MSTC Limited (MSTCLTD.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to MSTC Limited Q2 FY '26 Earnings Conference Call hosted by Equirus Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deep Modi from Equirus Securities. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to Q2 FY '26 earnings conference call of MSTC Limited. From the management, we have with us today Mr. Manobendra Ghoshal, Chairman and Managing Director; Ms. Bhanu Kumar, Director, Commercial; Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary. We will begin the call with the opening remarks from the management, and then we will open the line for Q&A. I now hand over the call to Mr. Manobendra Ghoshal. Over to you, sir. Thank you.

Thank you. Good morning, Deep, and good morning, and a warm welcome to all our stakeholders for today's conference. Building upon a good start of Q1 of FY '26, we've sustained a good revenue trend both on year-on-year as well as on a sequential basis for the quarter. With expenses being on basically predictable and flat trend, the PBT and PAT have also been higher both sequentially and on year-on-year basis. Now despite the fact that there has been a softening of prices in scrap, that has continued -- that trend has continued over quite a few quarters now, the revenue growth has still been led primarily by our flagship e-commerce segment. We have continued the process of consolidation of our business areas and defined our primary thrust areas as e-commerce and the growing area of development of software applications and platforms. In this, we have made some appreciable progress, about which our Director, Commercial shall update you in greater detail later on. Now apart from the electronic trading platform for EPR certificates, which is now under development, I'm also glad to share that MSTC has been selected by the DGFT to establish an online platform for allocation of tariff rate quotas for gold bullion import. We are working on that. We've also been selected by the government of Chhattisgarh for e-auction of sand mining blocks, the government of Karnataka for auction of liquor shop licenses, et cetera. Now all of these are testimonials to the robustness and transparency that your company enables for the e-auction process itself. We've signed an MOU with the Syama Prasad Mookerjee Port, Kolkata for providing e-commerce services for the leasing of port property for a period of 30 years. As I had informed our stakeholders during the last conference, we have been developing the software application for the KPKB, the Kendriya Police Kalyan Bhandar, which is now in its final delivery stage. Similarly, we have identified a few other specific opportunities, which we believe shall drive our growth over the next 2 to 3 fiscals. And this shall strengthen and diversify our revenue streams also going forward. On the part of our joint venture with Messrs Mahindra Auto, that is MMRPL, the performance has been as per expectations in Q2. While revenue has not yet become -- well, the venture has not yet become profitable, there has been a sequential improvement in the numbers, and we are closely monitoring the operational aspects of the company. As I have mentioned earlier, the EPR regulations do give us a reason to have a positive outlook for MMRPL, but albeit in the long term. And maintaining business operations at incrementally increasing levels is what we are looking at in the short and medium term. And while the effect of EPR on increased vehicle sourcing through OEMs builds up. Needless to say, we are watching this closely. And I would now like to request our Director, Commercial to give us a drill down on the way forward in -- as it is panning out now, followed by Director, Finance to provide a snapshot of the financials.

Yes. Good afternoon. This is Bhanu Kumar, Director, Commercial here. So before talking about what we plan for future, I would like to point out the key highlights of the performance for the H1 of this year. So operational performance during '25-'26, the company has grossed about INR 301.67 billion in terms of value of goods transacted. The marketing vertical has tapered down significantly, and it is facing closure as of now. As far as the financial performance is concerned, PBT of INR 125.79 crores is what has been earned in H1 of '25-'26 vis-a-vis INR 111.50 crores in '24-'25 H1. And PAT is INR 93.47 crores vis-a-vis INR 83.48 crores during '24-'25 H1. PBT of INR 122.16 crores vis-a-vis INR 108.72 crores is the consolidated financial performance. And PAT has been INR 89.84 crores vis-a-vis INR 80.70 crores. So there is just a marginal increase. But in the times to come, we are expecting that it will be a little more robust. Now as far as the highlights of this half year is concerned, the first major thing, which is going to have significant revenue inflows in the years to come is the award of the contract by Central Pollution Control Board to develop a platform for the electronic trading platform for the EPR certificates. So this is going to be quite a game changer and in establishing exchanges by MSTC. We also, as our CMD had already stated in his opening remarks, DGFT, the Director General of Foreign Trade has nominated MSTC for establishing a platform for online administration of allocation of tariffs for import of gold bullion. We expect that this will pave way for other commodities in future. MSTC has signed an agreement with the Excise Department of Government of Karnataka. You all may be aware that we had done this exercise for Rajasthan government earlier. So with that confidence, now we had approached other state governments and Karnataka has finalized this agreement as of now. Now as far as the other highlights are concerned, MSTC has carried out the major mineral block auctions, about 86 numbers have been auctioned in this H1, belonging to various states like Chhattisgarh, Uttar Pradesh, Assam, Madhya Pradesh and et cetera. We have also signed an agreement with Chhattisgarh for sand blocks. Sand blocks we have done in various states, Uttar Pradesh being very significant in the past. Now we are replicating that in Chhattisgarh. The Green Steel certification portal. Now these are some small assignments that we have done for the Ministry of Steel, one being the Green Steel certification portal. Now similar such small assignments from various ministries and our own Ministry of Steel are also on the anvil. And we are having a small development of software in the SaaS model, which we had introduced a couple of years ago. So that we feel now is going to drive the growth -- the revenue growth in the years to come. Now -- and MSTC had auctioned the property portal that we had launched earlier, now it is playing a significant role in the sense that most of the state government's assets are auctioned through this portal. And the Telangana State Industrial Infrastructure Corporation witnessed a very good price and competition, and they could sell some land parcels at INR 2,900 crores much beyond their expectations. MSTC has signed a 30-year agreement with Syama Prasad Mookerjee Port Trust in Kolkata. Now this is -- why we are highlighting this is we are going in for long-term agreements like this with our other clients also. That will be one of the focus areas in future. Commercial coal block mining, as usual, is continuing and 41 mines have been auctioned in the H1 of this year. As our CMD stated, the KPKB portal, which is going to be a path-breaking kind of a thing in the government sector as far as retail business operations is concerned. This will again pave way for similar portals for not just the military, but there are other entities who may use this kind of a platform. We are also planning to have more products on the lines of Upkaran. Upkaran, we had launched in the last quarter, which is going to be a digital platform for leasing of equipment. Now similarly, we are also planning to have our own travel portal, which will initially be for the government sector. Focus will be on the government sector B2B transactions, but definitely, it is going to be enlarged to accommodate B2C, the private sector and all other stakeholders. Now this is a plan that is on the anvil, and we expect that by FY '27, Q1, we should be making it operational. Now regarding the financials, I'll hand over to our Director, Finance, Mr. Sarkar.

Very good afternoon. So far financials are concerned, it was -- revenue growth was 9.31% from INR 179.27 crores to INR 195.96 crores, rising primarily over our e-commerce income, which grew from INR 123.47 crores to INR 146.28 crores, 18.47% increase. And expenses accordingly was not there. The increase was not there. It grew from INR 60.70 crores to INR 65.25 crores, that is 7.50% increase. With that, EBITDA stood at INR 130.71 crores as compared to INR 118.57 crores of corresponding period last year. So the growth of 10.24%. Depreciation remaining the flatter. And with that PBT and there is no exceptional item for this half year. So PBT stood at INR 125.79 crores as compared to INR 111.50 crores, that is 12.81%. Profit and loss after tax stood at INR 93.47 crores as compared to INR 83.48 crores that is up by 11.96%. Accordingly, EPS has also gone up from INR 11.86 to INR 13.28 per share, growth of 11.96%. And so far segmental reportings are concerned, total value of goods traded through our ecosystem, it is INR 301.67 crores and revenue has increased from INR 179.27 crores to INR 195.96 crores, mainly on the e-commerce growth and expenses, of course, has gone up from INR 65.83 crores to INR 70.17 crores. Exceptional items expenses are not there. So profit and loss before tax has gone up from INR 111.50 crores to INR 125.79 crores and PAT INR 83.48 crores has gone up to INR 93.47 crores, growth of 11.96%. This is from the stand-alone part. So far the consolidated part is concerned, so right now with the hiring of FSNL, so we have got only the share of loss from joint venture. So it is for this half year, it is INR 3.63 crores as compared to INR 2.78 crores last year. With that revenue remaining the same and there is no exceptional item. So PBT stood at INR 122.16 crores as compared to INR 108.72 crores last -- [ PPLY ], last year . And tax increased from 28.02% to 32.32% and PAT stood at INR 89.84 crores as compared to INR 80.70 crores. And as a group basis, the EPS stood at INR 12.76 as compared to INR 11.46. So far summary of the P&L is concerned. So what we can see that revenue from operation grew from INR 140.97 crores to INR 162.43 crores and other income was a little bit lesser from INR 38.30 crores to INR 33.53 crores. With that, total revenue grew from INR 179.27 crores to INR 195.96 crores. Employee benefit has grown up a little just a routine increase from INR 44.71 crores to INR 46.34 crores. Finance cost is nil this year -- this half year and depreciation remaining the flatter. And other expenses, of course, not a big jump from INR 15.99 crores to INR 18.91 crores. So with that, we have got PBT at INR 125.79 crores as compared to INR 111.50 crores last year and PAT at INR 83.48 crores to INR 93.47 crores. And so far consolidated is concerned, because we don't have any line item to consolidate, only the share of profit and loss account of joint venture. This year, it is INR 3.63 crores of loss as compared to INR 2.78 crores last year. With that, PBT stood at INR 122.16 crores as compared to INR 108.72 crores and PAT stood at INR 89.84 crores as compared to INR 80.70 crores. So that is all so far financials are concerned. Now I hand over the mic to the team for further Q&A.

[Operator Instructions] The first question comes from the line of [ Prathamesh ] from Orbit Exports Family Office.

Yes. Firstly, sir, congrats for the great set of numbers. And secondly, apologies for the -- if there is any background noise from my side. So I have questions regarding the 3 segments. First is the vehicle scrapping business. So in the vehicle scrapping business trading platform that we have, so if I'm not wrong, there are around 10 lakh vehicles in India of the government, which are about to get scrapped. So can you just tell me, sir, in value terms, how much can be the value of this? And how much take rate can we take out of this?

See, you are going by the reports that about 10 lakh vehicles are to be scrapped. But then for scrapping this a lot of background work and institutional framework is required. First being that these 10 lakh vehicles, the details should be available in the VAHAN portal. A lot of data, the historical data of many of these vehicles are not available in the VAHAN portal. And at that point of time, a lot of vehicles were done manually, the registration process and everything was done, and it was available in segregated form. Secondly, for the vehicles to be scrapped, then you need to have good incentive scheme. There may be vehicles, but then people will have to come out and say that I want to scrap this vehicle. So unless there is some incentive, there is some push, this is not going to happen. There have been a lot of incentives given by state government. This is a state subject. There have been a lot of incentives that have been formulated in the recent past, but that has not entirely translated to scrapping of the vehicles. And this, again, is in a very fragmented basis based on the state's own policies and initiatives. So these are 2 different things. Yes, of course, all the 10 lakh vehicles will have to be scrapped sooner or later, but this is turning out to be a slightly slow process.

Got it. Yes. Understood.

The 10 lakh vehicles would also -- basically the large part of it would be privately owned vehicles. And there is a substantial number of unorganized players in the market who are also into vehicle scrapping. So large part of that, those 10 lakhs would also tend to get diverted to the unorganized sector, which would basically need brought online. So that is what ma'am was talking about.

Got it, sir. Understood. Understood. Sir, my second question is regarding the EPR trading platform that we are making. So what sort of opportunity we are looking at in this segment? Has there been any active regulations that has been brought by the government for the EPR norms by which it will create more volumes on our platform in coming time.

Yes. So as far as the EPR is concerned, there have been policy guidelines as far as 5 categories of material is concerned, hazardous waste is concerned. And there are at least another 5 to 10 more categories which are likely to be included in the policy framework. These have been announced very recently just in the last year. And there have been some trading going on offline. There is no digital platform and all these things are happening on one-to-one basis or there are some small players who are actually doing any trading. So in order to regulate the entire setup since the volumes definitely is going to increase in the coming years, CPCB had decided to establish an exchange. And through an open tender process, we got this contract from CPCB. This is going to be quite a game changer as far as MSTC is concerned because this is a first of its kind of an exchange because the policy framework is also new, the categories are new, the players are new. So it is like starting from scratch. So the credibility credentials and our own experience will play a big part. MSTC, as you may be aware, has been disposing of hazardous waste for various government entities for the past more than 20 years in a very seamless and transparent manner. So similarly, we want to have this kind of credential established for the EPR trading also. So with the kind of volumes that we have already seen in the past for the 5 categories and what is in store in the other new categories that will be added up, this holds good potential for revenue growth as far as the exchange is concerned. Of course, time will only tell. And initially, for the first 1 or 2 years, yes, there is a lot of cost associated with it in developing and establishing this platform. There may be a positive revenue input from the end of '27, FY '27 or the beginning of '28. But in future, definitely, we are seeing this as one of the game-changing kind of a contract as far as MSTC is concerned.

Got it. Got it. So okay. So what I understood, there is a huge tailwind in this sector. But for a few, let's say, 2 to 3 years, we are not seeing significant contribution in our top line from this segment.

No there will be something that will be because 5 of the categories are already established. So there will be transactions, but it will not be very significant. It may be something like a routine thing. But as and when the -- as and when new categories are introduced, definitely the volumes will be going up.

Got it. Got it. Got it. And recently, we have done MOU with Kolkata, which is I think around about INR 5,000 crores. So are we expecting the revenue to start coming gradually. So for 30 years, I think around INR 200 crores should come year-on-year? Or is it going to be partly thing?

No, no, no, no. INR 5,000 crores is what Kolkata Port Trust, Syama Prasad Mookerjee Port Trust is envisaging over a period of 30 years by leasing its port land. And they are using our portal for auctioning of those leases. So what we get is a miniscule percentage of those events. It's nothing, you cannot relate it to INR 5,000 crores. So -- and that this is going to happen over a 30-year period. Why we have highlighted it here is the kind of association that we are envisaging from the port trust entities on a long-term basis. Like these associations earlier were on 1 or 2 years contracts. But now we are going in for long-term contracts. So the strategies, the platforms can be developed in a more comprehensive manner.

Sustainable long term business.

Sustainable, yes.

Got it. Great, sir. Great. Just a last question, sir. Sir, what sort of revenue mix does vehicle scrapping business and other key subsegments in the e-comm platform, if you can give that highlight? And secondly, what sort of revenue growth are we looking for next 3 years? That's it from my side.

See, as far as the subsegments of e-commerce is concerned, some of our revenue is based on percentage basis and some of it is on event basis. So it is a mixed bag. As far as the scrap business is concerned, it is on a percentage basis. But as you already are aware, the scrap prices are showing a downward trend. It is stable in the last 1 year. So there's not much growth in that segment, and it contributes to almost about 50% of our revenue as on date. As far as the other events are concerned, it is more or less on event basis, especially the coal and the e-sale and e-procurement kind of event. That's on events. So the number of events goes up, we get good revenue. If the number of events is much less. Like had highlighted about the Telangana state infrastructure land parcel sale. They might have got about INR 2,900 crores or INR 3,000-odd crores, but what we get is for the event only. So it has got no relation with this value. So it's a mix bag actually.

Which we're trying to optimize.

Yes. And in the years to come for another 2, 3 years, definitely, there is going to be incremental growth will always be there as and when we expand our business. And with the new ventures that we are talking of, we do feel that the growth can be a little more supplemented with the new ventures.

Okay. So can I consider there can be incremental, I think, 100 to 200 basis points of improvement in top line growth as compared to the previous years that we are delivering?

We would not like to put really numbers on to it. That would not be fair.

[Operator Instructions] The next question comes from the line of Prasanth Kothari, who is an individual investor.

My first question is regarding the Telangana government e-procurement mandate. You sent a notice to the stock exchange in March '25. I wanted to understand if there has been any progress as far as the e-procurement is concerned because I take the investor presentation and under the e-procurement subsegment, there's hardly any revenue that is being shown there. So please shed some light on this. Second question is regarding the E-Upkaran portal. Can you please provide an update and any revenue guideline?

Yes. The first question regarding the Telangana government order for not just e-procurement, it is for e-auction, e-procurement and e-sale of the raw materials. Now in this -- as far as the auction process is concerned, yes, definitely, it's trickling in. Some new additions are there from the government side. E-procurement, they do have a NIC portal also which they are using, which they have been using. So many of the events that are already listed there is continuing there. But the new entities that are coming up, our people are approaching them and they are acclimatizing them as to how the usage of the portal, the features and everything. So the revenues, I expect will trickle in probably from the next year only. But yes, definitely, the number of events will go up with the times to come.

And it will be subsumed into a normal revenue stream.

Yes. It is a normal growth. And see, the e-procurement activity as such is not a very big revenue earner as far as MSTC is concerned. It's more of a facilitation for the government sector with whom we do other businesses also.

Okay. Second question was regarding the E-Upkaran portal.

Yes. So Upkaran portal, as you know, was launched very recently, and it is basically a leasing or a purchase kind of a platform for most of the equipment and for leasing as well as purchase. Now we had not thought of any revenue in the first 1 or 2 quarters because this is a new area where people were dealing with these things only on one-to-one basis. So first, we'll have to onboard them, acclimatize them to the e-portal and its usages. That process is going on as of now. Once we have inputs also from the stakeholders as to how we can improve upon the portal and its features, functionalities, then we will be building up a business model into this and probably you can see some kind of revenue from this segment.

So madam, what will be the revenue model here? So it is advertising revenue.

We are still in the process of dodging as to what should be the business model and what would be the revenue streams. Right now, it is just onboarding of various stakeholders, acclimatizing them to a digital platform for usage for leasing and purchasing of equipment. So it is a little too early to talk about revenue or the business model as such.

Okay. Madam, can you also shed some light on the NPA portal that you had developed for private and cooperative banks?

Yes. So basically, we were operating the IBAPI portal for about 3, 4 years. And thereafter, the public sector banks had set up their own infrastructure. So this portal is now open for not just the NPA of the banks, the rural cooperative, private banks, they are also using it. Apart from that, a lot of government organizations, they are also selling or monetizing their assets, basically primarily the property. So that database features that is being used by a lot of organizations. That again, is one of the small subsegment of our e-commerce business itself. So you cannot actually attribute any number to the -- what is the income or revenue from the property portal.

[Operator Instructions] The next question comes from the line of Saurabh from SMIFS Limited.

My first question will be what would be our annual CapEx requirement for this year? And if you also can share some thoughts regarding how do you plan to utilize the future cash flow? And what could be the dividend policy going forward.

So let me answer the last question first. As already published in our portal and as per the Government of India guideline it is in the public domain, so the dividend policy is very clear. The minimum dividend the PSU has to declare is 30% of the PAT or 5% -- 4% of the net worth, whichever value is higher. So like this is a very declared policy. So -- and government until and unless there is specific dispensation from the Government of India. So generally, Government of India and the Ministry of Finance, it already decides through a meeting with the PSUs to how much dividend should be given there. So of course, within the framework of this policy and the extent guideline that is available in the public domain. Number two. Number two is a thing that you have sought about the CapEx requirement. We are in a phase of multiple developments as the call was going on. We have got a CPCB platform is going on and like another ventures are also going on. So the main thing that's coming up is like, we are still in the process of developing the same. And in certain things, the exact requirement of CapEx is going on. But still, I think it will be -- as of now, it seems not to be that much of capital intensive, that much of capital intensity. And so far cash is concerned, so in the earlier year also and every year also, we will -- last year, we had acquired a good office space to become a corporate office at Delhi, New Delhi, and that is the capital, that was the cash was utilized. So similarly, we will have a mix kind of judgment depending upon the situation. First priority will be, of course, our current server maintenance and the equipment. Second priority, of course, will be on the new business ventures like CPCB and that travel portal that we have called about. It will be a mixed bag of CapEx and initial revenue expenditure. And of course, third part will be, of course, the distribution of dividend and of course, acquisition of any office space it can be.

My second but is a suggestion management, which has been highlighting since multiple calls that the disclosure level from the presentation needs to improve, right. If you see the presentation, it is just like a statement of facts. There is no information provided regarding the movement in the earnings. Like if you see in the current quarter, the e-commerce sales have increased from almost INR 89 crores to almost INR 98 crores. But what has led to this kind of jump in the e-commerce revenue has not been explained. So in the last 4 to 5 quarters, the management has been giving --.

[Technical Difficulty] regarding our business model that our Director, Commercial, was also here, it comprises of -- there is a bunch of presentation that we are reporting. It comprises of bits and pieces, somewhere it is INR 50 lakh, somewhere INR 10 lakh, INR 5 lakh. So it would be very difficult -- you have to think from a market -- this service organization to e-auction service provider that the model of earnings is pretty different. So it keeps on like happening of the event and primarily depends upon the -- like still we are dependent upon the 89% to 90% in the government revenue. It depends upon the government disposal of scrap, government disposal of their natural resources like coal blocks, iron block and of course, the iron ore mining scenario in the country. So it keeps on fluctuating. Overall, basically, it is very difficult to tell how this has happened and what will be the trend because we are dependent upon some external event that is which is not in our control, like a manufacturing organization, unlike a big service organization where the service bunches are very, very clear. So our services are clear, but the events are not very much well defined, predefined. So it will be very difficult for say, like to have this. Still as gathered from our earlier experiences and valuable suggestions from the investors, this time we have already tried to put a single pager, which gives a very -- overview of what we are planning to do in future and per se, what has led to this type of things. So that page is very clear. Page #4 is very clear to our activity in brief. Otherwise, it's very -- I mean, like scattered type of activities. So it will run into pages and pages.

It's an agglomeration of multiple sources of revenue. So it is difficult to put a specific sector or because those keep varying from time to time.

Okay. At least a breakup of revenue between scrap and non-scrap to begin will be also quite helpful. And a paragraph on the latest quarterly performance with some comments from the senior management, MD and CFO will also help.