Okay. So, on a quarterly basis we have closed transaction charge at INR33 crores. Online data charge which is premium income as INR22 crores, IPO corporate action at INR7 crores, annual issuer income at INR47 crores, cash and e-voting put together at INR9 crores. These constitute almost 96% of our total operating revenue.

Vivek Sethia — HDFC Securities — Analyst

And the pledge income?

Nehal Vora — Managing Director & Chief Executive Officer

I don’t think we give that pledge income separately, right? It’s part of the transaction income.

Vivek Sethia — HDFC Securities — Analyst

Okay, okay, And just wanted to understand about your outlook. Like, going forward, like are we completely dependent on growth in the retail participation or, like, how are we planning to grow our business, and will it be purely volume driven going forward or are we looking into other avenues as well? So, what’s the outlook like?

Nehal Vora — Managing Director & Chief Executive Officer

No, I think the — see, again, future outlook, we don’t give as a policy, but I can just give you gorss…

Vivek Sethia — HDFC Securities — Analyst

Not in terms of numbers but just a strategic…

Nehal Vora — Managing Director & Chief Executive Officer

So, I’ll tell you. It’s important that we are going to continue to invest in technology, because the entire digital journey is something which is going to grow as we move forward. And CDSL is going to be at the forefront of that journey, both from an ease of doing business, from an investor protection point of view, making investors self sufficient, so giving more to the investors to take decisions themselves, that’s going to be our cornerstone of our entire focus.

Obviously, we will be kind of part of the market infrastructure institutional framework with SEBI, as prescribed. So, that is something which we’ll continue to really embark upon. And as more and more new policies, products and platforms get permitted by SEBI, CDSL would be as a part of that framework.

Vivek Sethia — HDFC Securities — Analyst

Okay, Thanks, sir. Thank you so much.

Operator

Thank you. Our next question comes from the line of Sanketh Godha from Avendus Spark. Please go ahead.

Sanketh Godha — Avendus Spark — Analyst

Yeah, thank you for the opportunity. Sir, just two data points. If you can give the provisional costs in the current quarter. And second, just wanted to understand that the corporate action income is seasonally weak in the fourth quarter. Is that a fair assumption to make, sir?

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, so, I’ll answer the second question first and I’ll ask the second question to be answered — the first question to be answered by the CFO. Normally, the AGMs technically occur in second and third quarter. I mean, if it gets extended, otherwise it’s first and second quarter. So, it is kind of connected with the AGM. So, you — it’s a kind of broad trend that you will see major income happening in the first, second. And when it gets extended, like it has been done in the past two years, to the third quarter also.

I’ll request Girish to answer the first question.

Girish Amesara — Chief Financial Officer

In terms of letters provisions, that is a reversal of INR2,40,00,000.

Sanketh Godha — Avendus Spark — Analyst

Okay, sir. And two questions with respect to the business, sir. Just, this KYC for insurance companies, especially the generation companies, it was made mandatory on January 2023. And just wanted to understand that this revenue is somehow flowing to the — our insurance repository business, if we are doing the KYC for insurance companies or is it done through KYC predominantly and before proceeding any revenue with respect to KYC on insurance? This has been made mandatory from ’23.

Nehal Vora — Managing Director & Chief Executive Officer

No, this is — there was a draft circular which was proposing to make it mandatory. It has not converted itself into a final circular. So, it yet remains in a draft stage. So, as of now, it is not mandatory. It is optional.

Sanketh Godha — Avendus Spark — Analyst

No, sir, conversion into a demat format is voluntary yet, but the KYC has been made mandatory from 1st January, sir. So, just wondering that KYC income flow is somehow getting reflected in insurance repository income or not.

Girish Amesara — Chief Financial Officer

This KYC that you’re talking about it for the policy — for the creation of the policy for the existing policy which is handled by the insurance companies themselves because bulk of the policy is stored in the physical from. So, this doesn’t come to the depository’s base, in terms of our Group company CVL for the reason that…

Nehal Vora — Managing Director & Chief Executive Officer

CIR.

Girish Amesara — Chief Financial Officer

CIR or GBL, because it is in the physical form. So, this KYC is done by the insurance companies internal.

Sanketh Godha — Avendus Spark — Analyst

Okay. So, you mean to say that when it becomes — when the depository — or demat format becomes a reality, compulsory, then you have two revenue sources, one is KYC income probably, and second is the charges with respect to the repository income, right?

Nehal Vora — Managing Director & Chief Executive Officer

That is normally how this business works. So, there is both sides business which is potentially expected to flow. But it depends as and when it is made mandatory.

Sanketh Godha — Avendus Spark — Analyst

Got it. And sir, next — last one from my side is that the accountant aggregator, if I see, what are the charges we are going to charge for SIP as an information provider? And then finally, do we want to get into TSP, that is Technology Service Provider thing or we just wanted to remain high, providing financial information to the guys who ask for it?

Nehal Vora — Managing Director & Chief Executive Officer

So, the commercials, as I said earlier, it’s early days, it’s yet not finalized, it’s the process of first, really establishing the framework and then the commercials will kind of follow. So, that is for us to wait and watch in the future.

CDSL will continuously assess which part of the account aggregator model, the FIT was mandated by the Regulator, and we are kind of the first depository which have done it. Whether we are part of the account aggregator model and the FIU that the financial information user model is something which we will have to reassess as the system really grows and matures.

Sanketh Godha — Avendus Spark — Analyst

Okay, sir. Perfect, perfect. Thanks for answering my questions.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Sujal Azare, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, sir.

Nehal Vora — Managing Director & Chief Executive Officer

Good afternoon.

Unidentified Participant — — Analyst

Am I audible?

Nehal Vora — Managing Director & Chief Executive Officer

Yes, please.

Unidentified Participant — — Analyst

Yeah, my first question was that IRDAI mandated the de-materialization of new insurance policy. I guess that you have answered in previous questions.

Nehal Vora — Managing Director & Chief Executive Officer

Yeah.

Unidentified Participant — — Analyst

So, that’s not issue. I just wanted — so, I’m a naive investor, so I Just wanted to ask you, what are new revenue drivers in your company of CDSL?

Nehal Vora — Managing Director & Chief Executive Officer

Okay. So, basically there are three principal revenue drivers. One will be for demat accounts, that transaction revenues. Every debit is charged i.e. the depositories. So, that’s a revenue charge. Second is the companies which are de-materialized or whose shares are de-materialized pay us an annual fee. So, that’s the second charge. And the third is the know your customer. There’s a repository, which are CBRE, CDSL Ventures is. So, that’s the third source that for every creation of a know your customer or a fetch by anybody in the system, there is a charge with CVL, again. So, these are the three principal charges.

Besides that, there is — for the annual — for the Annual General Meetings, we conduct it through online mode, so we charge companies for that. The value add service, there is an e-voting platform which we have. So, the other area where we charge. So, these are principally the broad areas of revenue to CVL.

Unidentified Participant — — Analyst

So, which is the most revenue, like… comparison all of this, which you stated?

Nehal Vora — Managing Director & Chief Executive Officer

So, I would recommend, there is a fairly easy to comprehend presentation on our website. It will give you not only what is the comparison, how has the growth been over the years. It’s a fairly pictorially represented presentation. It’ll be easy for you to understand. For any follow-on questions, feel free to email us. We will give you a reply.

Unidentified Participant — — Analyst

Okay, okay. Thank you, sir. That’s it from my side.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Yeah, if that capex figure is available, I just wanted to know that.

Girish Amesara — Chief Financial Officer

For a consolidated basis, we capitalized INR35 crores as capital expenditure. On a standalone basis, we have capitalized INR22.5 crores.

Prakash Kapadia — Anived Portfolio Managers Private Limited — Analyst

Thanks. Thanks, Girish.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Vinita Sagar for Infosys. Please go ahead. Vinita, your line is unmuted, you could speak to your questions.[Operator Instructions]

Our next question comes from the line of Vinit Sagar from Enforces. Please go ahead. Since there is no response, we’ll move onto our next question which is from the line of Rajesh Gajra from Informist. Please go ahead.

Rajesh Gajra — Informist Media Pvt Ltd — Analyst

Yeah. Hello, my question is with regards to the Q4 transaction charges trend in that. You mentioned that it is based on the debits that take place. I mean, it’s linked to the delivery volume, obviously. So, I wanted to understand two things from that. One, is what was the trend in the delivery volumes in Q4 versus the year-ago quarter.

And secondly I wanted to understand if the per debit charges that are applied, is it based on the value of the trade which is where the debit is taking place or is it based on per debit that is going on the fixed charge or is it based on the number of shares that are getting debited?

So, just wanted a clear understanding of this. Thank you.

Nehal Vora — Managing Director & Chief Executive Officer

Yeah, so the first question is there’s a 31% reduction in the year-on-year delivery volume across the exchanges over the previous financial year and as compared with this financial year ended. So, that gives you an overall trend that why there has been a lower transaction revenue.

The second question is that we charge on a per debit basis. However, it’s basically a slab wise approach. So, a person who is a frequent user of the system has to pay a per debit lower charge compared to an infrequent user of a system. So, it ranges from INR5.5 per debit to INR4.25 per debit depending on the number of transactions which you are doing. It is not linked to the number of shares or the value of the number of shares, it is per debit instruction where the charges add up.

Rajesh Gajra — Informist Media Pvt Ltd — Analyst

Okay. Thank you very much.

Nehal Vora — Managing Director & Chief Executive Officer

Thank you.

Operator

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

Sanketh Godha — Avendus Spark — Analyst

Hi, there. Thanks for the opportunity again. Sir, in the past you have disclosed the annual issuer charges broken down into listed and unlisted, and similarly, you used to give the pledged margin income or pledged income on the transaction side. It would be great if you can share this time too.

Nehal Vora — Managing Director & Chief Executive Officer

The first one, we never used to do it, listed and unlisted. I think pledge is what the CFO tells me that to disclose or…

Girish Amesara — Chief Financial Officer

This quarter, we have done an income of INR3 crores.

Sanketh Godha — Avendus Spark — Analyst

Okay, sir. Perfect. Thank you.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Nehal Vora for closing comments.

Nehal Vora — Managing Director & Chief Executive Officer

I would like to thank you for all your questions. And continue remain safe and secure. Take care. Thank you.

Operator

[Operator Closing Remarks]