Sharp increase in depreciation - assuming significant capex on tech. Where is this incremental capex happening? What is expected spend for FY26 and what run rate should we assume both in opex and depreciation in FY26 for technology?
We do expect capitalization to sort of depreciation and amortization to continue at these levels because as we are growing significantly, the tech refresh is a continuous process. Constituents include regulatory network, tech refresh, and BAU expenses, which will keep our depreciation at this level. We won't be able to call out a specific number, but at an expense level, we expect our ratios to stay flat.
Are we incurring any expenditure in our capex for co-location facilities as well? Media article suggesting SEBI is contemplating this - where does this stand in terms of implementation?
We will not be able to comment on this at this stage because it's really based on what media is saying. Until we have regulatory clarity, we won't be able to comment on this.
On product launches - last call indicated index options and weekly expiry options on track. Where are we in terms of launching, any timelines? Also light on electricity futures contract and incremental volume opportunity?
Our new products road map is very much in place. There is a lot of homework required along with various approvals before we can take this live. We have full readiness from our side, and we are waiting for the right green signal to take this to market. Between our indices and new products such as electricity, we will really look at significant growth in the coming time. India is the third largest market globally both from a production and consumption standpoint. We believe it's around the corner. We had a good launch of our Gold Ten futures on 1st of April, timed with Akshaya Tritiya.
We saw a massive uptick during the Trump tariff. Should we consider that as a one-time thing or a base going forward?
From the macro geopolitical standpoint, that's a very difficult question to answer. We do see a fair amount of global volatility in the approach across markets not only from the US, but across the world. These will always be events. The baseline goes up. The events themselves will be spikes. This year appears to be one which will offer a certain level of natural volatility. With or without that, we do see this impacting the baseline in a positive way.
Would you be able to get split of participation in terms of retail hedgers or foreign participants, how the trend is now?
So I think the numbers we have shared, we have about 13 lakh of traded clients. And when you look at large numbers, they will typically come from the retail side. Commercial clients will tend to be smaller in number. So they are either very large corporates or in the SME sector.
With respect to capacity building, are we building capacities to manage the TCS software better? Is regulator still skeptical about the software? Is this why there's hindrance with new product launches?
So your comment on not being able to launch a product is a little surprising. How did you arrive at that conclusion? We have a number of products in the portfolio. We have natural gas and crude oil, gold, silver, copper, aluminum, zinc, lead, and I think we are all having fairly healthy numbers across futures, options, deliveries. When it comes to new products, as stated in the past, we are ready from a technical and go-to-market standpoint, and we are waiting for the final set of approvals to come in before we can take it to market.
Do you think co-location, which happens in equity exchanges, can help here also? Can co-location facilities happen and increase FPI and other institutional participation?
Well, it remains to be seen. We cannot talk about something which is not there. As and when it comes within the regulatory approvals, then we will look it up and we can discuss it.
Could you give us a mix between what your FPI and DII hedges look like right now? Any push towards more green finance contracts like ESG-linked carbon trading?
Our DII portfolio is fairly limited at this point, primarily because there are a number of restrictions for mutual funds and so on to participate in commodity derivatives. There are some changes that we are working with the industry to understand the needs and incorporate this in multi-asset portfolios in a more dominant way. On carbon trading - one is compliance part and the other is voluntary. India tends to be more of a global seller than a buyer. So work is in progress at the broader government policy level. At the right time, when it's suitable for derivatives to be a component, we'll certainly be there.
Gold contribution is going up, and you alluded that gold invariably will have lower premium realization. Is it fair to say if gold contribution picks up, your premium to notional will see a gradual decline?
If you purely look at the statistics-wise calculation mathematically, it depends upon whatever the product that is contributing to the maximum market share, that will be the influencing factor. But as long as the volumes are going across the products, I think that is going to be good for the market and good for the exchange.
I attended NSE con call also and management clearly said they have in principle approval to start futures on energy. You clarified that none of the exchange has that approval. So if you can again clarify that point?
Yes. So your point taken about the second part, we look into it. I mean the first part, we've already our MD and CEO has already clarified. So I don't think there's anything else to clarify on that. I mean, whatever they have said, they have said in their own wisdom. We have clarified according to what we know.
We have multiple products likely to go live - silver, index options, electricity and weekly. Any order that you think based on your discussion with regulator, which can come first and how others will follow, whether all in this year?
Very difficult to predict. We cannot assign any timelines or any order. All we can say is we are working on these products. And as and when it is found feasible, they will be brought to market.
On index options - currently we have index futures, which are not seeing much traction. How do you see this differently when options are provided?
We are working on index futures and other products as we work on all products. It is for the market to take up which products they like. Of course, we put in all our efforts. Having said that, Praveen has already clarified that normally all the products we have in options are based on futures, but these products are based on the index itself, so they are discrete from each other.
Cost increase in this quarter - sharp increase in operating costs, especially employee cost and software support charges. What has led to this and are there any one-offs?
When we look at our cost line items, both employee and IT cost is where we've seen an increase this quarter over last quarter. For employee expenses, 75% goes into a one-time incremental expense associated with performance and 25% is the readiness from a capacity building standpoint as we go into next year with all our growth plans in place. On IT costs, there is a timing concentration in some warranty and annual contract renewals - INR30 crores this quarter vs INR20 crores last quarter; 30% of that is a one-time expense and 70% is expense getting concentrated in the quarter associated with maintenance renewals.
Significantly increased investments in tech enablement - can we relate this to co-location or HF trading on the platform? Also bullion contracts in options segment are 25% of notional but only 9% of premium - why are gold premium to notional ratios lower than overall?
As we grow, naturally, the costs will go up. On gold premiums - premiums are a function not only of time but also volatility. Crude oil and natural gas have higher volatility than gold. That is why despite the notional being higher, the premium value is substantially lower in proportion. Ever since we've made the gold options monthly contracts, we've seen a very good uptick in terms of the total notional turnover as well as the premium turnover.
SEBI has announced in-principle approval to NSE for electricity futures. What's our strategy even if we get approval? How should we look at volumes given NSE is already there?
It is not in our understanding that there is any approval from the regulator to anybody. As a commodity exchange highly focused on the energy sector, power is a very natural part of that portfolio. And we are highly engaged to make this a good success, and we are very positive about it.
On weekly expiry of indices - where are we in improving our indices, strengthening volumes? What are we doing to manage that before launching the weekly contracts on the indices?
Normally options on various other products are options on futures. In indices, there is index futures and there will be options on the index itself. So it is not an option on the index futures. Therefore, there is hardly any correlation per se between the index futures and the options which will come on the indices. These will be cash settled products based on the index itself. We are in pretty advanced stage. And as and when we are ready to go to market, we will let the market know.
On the cost side - given the volumes and the business growing on the options, do we anticipate to pre-empt our investments on tech side to drive and build a more sustainable platform going forward?
Yes, I think we will be ahead of the curve when it comes to tech investments. We have developed our agility, which means our speed to market when it comes to new products from a tech standpoint, the kind of connectedness that we are able to provide to the market participants and most importantly, our readiness for growth. So all of this is already very much baked in, into our readiness framework for technology.
When you say indices, what are all indices that we are looking at? Is it bullion? Any effort that we are putting in specifically improving the base metal contracts, which used to be a very good contribution at one point of time?
We have 2 index contracts running right now. One is the BULLDEX, the Bullion Index and one is the base Metal Index called the METLDEX. We are looking to enhance further through bringing options on them. In terms of growth in base metals in the year we have ended, we've seen almost a doubling of volumes in the base metal contracts as well. Now they are deliverable with India pricing and India price discovery. Hence, that timeline for the market to adjust to an India pricing and the contracts to again gain traction is going on.
Can you just help us with the futures revenue and options revenue for this quarter?
The option revenue for this quarter is INR 179 crores and futures revenue is INR 75 crores.
Barring one-time impact, full year tech cost was around INR 93 crores and employee cost around INR 144 crores. For FY26, can we assume tech cost around INR 90-110 crores and employee cost between INR 150-160 crores?
Yes, I think, Harsh, this number -- the numbers would be around these levels.
I wanted to ask a question over the FPI contribution from the FPI participation out of total volume of transaction charges we have got in the quarter.
It is roughly around INR 16,500 crores in options, and it is about INR 600 crores in futures. So you can say about 7% of the total turnover.
Settlement guarantee fund - contribution during the quarter was around INR 18 crores, similar to last quarter, but significantly up on Y-o-Y basis. How should we look at it going forward? And second, any other new products in the pipeline for FY26?
SGF is the settlement guarantee fund - it will be an outcome of the kind of volumes we have and volatility in the market. You can assume a similar ratio to continue. On new products - yes, we have a number of new products in pipeline. Top priority for us is the products that we are ready with where we are waiting for the go-to-market green light. We also have in the silver category, we are planning to launch the monthly options. We are looking at launching in silver, micro options, the 30 kg, 5 kg and the 1 kg.
On FII participation - introduction of index options and cash settled contracts, can it bring a bigger step change in FII participation? What other things can help in more FII participation?
So the norms for FPI participation came in the second half of '22, and we started participation early in '23. We also have to bear in mind that FPIs are only allowed to trade in crude oil and natural gas. So as and when more and more products come under the ambit and more and more FPIs come into the market, we will see more participation increasing. We are seeing more and more FPIs onboard onto the exchange.
The regulator came out with a consultation paper of segregating clearing corporations from the exchanges. If it gets implemented, what likely impact could be there on our top line and bottom line?
From whatever is available in public, it is quite clear that as it stands, this implication is there for the equity exchanges. The Commodity Clearing Corporation has a lot more complexity involved and handles warehouses and deliveries and so on. So we are not really expecting this any time now.
How do we foresee this core settlement guarantee fund cost? Full year it comes to around 7 percentage of the total transaction income. Is it fair to say going ahead, given our volumes are increasing, this 7 percentage of the transaction income kind of will be a recurring cost going ahead?
So Sanket, this 7% includes 1-1% of contribution to ISF and IPF, which is mandated as per SEBI regulation. And the SGF contribution is something which we look at the requirements, and we keep adding to that because that helps us in different ways to maybe manage the margins for the members, which helps in increasing the volumes.
We see a bit of cannibalization when gold is picking up, crude is not showing so much growth. Speaking to your members or traders, are you getting a feeling there is a bit of cannibalization, gold growing at the expense of crude?
If you see cannibalization would happen if we were constant and gold grew at the cost of crude oil or other things. We are seeing an overall growth. We have seen 100% growth. So how is there a cannibalization? Everything is growing. There are some things which are growing, contributing to lesser premium to notional. Some things are contributing higher premium to notional. So overall, while you may see the overall mix of premium to notional coming down, but as long as the entire premium is going up and the notional is going up and the volumes are going up, it's a good problem to have.
Just clarification - the FPI share, INR 600 crores in futures and INR 16,500 crores in option - is this an annual average or fourth quarter average?
I was referring to the recent quarter. Fourth quarter.