IIFL Securities Ltd (IIFLSEC) Q4 FY23 Earnings Concall Transcript

IIFL Securities Ltd (NSE:IIFLSEC) Q4 FY23 Earnings Concall dated Apr. 25, 2023.

Corporate Participants:

R. Venkataraman — Managing Director

Ronak Gandhi — Chief Financial Officer

Analysts:

Prayesh Jain — Motilal Oswal — Analyst

Ujvin Nevatia — Nevat Investments — Analyst

Kajal Gandhi — ICICI Direct — Analyst

Unidentified Participant — — Analyst

Devvrat Mohta — Capital International — Analyst

Ketan Athawale — RoboCapital — Analyst

Parin Jhaveri — JNJ Holdings — Analyst

Swarnabha Mukherjee — B&K Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the IIFL Securities Q4 FY23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. R. Venkataraman, Managing Director. Thank you, and over to you sir.

R. Venkataraman — Managing Director

Thank you, and good afternoon everyone. And welcome to the Q4 FY23 analyst call of IIFL Securities. I’m R. Venkataraman. I’m the Managing Director of IIFL Securities. And accompanying me is Ronak Gandhi, our CFO.

In its latest bimonthly monetary policy, the RBI has pressed the pause button on rate hikes. This move has come as a relief for the market participants and corporates alike. RBI was quick to underline that the decision should not be construed as the end of the rate hike cycle. This seems to be a prudent approach. March hike also came in at 15-month low at 5.6% and core inflation, excluding food and fuels, were at about 5.8%. And all eyes will be on the inflation trend.

According to NSO’s advanced projections, India’s GDP is predicted to grow at 7% in FY23. It’s actually retaining its position as one of the world’s fastest-growing major economies. During the quarter, our global regulators acted swiftly to rein in the crisis caused by the collapse of a few banks in the US, which exposed the entire system to vulnerabilities, especially in a rising interest-rate scenario. Going ahead, we believe that capital markets move in sync with emerging economic news across the globe coupled with geopolitical news as well as global interest-rate scenarios.

During the quarter, we put up a good performance on the back of continued traction in the insurance broking and distribution businesses. Our investment banking division completed eight deals across capital markets, debt and private equity. We are working towards sharpening our strategy and focus on uplifting [Phonetic] customers, in line with the reorganization structure approved by the Board, which happened last quarter. The reorganization team is awaiting regulatory approval.

Coming to the results of March 31st, consolidated revenues for the quarter came in at INR405 crores, up 17% quarter-on-quarter, 12% year-on year. For the quarter-on-quarter basis, brokerage income raised — increased 17%, INR181 crores versus INR155 crores, mainly because of growth in our institutional broking business.

Distribution income has gone up 78% on quarter-on-quarter basis, INR95 crores versus INR54 crores. And that was primarily driven because of product closure in our life insurance business. Investment Banking has decreased 22% quarter-on-quarter, INR32 crores in this quarter versus INR42 crores in the previous quarter.

On a year-on year basis, brokerage income has increased 15%, INR181 crores versus INR157 crores, equity income has increased by 70%, INR95 crores versus INR56 [Phonetic] crores in the last year, and investment banking has decreased significantly because last year fourth quarter was a bumper quarter for our investment banking business where we dropped in revenue of INR66 crores, which has fallen down to INR32 crores, and primarily due to weakened primary market activities.

Coming to other line items, other income was at about INR3.29 crores, which has fallen INR34 crores quarter-on-quarter and INR78 crores year-on year, basically due to MTM and — mark-to-market loss on investments and that too primarily the [Indecipherable], which we have been holding for decades.

Then comes the employee cost, employee cost was virtually flat quarter-on-quarter and down 4% on a year-on year basis. And that is primarily due to the variable pay-outs. Average [Indecipherable] cost was up 6% on a quarter-on-quarter basis. And that is primarily due to increase in the interest rate, in line with the overall interest rate hike in the system.

Our admin costs increased by 16% quarter-on-quarter and 27% year-over-year, mainly due to technology cost increase as well as some [Indecipherable] and marketing costs. Other line items, average assets under custody about INR1,24,000 crores, roughly 1,05,000 crores in custody assets and DMAT [Phonetic] and INR20,000 crores in other products, which is mutual fund, AIF, their fixed deposits, etc.

Average turnover for the quarter was INR1,95,604 and crores, BSE-NSE combined, which was INR1,600 crores in cash segment and INR1,90,000 crores in derivatives segment. The corresponding figures for the previous quarter was INR1,56,756 crores, which was INR1,569 crores in cash and INR1,55,187 crores in the derivatives segment.

With this, I have come to the end of my opening remarks. And I’ll be more than happy to take any questions. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Prayesh Jain — Motilal Oswal — Analyst

Yeah, hi guys [Phonetic]. Good afternoon.

R. Venkataraman — Managing Director

Good afternoon, Prayesh.

Prayesh Jain — Motilal Oswal — Analyst

Yeah, I think this was already mentioned that your IE revenues have improved sequentially. Could you quantify that for me as to what was the quantum of IE revenues and how much have they gone up sequentially?

R. Venkataraman — Managing Director

IE is institutional equity, right?

Prayesh Jain — Motilal Oswal — Analyst

Yeah, institutional equities.

R. Venkataraman — Managing Director

So, we don’t share all those details, but roughly 50-50 is investment banking trend and institutional equity has increased.

Prayesh Jain — Motilal Oswal — Analyst

Out of the broking, how much will be IE, [Technical Issues]?

R. Venkataraman — Managing Director

I think it is roughly 50-50. [Speech Overlap] Broadly speaking, it’ll be about 60-40 now.

Prayesh Jain — Motilal Oswal — Analyst

60-40, okay. 60, 40?

R. Venkataraman — Managing Director

Yeah.

Prayesh Jain — Motilal Oswal — Analyst

60 is retail and 40 is…

R. Venkataraman — Managing Director

No, 40 is infusion [Phonetic].

Prayesh Jain — Motilal Oswal — Analyst

Okay. Other than broking INR180 crores that we did?

R. Venkataraman — Managing Director

Yes.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And sir, you mentioned about the interest going — interest cost going up. How had been the margin trade funding book for us?

R. Venkataraman — Managing Director

Margin trading fund — actually margin trading book has fallen down. It was roughly about — it was about INR600 crores, right?

Ronak Gandhi — Chief Financial Officer

Right now, it is…

R. Venkataraman — Managing Director

Roughly, now it is about INR600 crores. It was actually [Indecipherable]. And you know, actually [Technical Issues] we don’t have a significant margin funding book. So, that is an opportunity for us to grow.

Prayesh Jain — Motilal Oswal — Analyst

Okay, the customers will be using — around 12 lakh customers you have, out of that how many would be using the margin rate funding a little right now?

R. Venkataraman — Managing Director

Roughly about 25,000.

Prayesh Jain — Motilal Oswal — Analyst

You have large scope for growth there.

R. Venkataraman — Managing Director

Yes.

Prayesh Jain — Motilal Oswal — Analyst

Yeah. And have you passed on the increase in interest to the customers or you’ve retained the cost impact from…

R. Venkataraman — Managing Director

I — actually that’s on a case-to-case basis. You know, the business is very competitive and all brokers including your own firm are very aggressive in offering attractive rates. So, some we pass, some we retain, that’s the correct answer. To say that I’ve passed on 100% is like a wrong statement.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And sir, on the upstreaming of fund through the clearing corporation, do you see any impact for you guys? I think one of the brokers mentioned that they had some INR40 crores impact.

R. Venkataraman — Managing Director

They have not dwelled on the mathematics of exactly how it will be impacted. But then, there is — definitely there will be an impact on — if the upstreaming guidelines come because of — now the float [Phonetic] income has gone up.

Ronak Gandhi — Chief Financial Officer

But as of now, they have allowed the big deposits, so there will be no impact as of now.

R. Venkataraman — Managing Director

Yes.

Prayesh Jain — Motilal Oswal — Analyst

Okay. But how much of the deposits the bank guarantees? Bank guarantee is something which is not allowed right now.

R. Venkataraman — Managing Director

No, bank guarantees are allowed. So now, the new guidelines which will kick in is that with client funds you cannot make bank guarantees. So, you have to use your own funds to make fixed deposits, on which you’ll get bank guarantees.

Prayesh Jain — Motilal Oswal — Analyst

Okay, sir. Not material impact…

R. Venkataraman — Managing Director

No, there will be an impact. The impact has not been calculated. So obviously, everybody [Indecipherable] work around. So, to say that there is no impact is wrong. There will be an impact. The exact quantum of that is not certain.

Prayesh Jain — Motilal Oswal — Analyst

Okay, got that. And, sir, on your distribution — kind of distribution business impact, once this ANC regulation kind of [Indecipherable] out, but it’s the way it’s been spoken in the media, if the TER cuts are implemented, what kind of cuts you would anticipate on the mutual fund commissions [Speech Overlap]?

R. Venkataraman — Managing Director

Yes — sorry?

Prayesh Jain — Motilal Oswal — Analyst

No, last time because in — somewhere in 2019 when the first — when the TER cuts were implemented, that time distributors took a lot of it. So even this time, would you think that the distributors would be the biggest…

R. Venkataraman — Managing Director

I don’t know. Actually, if you believe the media, everybody is talking about 25-basis points, 35-basis points cut. So my opinion is that I think the mutual — AMC will pass it on. I don’t think they’ll be taking it on their books. So, I’m sure there will be some impact.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And last question, sir, again on these regulations, for me the — another part is about broking being included in the TER and that would kind of impact the IEI business. So again, that could be challenging, right, for the IE business?

R. Venkataraman — Managing Director

So if this happens, then obviously IE incumbency is affected. But the thing is, if you look at it, the industry has passed through all these challenges, but overall size of the pie keeps on increasing. So, hope that growth in the pie will offset some of it. But obviously, on a unit level there’ll be no hit.

Prayesh Jain — Motilal Oswal — Analyst

All right, sir, thank you so much. All the best, sir.

R. Venkataraman — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Ujvin Nevatia from Nevat Investments. Please go ahead.

Ujvin Nevatia — Nevat Investments — Analyst

Hi sir, good. Good afternoon, everybody. Sir, my first question is regarding the impact of interest rate hike on the finance cost. Actually, can you give a rough idea how much of the cost has been passed on to the clients?

R. Venkataraman — Managing Director

No, actually the previous analyst also asked the same question. So, you know, basically we would have passed some cost and some cost we have to take the hit, simply because broking is very competitive and most of the brokers are offering very attractive rates. So to say that we have passed on 100% of the increase is wrong. I think some of that we have to take it because some big customers, you have to maintain the rates or offer them good rates. So, I would say…

Ujvin Nevatia — Nevat Investments — Analyst

Sir, can you give a rough idea how much percentage of that particular AUM has been has been passed on?

R. Venkataraman — Managing Director

Very difficult to say. I don’t have a number in mind. But I’ll ask the CFO to calculate and get back because I don’t want to hazard a guess.

Ujvin Nevatia — Nevat Investments — Analyst

Okay. Sir, my second question is your MTF loan book, how much it is financed by the internal source of funds and how much is it financed by the external source of funds?

R. Venkataraman — Managing Director

See, actually it will be 50% on — from our own books and we have borrowed about 50%, that will be the correct answer, so [Foreign Speech].

Ronak Gandhi — Chief Financial Officer

600 from the book has been…

R. Venkataraman — Managing Director

[Foreign Speech].

Ujvin Nevatia — Nevat Investments — Analyst

Okay, sure sir. Thank you very much.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Prayesh Jain — Motilal Oswal — Analyst

Sir, I this wanted to pick your brain on how do you see the brokerage rates moving from here on, on the retail side, especially now that the compliance costs have been moving up possibly with the loss of float incomes and as and when ASBA is implemented? So, how do you see the brokerage rates kind of trending from here on?

R. Venkataraman — Managing Director

Prayesh, that’s a very good question and if you ask me to put a forward-looking question, in the last 20 years maybe I have seen only one with decline of interest rates — of brokerage rates. And so, now I am feeling that given the fact that as likely pointed out, technology — contact [Phonetic] cost is going up, float is going away, with TER will come an impact [Indecipherable] booking. And you have forgotten one more thing, tech cost, technology cost [Technical Issues] I think every day. And so effectively, I have a feeling that if this trend continues then all brokers will have no choice but to increase rates.

So, I think that there will be a time soon in the next 12 months to 15 months where rated will go up. If not rates are going up, at least the continuous decline of rates which are going up — which we are seeing in India will at least stop. So now, these rates are called — super discount rates are in my opinion difficult to come by.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And do you also anticipate more consolidation? If you look at the number of brokers, that has been reducing every year. Do you think that will kind of gain further momentum and eventually on much lesser players will be there in the industry and that will be kind of good for large brokers like us?

R. Venkataraman — Managing Director

You know, what is happening in the industry is that in the last maybe 5 years or maybe — we have always — the entire — all the industry peers have been — obviously been talking about the consolidation of the industry, but to some — for some strange reason, it has never happened. And I think your company, Motilal, was a pioneer in taking over regional brokers.

You know, in the last 3 years, 4 years, what has happened is two things have happened. One is technology cost has increased dramatically. Secondly, is compliance cost has decreased dramatically. And you know, with everyday new-new compliance comes. So, smaller regional brokers who were earlier relationship-based brokers, they were — they are finding it more and more difficult. So, all of them have surrendered their cart and become sub-brokers or partners of larger brokers.

So in my opinion, what you say is correct. This trend will increase, especially given the fact that all your upstream income, this come, that come, then obviously it will be thus more and more difficult for them — for us. There were earlier class of brokers who were small, but they cater to this audience and what we call as basically super relationship broking. So, all those people [Technical Issues] more or less problems. So, consolidation will happen.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And more on the [Indecipherable] strategy, so from a 3-year, 5-year perspective, how do you see the business kind of shaping up in between our mix of broking, distribution and interest income, kind of how do you see this kind of shaping up [Technical Issues]?

R. Venkataraman — Managing Director

So, my guess is that as of now there are about 70-30 transactions to non-transactions. And the next 3 years, we should — in the next 3 years to 5 years we should be able to clip [Phonetic] it fully.

Prayesh Jain — Motilal Oswal — Analyst

I didn’t get that. We’ll be able to…?

R. Venkataraman — Managing Director

As of now, transaction to non-transaction is 70-30, more nominal. And this number should become 60-40, but it’s for 60 non-transaction, 40 transaction. That is what we are working towards.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And we have again last question. In terms of transfer of 1.5 million DEMAT accounts to 5Paisa, at what stage they are in and how do you [Technical Issues]…

R. Venkataraman — Managing Director

No, sorry, second question?

Prayesh Jain — Motilal Oswal — Analyst

Sir, on this — when do you plan to complete this 1.5 million DEMAT account transfer?

R. Venkataraman — Managing Director

So, what has happened is that as of now, we are awaiting for SEBI approval, right. And then we have to put NCLT. So, then we have to put the NCLT. So, I think we’re about 9 months — 8 months to 9 months away.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And how has IIFL Securities gained out of this by transferring?

R. Venkataraman — Managing Director

Well, see, if you look at this, the reason why we did this was — so if you know, IIFL Securities has online retail trading customers, private client groups, institutional equities and franchisee business. So, the entire online trading business, which was the small, I would say, online retail customers, that has been transferred to 5Paisa. So, what we are benefitting is that we — so this will help us to mitigate the overlap and have focus on both the private client group and the franchisee business. So, I would say that the big benefit is that — big benefit is about focus and conducive concern for the business which is suited for that, because the same margin, it was difficult for me to analyze one-time [Indecipherable] customer also.

Prayesh Jain — Motilal Oswal — Analyst

Sir, the traded [Technical Issues] sits in IIFL Securities as a cost or as an effect?

R. Venkataraman — Managing Director

See, traded [Phonetic] currently sits with us but effectively 5Paisa has its own separate tech platform and tech cost.

Prayesh Jain — Motilal Oswal — Analyst

Okay. Basically, the customers will be transferred or traded on to 5Paisa…

R. Venkataraman — Managing Director

[Technical Issues] will be traded [Technical Issues] equivalent.

Prayesh Jain — Motilal Oswal — Analyst

Okay, got that sir. Thank you so much.

Operator

Thank you. Our next question comes from the line of Kajal from ICICI Direct. Please go ahead.

Kajal Gandhi — ICICI Direct — Analyst

Hello, good afternoon, sir. Congratulations on good set of numbers.

R. Venkataraman — Managing Director

Thank you, Kajal, for your good wishes.

Kajal Gandhi — ICICI Direct — Analyst

Sir, just two things, one was the incremental customers which we are adding are clearly from this flat [Phonetic] plan or we have seen because we wanted to move to more affluent customers, so we are seeing some traction there also? And the incremental volume surge which we have seen sequentially is coming from this bracket only, all sub-broker, any color on that?

R. Venkataraman — Managing Director

Okay. See, if you look at our customization, as you rightly pointed out, our customer — pace of acquisition of customers have fallen and — because we have decided not to spend money acquiring online retail customers. So, most of our customers are coming from either the affluent channel or the sub-broker channel. So, the flat fee component of that is less. I would say that earlier it was about 80-20 flat fee, no it is about [Technical Issues] flat fee. So — because the sub-brokers in the [Indecipherable] segment does not have the flat fee thing.

And the growth is primarily driven by acquisition of some big customers. So, the affluence broking which has driven this — affluence broking, whether it is done through relationship management or sub-brokers, which has driven the surge in derivatives volume.

Kajal Gandhi — ICICI Direct — Analyst

Sir, what will be the color of this customer make any income that [Indecipherable]?

R. Venkataraman — Managing Director

I would say network bracket, so network bracket will be primarily more than, I would say, 5 million — 50 lakhs workforce is available.

Kajal Gandhi — ICICI Direct — Analyst

Okay. And breakeven or KIT [Phonetic] is changing for you for these set of customers then?

R. Venkataraman — Managing Director

See, basically, earlier we used to spend a lot of money in acquiring customers. So, that cost has come down. So, this cost is already factored in because we have a new [Indecipherable] sub-brokers in place. So, on an incremental margin basis, I hope that cash is coming.

Kajal Gandhi — ICICI Direct — Analyst

Okay, because earlier we were having a 1,000, 1,200 kind of number, on the scale.

R. Venkataraman — Managing Director

Look, earlier it was that because we used to acquire a large number of customers. If you see our acquisition numbers, we had acquired 2 lakhs and 1.5 lakhs per quarter. That has fallen dramatically to 50,000. So obviously, we are noy spending money to acquire new customers on that scale. I don’t want to spend money, but not on that scale.

Kajal Gandhi — ICICI Direct — Analyst

And anything on breakeven for these customers which you are acquiring?

R. Venkataraman — Managing Director

I think breakeven should happen faster. Actually they come — because these are focus acquisitions, yes.

Kajal Gandhi — ICICI Direct — Analyst

Okay. And the second thing is the sequential surge in [Technical Issues] a sequentially retail back-to-back quarter-on-quarter brokerage income surge because we [Technical Issues] that 118 crores was in the previous quarter and it is 121 crores in this quarter on a sequential basis. So, how do we read that?

R. Venkataraman — Managing Director

No, because of volumes increase it has happened.

Kajal Gandhi — ICICI Direct — Analyst

Sir, there is no material increase that we [Indecipherable], the 1,54,000 crores [Technical Issues] on a sequential basis and have been awarded [Phonetic].

R. Venkataraman — Managing Director

No, if you see the numbers, actually the 1,55,000 crores became 1,94,000 crores.

Kajal Gandhi — ICICI Direct — Analyst

Yes. But accordingly, we have not seen retail brokerage income rise in QoQ and that is what my question was.

R. Venkataraman — Managing Director

The growth — this quarter, growth has been driven by brokerage from institutional income and retail income growth has been marginal. It was not commensurate with this steep growth because options may — all the key customers who go in the S&I segment, the rate is already quite low. So, there is no direct correlation between increase in volume, especially on exciting [Phonetic] bigger special rate.

Kajal Gandhi — ICICI Direct — Analyst

Yeah, that was my question. Thank you very much.

R. Venkataraman — Managing Director

Thank you so much.

Operator

Thank you. Our next question comes from the line of Sumit Chandgarh from Wardhaman [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Thank you for providign the opportunity. I want to know the contribution of derivatives in the upgrade from retail segment. Hello, am I audible?

R. Venkataraman — Managing Director

Hello.

Unidentified Participant — — Analyst

Yes, sir.

R. Venkataraman — Managing Director

I didn’t understand your question.

Unidentified Participant — — Analyst

I just want to know the contribution of derivatives in brokerage for retail…

R. Venkataraman — Managing Director

[Speech Overlap] will be above 65, 75.

Ronak Gandhi — Chief Financial Officer

70-30.

R. Venkataraman — Managing Director

70-30.

Unidentified Participant — — Analyst

Okay, my next question is regarding active clients. So overall in the market, the active clients [Indecipherable] from last 10 months. So, how do you see in coming quarters, would this phenomenon continue in — or [Speech Overlap] consolidation?

R. Venkataraman — Managing Director

Number of active customers are falling down, and as I said, right now we are not focused on increasing number of active customers at all. We are focused on improving the number of active high-value affluent customers. So, we are more focused on trying to generate brokerage, do more cross-sell, rather just focus on the one metric, which is number of active customers.

Unidentified Participant — — Analyst

Okay, thank you sir.

R. Venkataraman — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Devvrat Mohta from Capital International. Please go ahead.

Devvrat Mohta — Capital International — Analyst

Hello? Hi, Venkat, this is Devvrat here. I had a couple of questions actually. Firstly, on the industry on this — on the float income, by when does this start having an impact on the financial for all the brokers?

R. Venkataraman — Managing Director

Actually, the — we don’t when the circle will come, people are expecting in this coming quarters. So once that comes, only then the impact will start. And then we also have to read the fine print on how we can protect ourselves. So, my guess is actually directionally speaking, yes, there has been impact and we have to wait and watch the final circle before concluding the extent of impact.

Devvrat Mohta — Capital International — Analyst

Can you just help me understand little bit on how — exactly how this — what exactly is the plan here?

R. Venkataraman — Managing Director

So the plan is actually the regulator says that the broker will not keep any money of the customer with us — with the brokers. So suppose you have INR100, you gave INR1 crore to me, it is sitting in my bank account and I refer to the exchange actually this money is lying with me. Now, regulator says that this money has to be given to the cleric [Phonetic] operation. So, you lose that float income.

Devvrat Mohta — Capital International — Analyst

Got it, okay. And this would impact I mean mostly independent brokers like yourself or — I mean the bank brokers or — who is kind of most impacted by this?

R. Venkataraman — Managing Director

See, if you…

Devvrat Mohta — Capital International — Analyst

[Speech Overlap] a new-age broker also?

R. Venkataraman — Managing Director

It will impact every broker, only the degree of impact will be less. So, people like us will be very badly impacted because we don’t have a bank in the ecosystem. And so, new-age brokers, people like us will be affected. Bank brokers to some extent will be relatively better because anyway the money was always staying in the bank account and they were just master value. So, the bank says — and I don’t know how — what was the transfer pricing or what was the equation they had. So to that extent, they will be affected. But we have to wait and watch the finding, whether the — what is the final [Indecipherable] concept of lease, whether the lease can be done on you have to actually take the money and upstream it.

Devvrat Mohta — Capital International — Analyst

Got it. But basically, I mean the impact you’re seeing would be greater for standalone brokers. So what about the new-age one, they’d probably be impacted just as much or probably worse — I mean, similar to you all, right?

R. Venkataraman — Managing Director

100%, they’d be similar to us. And when I say independent broker, I don’t mean whether in your old age or whatever. So, there are two categories, local broker and a bank-based broker. So, brokers who — anybody who’s not a bank-based broker effect will be good.

Devvrat Mohta — Capital International — Analyst

Understood. And can I ask one more question on just your own financials. If I look at your results, just quarter-on-quarter, you had a big jump-up in insurance revenue this quarter versus last quarter. What’s happening there?

R. Venkataraman — Managing Director

So, this year that the new regulations kicked in from first of April where the 5 lakhs [Speech Overlap] has been put in for guaranteed return products. So obviously, we had the product closure and we are — we benefited from that. So, we saw a lot of interest the last quarter.

Devvrat Mohta — Capital International — Analyst

Understood, okay. All right, thank you so much. This is the question that I had. Thank you.

R. Venkataraman — Managing Director

Thank you so much.

Operator

Thank you. Our next question comes from the line of Ankur from Alpha Capital [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Sir, congrats for a good set of numbers and thank you for taking my questions. Sir, you are saying — sorry, can you hear me?

R. Venkataraman — Managing Director

I said thank you for joining the call and — yeah, I can hear you.

Unidentified Participant — — Analyst

Yeah, so you are saying that the big jump in this quarter is because of the institutional business. So, can you comment on the visibility of that in the coming quarters and the year?

R. Venkataraman — Managing Director

Actually, you know, it’s a very difficult question to comment on and it’s very difficult to comment on the visibility, especially in a transaction in the broking industry space. So last quarter, we are lucky that we got a couple of very large audits from clients, so that helped us to bump it up.

Unidentified Participant — — Analyst

So any color, how has this quarter been, like we have almost one month past and we are expecting, as in what is your expectation, sir?

R. Venkataraman — Managing Director

Difficult to say any forward-looking statement.

Unidentified Participant — — Analyst

Sure, sir. And on dividend yield, what is our expectation? We have been paying dividend payouts of 30% to 40%. So, what kind of expectations can we have?

R. Venkataraman — Managing Director

See, my feeling is that this dividend yield of 30% will continue. So on that, there is no doubt. It’s a stated Company-defined policy. And the only reason why we’re not being more aggressive in payouts, because I assume that your next question will be that actually some of our competition will be more aggressive and because we believe given the fact that the regulations are becoming tighter on capital requirements on brokers, working capital requirement increase, so it’s better to conserve cash.

Unidentified Participant — — Analyst

Sure sir, thank you and all the best.

R. Venkataraman — Managing Director

Thank you so much.

Operator

Thank you. Our next question comes from the line of Raj from Arnav Partners [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello. So the earlier analyst, you were explaining about the [Technical Issues]. So, can you explain to me again?

R. Venkataraman — Managing Director

You know, what happens is that historically when you give money to the broker, so [Foreign Speech] INR100 [Foreign Speech] INR1 crore [Foreign Speech]. So then, what happens, INR1 crore which comes to me stays with me. And as and when you buy, I give — make the payment to the exchange and give you the shares. So, there are some customers who give us money and don’t trade. So, that shows that benefit of that money comes through a broker.

Now it is very clearly saying that the moment customer gives you money, INR1, you have to straight away give to the clearing corporation. So — for example, you give me money INR1 crore, so the INR1 crore which was lying in my books will now go to the clearing corporation. So, my books will be more or less — I’ll be like a pass-through.

Unidentified Participant — — Analyst

Understood, okay.

R. Venkataraman — Managing Director

So, all [Speech Overlap] will go to the clearing conversion.

Unidentified Participant — — Analyst

Okay, understood. Thank you.

R. Venkataraman — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Prayesh Jain from Motilal Oswal. Please go ahead.

Prayesh Jain — Motilal Oswal — Analyst

Yeah, sorry I’ve been coming again and again. But just more clarity on this float income again. The announcement that happened in the SEBI Board meet was that the fixed — the complete transfer — money transfer to the clearing incorporation, one is the cash [Technical Issues] cooperation. Second, if we can convert it into [Technical Issues] and third is the converting into overnight mutual fund. So, if the second and third options are followed, then the float income will continue to be with the broker, right?

Ronak Gandhi — Chief Financial Officer

Yes, that’s the reason…

R. Venkataraman — Managing Director

That’s the reason we said clear to see the final circle before committing.

Ronak Gandhi — Chief Financial Officer

As of now, the — as for the current circular, there is no impact on the float income because we majorly invest [Technical Issues] and overnight [Technical Issues].

Prayesh Jain — Motilal Oswal — Analyst

Okay. And I think the only change would be that you have to do this on a daily basis now? Is that the right thing?

R. Venkataraman — Managing Director

Yes.

Prayesh Jain — Motilal Oswal — Analyst

And possibly mix, of overnight funds will increase and that would kind of hold on [Phonetic] on the yields on the float, right?

Ronak Gandhi — Chief Financial Officer

On the cash side, we have to upstream it, but majorly all the money we park in fixed deposit and with the float reduction.

Prayesh Jain — Motilal Oswal — Analyst

Okay. And second thing is on the other part of the ASBA thing. ASBA [Technical Issues] market transaction is valid. Currently it’s voluntary for both brokers and customers. But how do you see this eventually panning out, if it has — this had to be implemented then definitely the floating one will go [Technical Issues], right?

Ronak Gandhi — Chief Financial Officer

See, as of now it is for UPI clients, so the amount is like INR2 lakhs which will not be a major because the client base what we have, they do a bigger transfer. So as of now, there is no major impact for us.

R. Venkataraman — Managing Director

But theoretically saying, what you say is correct. [Foreign Speech] we have a fixed deposit and liquid funds.

Prayesh Jain — Motilal Oswal — Analyst

So currently, it is [Technical Issues].

R. Venkataraman — Managing Director

Operator intensity has also increased.

Prayesh Jain — Motilal Oswal — Analyst

So currently, only up to INR2 lakhs can be blocked, right? Is that the right thinking?

R. Venkataraman — Managing Director

[Foreign Speech].

Prayesh Jain — Motilal Oswal — Analyst

[Foreign Speech]. Okay, that will be a very small amount, right?

R. Venkataraman — Managing Director

Yes.

Prayesh Jain — Motilal Oswal — Analyst

All right, sir, thank you so much.

R. Venkataraman — Managing Director

Thank you so much.

Operator

Thank you. Our next question comes from the line of Ketan Athawale from RoboCapital. Please go ahead.

Ketan Athawale — RoboCapital — Analyst

Hello sir, thank you for the opportunity.

R. Venkataraman — Managing Director

Thank you.

Ketan Athawale — RoboCapital — Analyst

I just had one question. How many franchisee or channel partners do we have?

R. Venkataraman — Managing Director

We have about 7,000 franchisee and channel partners.

Ketan Athawale — RoboCapital — Analyst

And how do you see that number in 3 years to 4 years?

R. Venkataraman — Managing Director

So, this number should double.

Ketan Athawale — RoboCapital — Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Parin Jhaveri [Phonetic] from JNJ Holdings. Please go ahead.

Parin Jhaveri — JNJ Holdings — Analyst

Good afternoon.

R. Venkataraman — Managing Director

Good afternoon.

Parin Jhaveri — JNJ Holdings — Analyst

Thank you for this opportunity. Sir, I have two questions. One is basically what is the status of the real estate field and the current valuation for it? I’ll ask my second question later.

R. Venkataraman — Managing Director

I’ll tell you. Let me answer this question. We have currently 6,20,000 square feet of real estate. The big chunk is Chennai 2,50,000 square feet. Then we have — so basically the office is Ahmedabad, Mumbai, then Puna, Thane, Gurgaon, Hyderabad and — these are the locations. So, the book value is about INR227 crores, market value as per outsider vendors are about 677 — INR670 crores. So, that we are keeping it as — we are having it at INR220 crores, INR220 crores. 27% is lease to outsiders and rental income is 27% from outsiders and the rest within the group, out of which I am confident in the coming quarter we should be able to get rid of Ahmedabad. Talks are in advanced stage and then we hope that others we have to work on exiting.

Parin Jhaveri — JNJ Holdings — Analyst

How do you get Ahmedabad?

R. Venkataraman — Managing Director

[Foreign Speech].

Parin Jhaveri — JNJ Holdings — Analyst

Value-wise?

R. Venkataraman — Managing Director

[Foreign Speech].

Parin Jhaveri — JNJ Holdings — Analyst

So basically, maybe if you can just over a period of time, say, in next 2 years, 3 years, you think what should the same amount be?

R. Venkataraman — Managing Director

To be very honest, we sold some properties two years ago and then we got hit by a roadblock, [Foreign Speech]. So my guess is actually Mumbai [Foreign Speech], Thane and Gurgaon we’ll retain and then we’ll dilute them, so as and when it happens.

Parin Jhaveri — JNJ Holdings — Analyst

So, is it fair to assume that out of that — this 27% which we are forecasting, you said it’s other way around, right, 70%…

R. Venkataraman — Managing Director

[Foreign Speech].

Parin Jhaveri — JNJ Holdings — Analyst

So over a period of time, Is it fair to assume that 25%, 30% will be sold?

R. Venkataraman — Managing Director

My guess is that, yes, you can take — you can assume that out of the 6,20,000, our target is to sell about 2 lakhs, for sure.

Parin Jhaveri — JNJ Holdings — Analyst

Okay. And sir, my next question is seeing the current valuation and your dividend distribution policy at 30%, will a buyback be a better option? What is your thought process?

R. Venkataraman — Managing Director

That’s a good question you had, and I think one of the previous gentleman asked us a question on dividend payout policy also. So as of now, roughly about 30%, 35% we are paying out. And reason is that we have decided as a corporate, as a Group to retain cash simply because working capital requirements for this business is increasing and it’s better to see how this new circular will unfold before taking a call on more aggressive payouts.

Parin Jhaveri — JNJ Holdings — Analyst

So this 30%, 35% payout, would that be used towards buyback and…

R. Venkataraman — Managing Director

No, that I think we will work — with our CFO we’ll work and find our which is best for the shareholders and do the needful, because we did one buyback, [Foreign Speech].

Parin Jhaveri — JNJ Holdings — Analyst

Yeah, that was in February 2021 at INR54.

R. Venkataraman — Managing Director

Yes.

Parin Jhaveri — JNJ Holdings — Analyst

Okay, sir, thank you so much.

R. Venkataraman — Managing Director

Thank you so much.

Operator

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

Swarnabha Mukherjee — B&K Securities — Analyst

Hi, thank you for the opportunity and congrats on a good set of numbers, sir. [Technical Issues] questions. First one on the client acquisition side, so the 7,000 channel partners that you had mentioned, so if I were to look at your client acquisition, so earlier as you mentioned that through that customers you are [Technical Issues] and now you have trimmed it down focusing on the affluent segment. How did your sourcing mix change because of that?

R. Venkataraman — Managing Director

The sourcing mix earlier was about 60-40, 60 — 70-30 — 80-20, because 80 was acquired by ourselves, 20 was done by some locals, correct? Because of online — this was spent on acquired customers. So now, if you look at the business, now I think it will be 70-30, 70 is qcquired by partners, 30 by us.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, and what we do online, that is predominantly online or also through branches as well?

R. Venkataraman — Managing Director

Through branches, branches, RMs [Phonetic], everyone.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, but if I were to look at our own direct two weeks, how the — [Indecipherable] that number looks maybe right now… Hello?

R. Venkataraman — Managing Director

What was the question?

Swarnabha Mukherjee — B&K Securities — Analyst

So, question is, so you are saying 30% right now is done by us directly. So right now, is that predominantly online, out of that 30%?

R. Venkataraman — Managing Director

I would say that it will be maybe 50-50 online-offline. Offline is also there because we are using all the branches and the RMs also.

Swarnabha Mukherjee — B&K Securities — Analyst

Sure. And in terms of, say, the kind of customers we were — we are getting now, what would be the mix in terms of, say, where they are [Technical Issues] the geography [Technical Issues].

R. Venkataraman — Managing Director

Geography — Tier 2, Tier 3, and basically all over India. And demography [Indecipherable].

Swarnabha Mukherjee — B&K Securities — Analyst

Okay. So sir, Tier 2, Tier 3, in this now, reduced — I mean, very focused kind of acquisition, what would be the share of Tier 2, Tier 3 right now?

R. Venkataraman — Managing Director

I don’t have an exact number right in front of me.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, maybe I will connect regarding that…

R. Venkataraman — Managing Director

[Speech Overlap] separately I’ll give you the answer. So basically, your question is that out of the 40 — 50,000 customers we acquired last quarter, which is the [Technical Issues] we are taking.

Swarnabha Mukherjee — B&K Securities — Analyst

Yes, so what kind of geography and I wanted to compare vis-a-vis what it was in Q4 last year when you were kind of hitting the peak in terms of acquisitions.

R. Venkataraman — Managing Director

[Technical Issues].

Swarnabha Mukherjee — B&K Securities — Analyst

Yeah, so that is one. And I also wanted to understand that even your retail growth versus revenue, what would be the share of what is coming from sub-brokers?

R. Venkataraman — Managing Director

From?

Swarnabha Mukherjee — B&K Securities — Analyst

From the partners, what would be the growth revenue share that is coming in your overall retail gross growth income?

R. Venkataraman — Managing Director

It’s roughly 50-50.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, all right. And in the elite life insurance distribution, what would be the kind of mix between new premium and renewal premium? And what would be our commission?

R. Venkataraman — Managing Director

That — okay, last year we collected — first year premium we collected was last year about INR160 crores in life and INR120 in JN [Phonetic]. This year INR280 crores and last year was — obviously it was INR180 crores.

Swarnabha Mukherjee — B&K Securities — Analyst

Right, so…

R. Venkataraman — Managing Director

[Speech Overlap].

Swarnabha Mukherjee — B&K Securities — Analyst

Sir, I did not get, so out of, say, for example INR81 crores of life insurance premium in FY22, how much would be the revenues?

R. Venkataraman — Managing Director

100% is first year, [Foreign Speech].

Swarnabha Mukherjee — B&K Securities — Analyst

[Foreign Speech]?

R. Venkataraman — Managing Director

Yes.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, and overall [Foreign Speech] commission — what would be the commission number, so — actually the rate at a blended level?

R. Venkataraman — Managing Director

Rate, I don’t have. Rate we can’t share.

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, all right, no problem sir. Yeah, okay, thank you, sir. Rest of the queries I’ll take offline. Thank you so much.

R. Venkataraman — Managing Director

So, if I understand your big question is that you want the geographical spread of the customers acquired in the last — this year — this quarter and last quarter?

Swarnabha Mukherjee — B&K Securities — Analyst

Yes, correct.

R. Venkataraman — Managing Director

A big question, yes.

Swarnabha Mukherjee — B&K Securities — Analyst

Not last quarter, maybe last year same quarter when [Technical Issues].

R. Venkataraman — Managing Director

Sir, [Technical Issues].

Swarnabha Mukherjee — B&K Securities — Analyst

Okay, sir, thank you so much.

R. Venkataraman — Managing Director

Thank you so much.

Operator

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

R. Venkataraman — Managing Director

Thank you so much for a set of really enduring and [Indecipherable] questions. And whatever questions I could not answer with clear-cut data, I — you can contact our CFO and he will get back to you. Thank you so much.

Parin Jhaveri — JNJ Holdings — Analyst

[Operator Closing Remarks]