Growing retail, good volatility and a diverse portfolio helping MCX revenue growth: Mrugank Paranjape

New exchanges coming in or more established or larger exchanges coming in is only going to expand the pie. MCX does not have much to worry about, said Mrugank Paranjape, MD & CEO, MCX, in an interview with ETNOW.

Edited excerpts:

How do the sequential volumes pan out for you and what exactly was the traction across key segments particularly in crude oil and gold, besides industrial metals?

The Q4 performance is in many ways a culmination of what we have been doing over the years; a) in terms of how we look at the various segments of MCX. Both crude and gold have done very well but with a rich diverse portfolio, it is not something where we are dependent on just one commodity for a quarter because these are cyclical.

Beginning this year, metals was doing very well in terms of volatility, but that has been replaced by these products. So a good diversity in our product portfolio helps us a lot. The second thing which has helped MCX is the fact that the retail growth is coming back into this market. Our unique client code that trade on the exchange on a daily basis is over 3 lakh. Our total client base that is registered with us is about 30 lakhs. We are seeing very good sustained growth in terms of the retail segment.

This is because of the immense support we have received from members of the exchange. A lot of them have combined their memberships under the unification that SEBI has allowed and that is helping a lot of them to grow their volumes. Multiple factors -- growing retail, good volatility and a very diverse portfolio -- is helping the revenues growth quarter on quarter.

What has been the realisation trend that you have seen sequentially and trajectory of the transactional revenue along with ADTV (average daily trading volume) trends?

First, I will talk about the ADTV trends. It is pretty positive. We have grown about 21% over last year. If I take the growth and as you would have seen the last historical year’s data, typically it is something which grows gradually across the full year. Quarter on quarter, you will see some variations but this sort of growth is very healthy.

We see similar trends continuing in terms of the growth on the ADTV that we foresee in terms of some of the time to come. We are expecting a similar trend to continue for some time in terms of growth, especially in terms of the volume.

What is the EBITDA margin range that you are looking to maintain? What are the levers for improvement as the software chart as well are expected to gradually decrease in FY20?

We have been consistently informing all our investors that the top line growth will be consistent with our ADTV growth. When it comes to our cost, about one-fourth of our cost is completely linked to our top line. It is a percentage of our top line and therefore it grows at the same rate as the top line. But it is the balanced cost which we have contained very well and which we believe can be contained at the rate which we have been doing. It is not more than a year-on-year growth of may be 1% or 2% and it is really that differential which will add to the EBITDA margin going forward. For every Rs 100 of revenue, Rs 80 goes straight into the bottom line, after the fixed costs are taken care of.

How is the liquidity in the options and the level of pickup seen in institutional participation?

There was a very nice trend in options in last quarter. The retail client base probably grew daily and has now crossed 1,000 clients on an average for the last quarter which is about 20% over the previous quarter.

On the institutional side, we are still awaiting some parts of the regulatory framework to be in place.

While the SEBI Board has already allowed mutual funds and PMS, we still do not have the final guidelines, which are expected anytime now. We also expect trading in indices to be approved. Once a couple of these things happen, we will see the institutional participation come through in commodity exchanges.

How has your market share fared since NSE and BSE have been taking steps for more traction in commodities? What is your strategy going forward?

In terms of the reflection of the last two quarters, our market share in terms of the overall commodity markets is at an all time high of 91.6%. It vindicates our belief one can be successful as long as the products are consistent and in line with what the market expects and technology is performing in line with market expectations and delivering what the market wants.

Finally, MCX offers a good product and comfort of trading. We are very confident that we are unlikely to lose market share in terms of existing products.

If there is some new innovative product which comes about in another exchange, definitely people will go and trade on that, but that is not really losing market in our view. We have always said that new exchanges coming in the more established or larger exchanges coming in is only going to expand the pie. MCX does not have much to worry about.