On the technology cost - it has been growing at around 30% for the last 2 years. Over the last 2 years, what kind of capacity have you created versus when you started? And how much more folios or demat accounts can you handle now versus 2-3 years back? Secondly, how much further would you need to invest in technology from here - same pace or slower? Lastly, how many folios did you end FY26 with, and what is your eCAS and e-voting revenue?
Technology is the DNA of our business. It's kind of the Raw Material, Work in Progress, and Finished goods. We have created both horizontal and vertical scalability. In September 2019, we were 1.8 crore demat accounts. Today, we are about 10x plus more in a short period of 6 years. Technology has to cope with the scale, both in terms of infrastructure, application, security and the linkages which form this. The number of application protocol interfaces with which CDSL has moved about has grown significantly and exponentially. To draw really an analogy, the coastal road or the recently launched metro line in Mumbai - the roads are built to give a value proposition. Now if you see the scale, you can have a small car also being driven on the coastal road and a large car also being on the road. As markets evolve, the ecosystem evolves, the players evolve. And when that is not constant, it's difficult for me to commit on what would be the constant at CDSL. Whatever it takes to ensure that this commitment remains high is what we are committed to. There's a huge potential as SEBI survey itself talks about only 9% to 10% participation. This can easily grow to 25%, 30%. In the Western world, it is as high as 40% to 50%. The age of the investor opening the demat account, which was intuitively understood to be 18 plus, has now moved to a few days. Post birth, a lot of newborn demat accounts are getting opened.
My question is also on the technology cost - the rise has been pretty steep, 4x over the last 3 years, and now technology cost is higher than employee cost for the full year on a consol basis. If you can provide some numbers around how much of this cost of INR162 crores is regulatory led or related to upgrades, or is it catch-up versus what competition is investing? What is the opex here? What is the capex number? And how much are we investing in tangibles and intangibles related to technology?
I would first like to start off that technology cost, as you have rightly pointed out, on a consolidated basis has overtaken the human resource cost. This kind of demonstrates my vision that we are a tech-based and applied technology-based company. Our intent is to ensure that the efficiency and the leverage effect of technology rollout will overtake the employee cost. So, it's becoming a more tech-based company supported by able humans. In terms of whether it is growth or regulatory-driven or competition catch up, I would not like to comment on the competition. Our focus is not numbers. Our focus is value proposition. On whether we are investing in tangibles or intangibles, tangible is the number of APIs which have been rolled out, the ease in which the Depository Participants have seen speed and scale. The intangibles is the loyalty, which we continue to enjoy, the commitment we continue to enjoy, the market share of new account openings we continue to enjoy.
On annual charges - how many folios would we be having right now? And with the flurry of IPOs in FY26, what kind of folio additions are we expecting? Also, in terms of the sharp fall in IPO and corporate action revenue - can you give some breakup between IPO revenue and corporate action revenue?
We don't give the numbers between IPO and corporate action - it's just correlated. That's the reason we don't give it. But overall, the industry has seen less IPOs. Both the depositories have seen a significant fall in the IPO and corporate action income. In terms of large IPOs, yes, there are large IPOs expected in this financial year. And this is exactly the point - we need to be platform ready, infrastructure ready, connect ready and speed ready in these large platforms and these large IPOs come. In terms of folio increase, we will be disclosing this as per our practice as the CFO mentioned earlier, in the first quarter call of the next financial year after the June quarter end.
First question is the expenses margin - technology and employee-related expense have increased during the year. Should we expect that to continue over the next few years versus a large investment lead in future growth initiatives? Second, unidentified investor app strategy - long-term strategy on engagement monetization evolution over time? Third question is data app business opportunity - do you see data service, API infrastructure and verification related service becoming a meaningful revenue contribution in the next few years?
On employee and technology costs - we don't give any futuristic statements. We are in a business where technology and human resource are the only cost, there is no other cost which is there to this business. And it has to be a state-of-the-art to ensure that the value proposition remains extremely strong. On the investor engagement - eCAS, we've launched it in 23 Indian languages to ensure that financial inclusion and social inclusion is extremely high. Similarly, the investor apps also are in multiple vernacular languages. It's a continuous process of evolution, and we are improving on the UI, UX also of this, but basically will be rolled out in the next few months or so. On information and data as a business - there is a new act, the DPDP Act, which kind of gives the foundation on how data needs to be protected and used. In terms of whether data can be leveraged as a business will be driven by the SEBI's rules on what is to be provided free and what can be charged for. So as and when that framework comes out, we will be able to take that forward.
On the unlisted revenue opportunity, which got moderated a bit - incrementally, do you think this run rate of INR3 crores per quarter will continue because the opportunity now has been largely addressed? And in unlisted companies, the join fees play a significant role; though we have managed to crack the market share in the demat account in a big way, we did not do as much in unlisted companies. Any additional efforts or BD required to gain market share in unlisted space?
On the unlisted revenue, as the markets evolve, as the economy grows, as the GDP grows, the level of these private limited companies are also going to grow. So I see it as a positive that more and more larger companies will come into the fold. These numbers are not cast in stone - as they see the participation grow and the inclusion grow, the intent is to bring more and more companies into this fold. On the market share - there was basically the ISIN issuance, which has been exclusively given to our competition for many years. The intent is now it's going to be done by both in the near future. So therefore, that additional advantage, perceived additional advantage, which is there would now be with both the depositories. We will continue to focus on our service and the ease of doing business and the service standards to ensure that more and more people choose our platform. On the overall picture, it's yet a very small ecosystem. There is a large, untapped demand. I would see it as maybe early days in terms of coming to a conclusion who has won, who has not won.
ISIN issuance for unlisted companies - is it already live with both depositories, or will it become effective in a couple of quarters? Any effective timeline?
It has to yet go live. It will be done in the future. Again, timelines, we don't give any futuristic outlook. You'll wait and watch. We are continuously on it to ensure that it would go live as soon as possible.
On the KYC regulation - from 1st April onwards, the fetch rate has reduced from 35 to 28 and probably creation fees also reduced to some extent. On a like-to-like basis, what would be the rate impact - is it a 20% rate impact which we should build, assuming volumes remain same? Second question on technology - 24 crores demat accounts have grown 5x in last 5-6 years, justifying tech increase till date. But INR160 crores cost plus another INR120-INR100 crores on fixed asset accretion is roughly INR240-250 crores being invested in technology annually. If demat accounts grow at a moderate 10-15% rate from here, should investors assume that technology spend will track that?
Your number is slightly misplaced, it's 10x more, INR1.8 crores in September 2019, it has grown to INR18 crores as we speak in 2026. So, it's a 10x growth and not a 5x growth. As in any technology rollout, there are certain foundational costs and there are incremental costs as we add the volumes grow. But the road and the foundation have to be such that it can support this additional server, assets which has to be built. And therefore, this is a transformational change in that sense to allow that scalability to take place both on vertical basis as well as horizontal basis. What is needed is being done, and therefore, we have been consistent for the last 6.5 years of seeing consistent growth happening. When COVID hit us, there was a sudden spike which happened. Are we prepared for that? And the answer is we should be, because when the opportunity comes, infrastructure takes time to build. You need to be future ready for these kinds of spikes.
Continuing with this question on KYC - what are the counters we have to kind of recoup some of the lower revenues now from the KYC?
The intent is that as markets deepen, more investors will come into play. This is an incentivization which the regulator believes with lower cost, more people will want to join the ecosystem. So, the entire population of people investing in securities market will grow further, which will lead to a higher number of people within the ecosystem.
On the implementation of one India, one nation, one KYC - theoretically, how does that change the business model and approach? Do the fetches increase and creation go down? Or how does that really kind of work? Second, from a competitive dynamics perspective - with quite a few players now wanting to get into the discount broking model, how is the kind of negotiations or competitive environment there with respect to getting onboard the new players that are coming?
On one KYC - KRAs are well positioned, not only CVL, but all KRAs are well positioned because there's a validation process, which will ensure that the expectations out of KYC becomes more sharper or more influenced by, as there'll be an intermediary layer of KRA. That's the way we see it. But we'll have to wait for the formal announcements to happen to see what the impact is. In terms of new discount brokers wanting our platform - foundationally, if we are providing value proposition, speed and our investment in technology is what differentiates us as a technology product or as a platform product is what will drive people coming to us. So, it's not only about speaking to them, reaching out to them, but even the look and feel of the experience once they go through the platform would be the main driver on whether they will want us versus our competition.
On the online data charges - as against INR35, what is our blended charge as of 31st March? And as from today, what is that blended price charge post the negotiation with the client? Have you taken the entire 20% price cut?
There is no question of a blended cost as you are mentioning. Each one has its own cost and driven by what SEBI has described.
The inflation of the last 2 years and all that, does it not necessitate some change now?
They are saying the scale is going up. So that's a play which they keep in mind, what would be the role of the increase in scale versus basically the inflation. They are also very fair in terms of things. So, all these factors are taken into account before any charges are changed.
Folio count and eCAS/e-voting revenue follow-up.
On the question of Folio, financial year '25-'26, we had disclosed Folio of INR33.26 crores. Folio as on 31st March '26, we'll be disclosing in the earnings call for June quarter '26-'27.
Bookkeeping questions - what has been the reason for the sharp fall in other income? And if you can provide the eCAS revenue, the pledge revenue and the revenue from the unlisted companies?
The investment income is subject to mark-to-market as on 31st March, and that is the main reason for the fall in investment income. In terms of consolidated account statement revenue, it is INR12.08 crores for March quarter. E-voting is INR5.58 crores and other operating income of INR3.23 crores. The application processing fees for the March quarter has been at INR3 crores. Unlisted issuer revenue is INR3.5 crores.
On online data charges - can you provide the breakup between Fetch and new record creation? What percentage is from Fetch and from data creation? Also, you did not mention the pledge revenue earlier - if you could give that as well?
Typically, the breakdown between fetch and creation is about 80%, 20%.
Pledge revenue follow-up.
Pledge income for March quarter is INR6.30 crores.
Data keeping question - impairment cost for the quarter. Second question is on one of the DPs migrating fully to the competition. Are we seeing any incremental trends, because while our outstanding market share is still stable on demat accounts, incremental market share is seeing a bit of pressure, not big bit, but small bit? So are you seeing any competitive pressure from any existing DP either trying to be more open architecture giving for 2 companies or even migrating from one to another?
I think your information is slightly misplaced. There is no DP which has completely moved. It continues to remain on both the platforms. In terms of competition is the way of life, and that's why we have 2 depositories. And I think that is to ensure that the best value proposition continues to remain driven to the ecosystem, to the intermediaries and to investors. I would like to welcome that because that's how we have always functioned as India has always functioned with 2 depositories. The exact reason why we are investing in technology and people is for this very reason - to ensure that the value proposition not only remains high, it remains really ahead of the curve and gives the entire ecosystem what it really aspires for. Whilst competition will do what it has to do, we will do what we have to do.
Impairment cost follow-up.
The impairment cost is INR7.62 crores for the March quarter.
On KYC rate change follow-up.
With effect from 1st of April, the fetch charges have been reduced by 20% from INR35 to INR28 and the creation charges have been reduced by 75% from INR20 to INR5.
Clarification - 80% of our KYC charges right now is creation, you said the mix of creation and fetch?
80% is fetch and 20% is create. It's going to be across basically the industry. So, it is not only for CVL.
Just wanted clarity - the split between creation and Fetch was 80%-20% or the other way around?
Creation was 20%, Fetch is 80%.
I think you mentioned on last quarter's call that there was a shift in volume in the revenue mix towards fetch. Is that continuing? Or is it in steady state?
It was always that.
How are we billing our customers for the depository segment - basically our core revenue drivers? And how are we recognizing those revenues for this segment? And if we have any key metric which we can measure to see it translate to our top line?
The key revenue drivers is part of our investor presentation - it's the market-based transaction charges and also folio-based charges, which are charged to the issuer companies. You can do a trend analysis of the past to see as the demat accounts grow what has been the increase in the portfolio-based issuer charges versus the transaction-based charges, which is a function of the market volumes also. So, it's fairly clearly identified in the presentation, which is put out on our website.
On pricing principles - last 2 years, at an economy level, there is inflation of 5% to 6%. Now when number of accounts increase and transactions increase, operational leverage kicks in and therefore, there is always this sense that prices should reduce. When would you consider a change, an upward change in prices? Could you explain the principles and how these decisions are taken? And how much is the regulatory interface as far as increasing prices is concerned?
The intent is inclusion. As we've seen in the mobile phone market, what were the charges when it started off, it's kind of become 120 or 125 of that because that scale grows, the charges go down so that there is more usage, more inclusion. So, the same fundamental principle on which it is based. CDSL has always been very fair in terms of ensuring that we are cheaper than our competition, giving that value proposition also. So, it's giving lower cost for inclusivity for more and more players to come into the fold, but also not compromising on the quality, which is getting given to such people at a lower cost. We have not changed our charges for many, many years. But in terms of the structure, the SEBI approves charges where depositories are concerned. So there needs a prior approval or any change upward or downward, obviously, after deliberation by the honourable CDSL Board, but it has to be then proposed to SEBI for it to be approved before this gets rolled out.