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

Next question comes from the line of Devesh Agarwal with IIFL Capital.

Devesh Agarwal

Congratulations on a good set of numbers.

Ma'am, my first question is on the traded UCC.

After two strong quarters, this quarter, we have seen a decline in the numbers.

One, I wanted to understand what has led to this decline?

And secondly, what according to you is the lead indicator in terms of addition of new traded UCCs?

Is it the stronger prices or higher volatility, which can drive the new UCCs.

Praveena Rai

So, we've had growth in UCCs quarter-on-quarter over the last few quarters.

This is the impact of new members as well as expanded interest by participants in the commodity markets.

We see a tad change this quarter, but I would say it's like more or less at par with the last quarter.

Last quarter, of course, was high, given the fact that it was a highly volatile quarter with sort of a lot of interest and a lot of opportunity that people would have seen.

So, I think we see this as sort of a UCC-wise flat quarter where some of the participants would have come in and are not probably participating this quarter.

But the underlying strength of new members and new participants is a trendline that we still see as positive.

Devesh Agarwal

And any number, ma'am, that you have in your mind, possibly that you can reach in a year's time?

Praveena Rai

I don't want to put a number here.

Last year, we closed at 20 lakh at a full year number.

And we do expect to have higher numbers this year.

And the headroom for growth continues to be substantive.

Moderator · Conference Operator

Next question comes from the line of Supratim with Jefferies.

Supratim

My first question, again, going back to regulation and the impact, thanks a lot for the colour that you have provided.

But if you could give us some sense around what Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Adarsh Singh with ASK Private Wealth.

Adarsh Singh

My question would be that if you see energy and particularly crude and natural gas, that contributes a large part of our overall revenue.

But let's say, going forward, when the volatility reduces, let's say, a year forward, of course, the contribution from them would start lowering if you see, let's say two, three years forward, new energy sources would come, the contribution from particularly natural gas and crude would come down.

So, what are our new products, let's say, for example, index options that you were trying to scale?

I mean what is the traction there to counter the impact of crude and natural gas?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Niranjan Kumar from Avendus Spark.

Niranjan Kumar

I have two questions.

One on the SGF contribution.

So, on a Q-o-Q basis in this quarter, the decline was lower than the decline in revenue or transaction income.

So, is it broadly because of the market-based activity or because of the change in the calculation methodology by SEBI in March?

That's first question.

Maybe second question, the employee cost, the growth which you have seen in this quarter, is it largely driven by increments or by the employee count addition?

Like is this a sustainable number going ahead?

Those are the two broad questions.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Shrenik Mehta with Indo Alps Wealth.

Shrenik Mehta

So, my question is about the Bullion Options Notional ADT, which rose almost 116% sequentially, while the Bullion Options Premium ADT fell 27%.

So, this is taking the premium to notional from 1.03% to 0.35%.

Now, since the transaction revenue is a function of a premium and not notional, can you decompose this 68% yield compression, say across four buckets: mechanical notional inflation from higher gold and silver prices levels – one.

Number two, implied volatility normalization post Q4 spike.

Number three, participation mix shift towards further OTM and shorter-dated strikes, and the contract mix from Silver 100 to the Gold 10 and the BULLDEX.

What is the contribution of each?

And which of these do you think are structural rather than the cyclical ones?

Just want to understand the future idea a little better with this feedback.

Praveena Rai

Yes.

So, I think I'll just take your first part, and then I'll request DG Praveen to come in.

So, when it comes to price-related, right?

So, let's move from ADT, which is Average Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Abhijit with Kotak Securities.

Abhijit

Congrats on a good set of numbers.

I had one question on technology cost, if you could give some colour on where we are in terms of adequacy towards maintaining the right amount of capacity given what we saw in the previous quarter in terms of growth in volumes.

And internally, we kind of have a benchmark in terms of where we put the capacity number against the volumes that we see in the recent period.

Praveena Rai

So, I think we -- as stated in all our earlier discussions, we continue to invest in the technology space.

And when I say invest, I think it is invest smartly and invest efficiently.

So, it is our, of course, after risk and compliance are very top priority.

At this stage, we are working towards a high degree of scale being available.

In fact, just in the last one year, we have very successfully handled large volume of transactions.

We would have started the year at less than a billion.

And when I say a year, I'm talking of maybe four quarters back, a billion transactions a day, and we've already handled more than 3 billion transactions a day with the capacity to handle more than double that.

So, capacity-wise, very well positioned as we speak in terms of the growth that is coming our way, but we continue to look to drive resiliency, looking at driving scale.

We've, of course, got Sanjay Rajpal, our new Executive Director for Critical Operations and Technology, who's joined us and making sure that this technology platform readiness for scale and resilience in an efficient cost-managed manner is a top priority for us.

Moderator · Conference Operator

Next question comes from the line of Parikshit Gupta with Fair Value Capital.

Parikshit Gupta

I have a few questions on the electricity futures and with some context from the electricity performance report that you have published for FY26. So, the first question, Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Bunty Chawla with ASK.

Bunty Chawla

My questions have been answered.

Just one question on other income, we have seen a drastic growth on a sequential as well as a Y-o-Y basis.

What are the components or what are the drivers behind that?

And how one should see this for full year FY27?

Praveena Rai

So, it's a very good question.

I think like we opened the discussion saying that we've had extremely sharp growth in Q4, reflecting a lot of macro environmental factors as well.

We see that while it moderates, it consolidates and demonstrates a strong baseline level where the exchange growth continues to be strong.

So, we do see growth to be on a strong track this year.

While the very strong macro factors may or may not necessarily kick in, that's not something that is in our control.

But all the controllables have strong indicators, and we do expect the numbers to be strong.

Moderator · Conference Operator

Next question comes from the line of Sanketh Godha with Avendus Spark.

Sanketh Godha

In your initial remarks, you said that most of the mutual funds have started using MCX price as a benchmark to calculate their AUM.

So just wanted to understand this data- related income opportunity, how much it contributed probably in the current quarter's revenue?

And how do you see this to play out in subsequent years as more and more mutual funds probably start using your price, in that sense?

So that's my first question.

And second is a data keeping.

Can you call out your float income, which is part of your operating income, the float income what you earned on margin money?

Praveena Rai

Yes.

So, with respect to the AMCs, what was important is for us to establish the process and establish the kind of needs that they have and to make sure that we are able to provide what the funds require.

So, I think that's clearly been the focus in the last quarter and each fund would have had to go to their Board and get their policies approved and all those actions without sort of complicating it with a revenue stream objective at this point.

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Shravan Kumar, an Individual Investor, please go ahead.

Since there is no reply from the line of Mr. Kumar, we'll move to the next.

That is Saket Saraogi, an Individual Investor.

Saket Saraogi

My question is regarding the sequential dip in the volumes, the revenue of the company.

So, like what led to the decline in the revenue in this quarter?

Praveena Rai

Yes.

Saket, I think we were talking about that.

Thank you for your question.

So Q4 last year was certainly a very, very strong quarter.

It was driven both by baseline fundamental increase in our number of members, participation, drive from sort of new products and so on, along with some of the big macro geopolitical factors that kicked in, in a very significant way.

So, what we are seeing this quarter, it's a normalization of that without some of those sort of very strong geopolitical factors playing in at that same extent, but with some of the fundamental and foundational growth elements still continuing to be strong.

So, we have seen growth vis-a-vis Q1 of last year, a very strong growth vis-a-vis Q1 of last year.

While, yes, of course, when compared to Q4, the numbers are lower from where they were.

Saket Saraogi

One follow-up.

Like last year, there has been a rise in the prices of silver and gold that have aided the volumes of our products.

So, this year, more or less the price has been stable quite a bit.

And also on the other side, the equity part of the market, those have started becoming a bit buoyant.

So those all factors do, because silver and gold being the major contributor to our revenue.

So, will that have an impact on the volumes this year?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Aditya Chheda with InCred Asset Management.

Aditya Chheda

My question is on the competitive intensity.

Some of the challenger exchanges have become active in the segment.

So, are we tracking any leading indicators, maybe something such as new member registrations, etcetera, that would help us foresee any competitive intensity in this segment for us?

Praveena Rai

Yes.

So of course, commodities have been doing well.

Numbers are good.

Growth is high.

So, competition is stepping in, and we are taking it seriously because these are big competitors in the adjacent spaces in the equity side.

We are staying focused on launching products that the market requires, looking at enhancing our participation.

So, in the last quarter, we've had 12 new members who have joined.

We've had 35 new FPIs, taking our FPI count to about 220.

At a higher base of INR10 lakh-plus crores, we have about 2.5% contribution coming from FPIs.

And of course, looking forward to more as policy permits us to bring in more participation across contracts on FPIs.

Having said that, we are watching competitive activity closely.

At this stage, I think all our main contracts with head-on competition have held strong.

There have been some competitive actions on sort of expiry date change and so on and so forth.

So, we are reviewing the impact of that.

They sort of tend to have volume for about a couple of days, on days where we have not seen that impact our own volume.

But it's something that we are watching slowly, and we will have our action plan oriented to it as well.

Aditya Chheda

Right.

And apart from these strategies, do you also believe that the technological progress and the moat that we have would be a key enabler to protect your market share in these segments and your outlook on the same?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Next question comes from the line of Aditya Yadav with Transient Capital.

Aditya Yadav

My question, first one was around the -- there were reports two, three months back that SEBI would revise the dedicated commodity derivatives department and that would be done in a very short period.

So, could you just give some, can you provide updates on that, whether that has happened or it's very imminent?

And how does that impact our engagement cadence with SEBI and with certain things we have open on our end like SBI position limits, colocation, etcetera?

Praveena Rai

So, there is a strong focus at SEBI.

There are independent teams within MRD at reasonably senior levels that now work on the commodity segment.

So, I think your understanding is correct there.

And the rest follows, I guess.

Aditya Yadav

And any timelines for the open parts we have on our end, the topics we have right now?

Any timelines on that front?

Praveena Rai

We can't comment on that.

We are working with a lot of focus to get things over the line.

Moderator · Conference Operator

Next question comes from the line of Adarsh Singh with ASK Private Wealth.

Adarsh Singh

So, another question from my side.

So, if you see basically this quarter, we had three months of heightened crude prices and higher volatility.

But if I see as compared to fourth quarter, we only have a marginal or a slight increase, I mean, actually a decrease in the quantity of crude oil options quantity.

So, what is the reason for that?

Praveena Rai

So, your question is, has the volume come down?

Is that your question?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

The last question comes from the line of Shravan Kumar, an Individual Investor.

Shravan Kumar

In extension to that revenue dip from the exceptional quarter of Q4 last year, we pretty much normalized now.

But I want to know as we are running on the high base from FY26, do we expect any smoothing of growth going forward into FY27?

Praveena Rai

So, we are expecting the growth momentum at the fundamental level to continue to be good.

While the exceptional quarter on Q4 driven by many other factors holds the last year's numbers, we expect the numbers this year to be on a strong momentum as well.

Shravan Kumar

All right.

Just one more question.

There is price softness or lesser volatility in the bullion, especially gold and silver in the month of June after the destocks and all between the geopolitical environment.

So, did you see any softness in the volumes in the bullion in the June month or in subsequent July month?

Multi Commodity Exchange of India Limited

Moderator · Conference Operator

Ladies and gentlemen, that was the last question for today.

We have reached the end of the question-and-answer session.

I now hand the conference over to Ms. Praveena Rai, MD and CEO, MCX, for closing comments.

Praveena Rai

Thank you to everybody.

It was a very, very meaningful discussion.

We appreciate the questions and the discussion.

It gives us a lot of food for thought, even as we answer this with the knowledge and analysis and plans that we have in mind.

It also helps to trigger us for what we need to focus on and what we need to do next.

I appreciate everybody taking your time, all the analysts and individual investors on the call.

And thanks for the organizers for putting this together.

Thank you.

Moderator · Conference Operator

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

Thank you for joining us.

You may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you.

We will now begin the question-and-answer session.

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

Amit Chandra

My first question is on the recent RBI regulation regarding the bank guarantee.

So, it's been a month.

How do we see the impact of that on our volumes?

And also, is it fair to say that the impact of this bank guarantee will be more gradual and it has not come Multi Commodity Exchange of India Limited