MCX — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the Multi-Commodity Exchange of

Thank you.

The next question comes from the line of Devesh Agarwal from IIFL Securities.

Please go ahead.

Devesh Agarwal

Good afternoon, everyone, and thank you for the opportunity.

Many congratulations to the entire team for another good quarter.

Ma'am, just first thing, continuing with what Amit was asking, in terms of new products, is there an update on the series contract that we were kind of designing.

And can you put a timeline around that, the new series contracts?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Prayesh Jain from Motilal Oswal.

Please go ahead.

Prayesh Jain

Yes.

Hi.

Congratulations, team.

And ma'am I'm just extending that question on the series contracts as to where we are with respect to that product, whether we have tested it completely and our readiness is there.

And when can we file it with the regulator?

So, any clarity there, because I think that is something which the markets have been anticipating for quite some time, the Crude series contracts.

So, anything where, at what stage we are with respect to that product will be very helpful for us?

Praveena Rai

Hi, Prayesh!

Nice to connect with you.

So, Prayesh, when it comes to the series contract, as you call it, as I mentioned, our internal readiness on whatever products we want to launch is there.

So, there will be a small delta of work, but that's more of a procedural item.

So, from a readiness standpoint, there is no major bottleneck.

However, this is something that we are continuing to explore, continuing to work on.

And we can, update at the right time, as and when something comes up.

Prayesh Jain

Got that.

Ma'am, secondly, on the Base Metal contracts, rightly that you mentioned that you would want to revive the METALDEX and then bring in the index options on both BULLDEX as well as METALDEX.

But, you know, as Base Metals volumes have not kind of picked up the way we would have liked it to be.

So, what were the reasons for that and what could be the further driving factors for this, that you could revive these volumes?

Praveena Rai

So, we have had, reasonably good performance in Base Metals, especially when you look at contracts around Copper, and so on.

And we believe that some actions might drive this further.

So, we are exploring rationalization around warehouses and certain actions that could help us to simplify the actual execution of the contract along with the deliverables, which will then, be a little bit of a fillip to that business.

But we do strongly believe in both the BULLDEX and the METALDEX as opportunities.

Prayesh Jain

Ma'am, just a couple of more questions.

One will be on the regulations, right, you know, if you look at...

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Arpit Kapadia from IGE family.

Please go ahead.

Arpit Kapadia

All my question has been answered.

Thank you for the opportunity.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Shalini Gupta from East India Securities.

Please go ahead.

Shalini Gupta

Could you please say what was the transaction fees during the quarter and if possible, if you could break it up into options and futures?

Chandresh Shah

So, transaction charges for the quarter were around INR300 crores and 72% of that is contributed by options and 28% is by futures.

Shalini Gupta

And, Sir, if you could please give the corresponding figure in the second quarter, second quarter of this year, Q2 FY – financial year '25?

Chandresh Shah

Q2 FY '25?

Shalini Gupta

Yes.

Chandresh Shah

So, the previous quarter, transaction charges were INR245 crores, 70% was contributed by options and 30% by futures.

And just one correction, this in Q3, the transaction charges is INR265 crores.

Shalini Gupta

INR265 crores.

Okay.

Yes.

Okay.

Yes, sir.

Otherwise, my questions were on the new product launches which have been asked amply.

So, thank you so much.

Moderator · Conference Operator

Thank you.

The next question comes from the line of Kunal from Fair Value Capital.

Please go ahead.

Kunal

Okay.

My first question was, I wanted to ask about if you had any updates on Electricity derivatives and your collaboration with IEX on these?

Praveena Rai

Hi, Kunal.

So, Kunal, it's a very good question.

So, when we look at our new products, Electricity is one that is top of the radar for us, and we continue to work on it and explore that option.

We believe it's a good opportunity.

Also, given the maturity of the spot exchange as you rightly mentioned.

So, this is something that's on the radar.

Kunal

Any timeline that we can expect, or will you take it up?

Praveena Rai

We are not in a position to share timelines.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Akshay Patel from CD Integrated Services.

Please go ahead.

Akshay Patel

So, ma'am, my first question is that we have grown very significantly in the first 3 quarters of FY2025. So, my question was on the front of the revenue growth, sustainability of the revenue growth.

So, how sustainable is the revenue growth of the MCX and can we expect the same growth rate to continue in the next year and years to come?

Praveena Rai

So, I think the growth of the last few months, has been steady and it has been consistent, and we don't see a reason for the growth to not continue.

So, I think the numbers reflect the point that, you know, you're making and that's really our own view to the situation as well.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Ajox Frederick from Sundaram Mutual.

Please go ahead.

Ajox Frederick

Thanks for the opportunity.

My question is on the new client addition.

You mentioned in your opening remarks about INR11 lakhs traded clients, which used to be INR9 lakhs.

So, what has driven that increase in growth during the year?

Praveena Rai

So, hi Ajox.

So, increasing the traded client participation is an important objective for the Exchange.

And we have had a number of initiatives, including awareness sessions, working closely with our members to increase the client trading participation and so on.

So, that has led to the increase in numbers that you're seeing here.

And it's something we track every month, and we see a month-on-month growth in these numbers.

Ajox Frederick

Okay, okay.

And going forward also, you feel this traction will continue, right?

That's what you're saying.

Your steps are indicating that.

Praveena Rai

The interest in commodity derivatives trading, you know, will continue to grow.

We continue to stay focused on these initiatives, around creating awareness.

So are our members.

And I think we should see the results according to that.

Ajox Frederick

Very good, ma’am.

Thanks a lot.

And all the best.

Praveena Rai

Thanks, Ajox.

Moderator · Conference Operator

Thank you.

The next question comes from the line of Chintan Sheth from Girik Capital.

Please go ahead.

Chintan Sheth

Thank you and congratulations, ma'am, for the role.

One question I had on the FPI participation.

You mentioned that we are working towards, increasing participation Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Parikshit Kabra from Pkeday.

Please go ahead.

Parikshit Kabra

Hi, thank you for the opportunity.

So, I'm actually struggling a little bit in terms, as an investor, to figuring out, you know, how to underwrite the growth of the company.

Because yes, on the one hand, you're uniquely positioned to tap into this growing market.

But on the other hand, in terms of any form of operational guidance in terms of how we are adding more clients, what our target for the clients that we'll be adding over the year or the instruments, we're left a little bit in the dark.

So, number one request is, can we start at least showing the number of active clients on a quarter-on-quarter basis in our presentation so that we can at least start tracking that number?

Praveen DG

It is already, if you can look at our presentation, we are already giving the active clients, both in futures and options separately.

And also, we are giving it at the consolidated level.

We are giving quarterly as well as we are giving it on a yearly basis.

Parikshit Kabra

Okay.

I apologize then.

I seem to have missed it.

I thought I had gone through it in detail, but fair enough.

And secondly, in terms of actually adding clients, you mentioned briefly just now that you're doing awareness campaigns.

But is it possible to understand this more?

Like, what were we doing before?

What are we doing now?

Are we adding new avenues to increase awareness?

Are we adding new features, not just products, but new features that enable certain type of clients to increase their trading volumes, so on and so forth?

Praveena Rai

So, I think over the months we have added the kind of products and contracts that are more amenable to a wider range of clients.

So, I think, in fact, last year or earlier this Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Deepak Ajmera from ITE India Family Office.

Please go ahead.

Deepak Ajmera

Yes, thanks for the opportunity.

My question is also on the similar line.

We are saying that we will be launching lots of new products and we will increase FPI participation, etcetera, but as there is no clear timeline given by the management, but can you highlight what progress already we have made in that part whether it is weekly, option expiry, etcetera means what progress we have made and what is holding launching the same etcetera that will help us in understanding it more?

Praveena Rai

So, we are not in a position to comment on any timelines at this stage.

I think we did call out that, we are operationally, have a certain level of readiness that will allow us to move fairly fast.

Now a lot of these will be under regulatory purview.

And we continue to explore various options that we will need to look to market based on the industry's requirement and at the right time, we'll be able to communicate this back.

Deepak Ajmera

Yes, similarly for Electricity derivative, etcetera.

Yes, we agree you will be launching maybe later or sooner, but to understand it more what is holding these things and what progress we have made from the last two, three calls which we have attended?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Ashish Parikh from MK Investment Manager.

Please go ahead.

Ashish Parikh

Hi, thank you.

I just wanted to have a brief understanding as to how margins differ from say cash settlement versus physical settlement.

And just a follow-up in terms of margins which will be the most profitable, say Gold or Bullion or something like that?

Rishi Nathany

Hi, Ashish.

So, margin doesn't differ per se from cash settlement or delivery settlement.

It's only in the delivery period that you can face higher margins.

That is because the chances of being marked for delivery are there.

Having said that, each contract has different margins depending on their volatility and, as you know we all have that span margining system.

So, this is that.

Or if you see heightened volatility, there can be additional margins over and above.

Ashish Parikh

I'm sorry, margins I mean the revenue side for the company.

So, in terms of physical settlement which would be the most profitable for a company?

Praveena Rai

Misunderstood the question.

Rishi Nathany

We are sorry, we misunderstood your question.

So naturally, Chandresh, if you want to answer.

Chandresh Shah

See margins I think since we have a common system, it is not so easy to compute margins product-wise, but the contribution from maybe Energy and Bullion would be the highest.

Ashish Parikh

Okay.

Yes.

Thank you.

Moderator · Conference Operator

Thank you.

The next question comes from the line of Nandini Agarwal from Glove Capital Markets.

Please go ahead.

Multi Commodity Exchange of India Limited

Thank you.

The next question comes from the line of Sanil from ICICI Securities.

Please go ahead.

Sanil

Hello.

Good evening, ma'am.

Congratulations on a good set of numbers.

So, my question is more on the same lines of the client participation.

So, in your PPT, you give the traded clients data.

So, in this quarter if I see on a sequential basis there has not been any increase in these clients, which was increasing on a very exponential scale if I look at the past two quarters?

So, any reason why this quarter there was not much growth and if I may continue on this, if I look as you said, there are 11 lakh unique participants.

But now if I look at equities, there is about around 96 lakhs who had participated in F&O in the last year.

So how much do you think is the potential of the commodities market in this?

Praveena Rai

So, we are seeing growth in the numbers of participants and traded clients.

Now, the numbers for equity will, of course, be much larger.

So, the Commodity derivative Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

The next question comes from the line of Sanketh Godha from Avendus Spark.

Please go ahead.

Sanketh Godha

Yes.

Thank you for the opportunity.

So, two, three questions.

One on the tax rate.

So, in the past, we guided that our tax rate will be around 22-odd percentage.

And for the 9 months, that number seems to be lower than that.

So, is it fair to assume that the tax rate will be closer to the current levels, what you are reporting, or it will be closer to 20-odd percentage?

Chandresh Shah

Sanketh, the tax rate would be around this level.

Sanketh Godha

So around 20%, 21% is the fair number to assume, sir?

Chandresh Shah

25%.

Sanketh Godha

In the current quarter, the tax rate came at 20.8%.

So just wondering…

Chandresh Shah

For tax rate, you check the standalone numbers.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question.

I now hand the conference over to Ms. Praveena Rai for her closing comments.

Praveena Rai

Thank you very much.

I think we had some very, very good questions coming in.

I hope clarity of really the results, as well as where MCX stands today, was made available to, both the session, the interactions and the Q&A.

Thank you very much for your time here and your very active participation.

I also want to thank my colleagues in the room for being here and being available for this conversation.

Thank you.

Moderator · Conference Operator

Thank you.

On behalf of Multi Commodity Exchange of India Limited, that concludes this conference.

Thank you for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Ladies and gentlemen, we will now begin the question-and-answer session.

The first question comes from the line of Amit Chandra from HDFC Securities.

Please go ahead.

Amit Chandra

Yes, thanks for the opportunity.

Yes, so my first question is to Praveena ma'am.

So, ma'am, it's been three months you have joined as the MD and CEO of MCX.

So, what has been the top three priorities in terms of the changes required in the Exchange and what are the areas you want to focus to scale the Exchange volumes and also to improve participation?

And secondly, as you all know that the technology transition is behind us and the focus has shifted to innovation of products and launching new products.

So, you have explained where we have been in the journey, but we are very curious to know about where we are in terms of timelines, in terms of launching of the weekly options and the index weekly options contract?

And what are the technological challenges and the regulatory challenges we might encounter in this journey, because from here on to take MCX to the next level, we need some innovative products and as we see in other exchanges, index and weekly are the ones which are the most traded contracts.

So, we are curious to know about your plans on this.

Thank you.

Praveena Rai

Thank you, Amit.

Thanks for the question.

So, when I look at the top three priorities, observing and evaluating the priorities for MCX, the first is operational excellence.

And when we say operational excellence, it's really our ability to interact with our members as well as clients in a way that makes trading at the exchange, at the level of performance and best in class that it needs to be.

It continues to involve and engage a high degree of focus on our technology.

So operational excellence, including our continuous development going forward on technology will be a priority.

The second is to really keep our hat on the compliance side very strong as a market infrastructure, that's the expectation from the regulator.

And it will be a high focus area for MCX.

And on the back of these two really gives us the ability and confidence to start the innovation.

And there we will be looking at new products.

And I spoke about that a little bit in the session.

Looking at new products, looking at new contracts to our -- structures to our contracts, commodities that we currently do not have live contracts in.

So, all of these are areas that we will be continuing to explore.

Multi Commodity Exchange of India Limited