Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Multi Commodity Exchange of India Ltd (BOM:534091, Financial) achieved the highest ever income since inception.
- The company closed the year on a profitable note.
- Turnovers also clocked the highest ever, contributing to a positive year-end.
- IT costs have come down in terms of operating expenses.
- FPI participation is expected to increase, potentially boosting volumes in the coming quarters.
Negative Points
- Revenue dropped sequentially despite a surge in volumes.
- Treasury income dipped by around INR5 crores, contributing to a revenue drop.
- Depreciation costs are expected to remain high, offsetting reductions in other IT costs.
- Options revenue growth was lower than expected due to lower premium conversion.
- New product launches are facing delays due to rigorous testing and regulatory approval processes.
Q & A Highlights
Highlights of Multi Commodity Exchange of India Ltd (BOM:534091) Q4 FY24 Earnings Call
Q: Could you explain the reason for the drop in revenue sequentially despite the surge in volumes? Also, what is the expected run rate for software costs and the timeline for new product launches?
A: The drop in revenue is primarily due to a decrease in turnover in futures and a dip in treasury income. The expected run rate for software costs, including depreciation, is around INR60 crores annually. New product launches, such as gold seal contracts, are still in progress and will take some more time. (Padala Reddy, CEO & Satyajeet Bolar, CFO)
Q: What led to the lower premium conversion in options revenue, and how do you see this trend going forward? Also, can you break down the software support charges into fixed and variable components?
A: The lower premium conversion is due to higher volatility leading to trading in lower premium contracts. The software support charges include a fixed component and a variable component linked to crude oil contract volumes. (Padala Reddy, CEO & Satyajeet Bolar, CFO)
Q: How do you see FPI participation impacting volumes, and what is the timeline for new contract approvals and launches?
A: FPI participation is expected to increase, with full impact visible in the next one or two quarters. The timeline for new contract approvals and launches, such as index options, is around five to eight months. (Padala Reddy, CEO)
Q: Can you provide a breakdown of options and futures transaction revenue and details on upcoming product launches?
A: In the quarter, INR149 crores were earned as transaction charges, with INR46 crores from futures and the balance from options. Upcoming product launches include agri-commodities like cotton wash line and sunflower wash line, and index options. (Satyajeet Bolar, CFO & Padala Reddy, CEO)
Q: What is the status of interoperability and the total income breakdown for the year?
A: Interoperability is not currently on the table, but fungibility of collateral is being worked on. Total revenue from operations for the year was INR684 crores, with INR560 crores from transaction charges and INR84 crores from interest income on margin funds. (Padala Reddy, CEO & Satyajeet Bolar, CFO)
Q: Can you clarify the cost structure for FY25, including employee costs and software support charges?
A: The software costs, including maintenance and depreciation, are expected to be around INR60 crores annually. Employee costs and other expenses are expected to stabilize in the next one or two quarters. (Padala Reddy, CEO)
Q: What is the reason for the sharp increase in UCCs this quarter, and why have traded UCCs declined on a Q-on-Q basis?
A: The increase in UCCs is due to members uploading data to all exchanges. The traded UCCs in options have actually increased, and the total UCCs traded this quarter were INR5.3 lakhs. (Padala Reddy, CEO)
Q: What is the average realization in the options segment, and what caused the drop in the option premium ratio to turnover?
A: The average realization in the options segment is [40.83] per lakh. The drop in the option premium ratio is due to contracts being traded far away from the money, resulting in lower premiums. (Satyajeet Bolar, CFO & Padala Reddy, CEO)
Q: Can you provide the breakup of the total income for the whole year and any update on interoperability?
A: Total revenue from operations was INR684 crores, with INR560 crores from transaction charges and INR84 crores from interest income on margin funds. Interoperability is not currently on the table, but fungibility of collateral is being worked on. (Satyajeet Bolar, CFO & Padala Reddy, CEO)
Q: What is the status of the new product launches and the expected timeline for approvals?
A: New product launches, such as crude NG and natural gas NG mini options, have already been launched. Other products like the gold 10 grams monthly contract and cotton candy are under testing. The timeline for approvals is around five to eight months. (Padala Reddy, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
