Nava Limited (513023) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Nava Bharat Ventures Limited Q2 FY '21 Earnings Conference Call, hosted by Emkay Global Financial Services. We have with us today Mr. Ashwin Devineni, CEO; and Mr. GRK Prasad, Executive Director. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Chandak of Emkay Global. Thank you, and over to you, sir.

Thank you very much, Ramon, and good day to everyone, and welcome to the Q2 FY '21 earnings call for Nava Bharat Ventures. We thank the management for the opportunity. And without much ado, I would like to call in Mr. Devineni for his opening remarks. We'll open the floor after -- for Q&A after his opening remarks. Thank you very much, and over to you, sir.

Thank you, Vishal. A very good morning to everyone, and a very warm welcome to all the participants. The statement of the financial results, both on stand-alone and consolidated basis and a press release detailing the operations of the Nava Bharat Ventures Group for the quarter and half year ending September 30, 2020, have already been filed with the stock exchanges and posted on our website. I hope all of you have taken a look at them and trust that they provide adequate information on our performance for the quarter and half year ended September 30, 2020. Given the above, we would like to now proceed with the question-and-answer session and request you all to see clarifications as you may desire. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Congratulations on decent set of numbers. So my first question is on the receivables, sir. Of course, can you please just update where the state is right now? And what is the time line? And the -- and any further discussion if you had with ZESCO?

Yes. Mohit, with respect to receivables, I presume you're talking about Maamba Collieries. The current situation on the receivable is, to date, we have build about $909 million. We've received about $550 million, which is about 65 -- 61% of what we have built. And the outstanding remains at about $359 million. And this includes about $19.6 million of interest. So where we are with that is, as you've probably seen, we have commenced an arbitration proceeding against ZESCO with regards to the outstanding amount. So that process is currently underway.

Is there any time line? Would you expect things to get resolved some solution?

Well, the arbitration, normally, it is a process. It is a general process. This is being done in London. So we are all hoping that it gets resolved sooner rather than later. But generally, an arbitration of claims of such nature take about a year to 2 years.

Okay, sir. Understood, sir. Secondly, on this, coming to your domestic operations. How do we expect the H2 to fair, given that there is still -- I don't think power demand is -- has picked up? Do you see any improvement in the PLF of the power plants in H2 for the domestic power plant?

So one is, fortunately, we are in a situation where we have captive consumption, both in the Orissa side and the Paloncha side. For the power plants, such as the 150 megawatts in Paloncha and so on, which are not linked to captive consumption, we are looking at a group captive scheme. As you probably have noticed, power demands are not at the greatest given the current condition. So we are looking at the group captive scheme, where we have several industrial players that have shown interest to be a part of this scheme. So we're looking at essentially getting these power plants into operations using a group captive scheme, the non-captive ones.

And can we expect some kind of announcement regarding that in H2? Or do you think it will take some longer time?

No, we are progressing. This is always a combination of regulatory approvals and commercial agreements. So yes, while we do expect or we hope that these agreements will be crystallized sooner rather than later, we can give a very, very definitive time line. But we are in fairly advanced stages in terms of discussions on these deals.

Lastly, again, on the Maamba. Sir, on the -- as loan outstanding is concerned, in the press release, there's a mention of restructuring of the balance loans. Are you looking at a larger tenure here? And on the prospective power tariff adjustment, is there any update which you can share?

Yes. So as I mentioned on the previous outstanding amount, we have the arbitration process. But I think moving forward in terms of future tariffs. Essentially, what we want to attain is a tariff that is workable for both us and for ZESCO, so that ZESCO can -- being the state utility there, can pay us on a monthly basis in full without us having to chase up and they are not being any shortfall. So those tariff discussions and negotiations are underway. And I think once we come up with a tariff that is workable for both ZESCO and for us. And what I mean for us is it needs to be a tariff that is enough to meet our operational expenditure, to meet our debt servicing and also, we should have some surplus so that we can start dividend distribution. So monies can flow back into the parent company. So those discussions are underway. I think once we arrive at the tariffs, we will be approaching the lenders in terms of the debt restructuring. And the restructuring process will probably envisage a combination of various elements, including probably increase in loan tenure and so on. So that our repayments are brought down and where we can also sustain the new tariffs that we agreed to. The lenders are aware of this tariff negotiation. And so they are also in line with our plans of agreeing to a sustainable tariff. And then they're looking forward to us coming back to them to restructure the debt.

[Operator Instructions] The next question is from the line of Vishal Chandak.

Yes. Am I audible?

Yes.

Great. Sir, if you could just -- there have been news flows about export tax on chrome ore from South Africa. So if you could just help us understand if that flows through, then what would be the demand supply situation of ferrochrome as well as ferro alloys in India? And also how would the pricing is expected to move?

So in terms of the chrome ore, our ferrochrome is based on conversion with the Tatas. So we are not really impacted by chrome ore from South Africa and so on. We're in the process of actually finalizing another long-term agreement in terms of conversion with the Tatas, where they provide us the chrome ore, and we are essentially the conversion partners.

I completely understand, sir, that we are in the -- we are just doing the conversion work. But if you could just -- from your experience through... [Technical Difficulty]

We seem to have lost the line. So Vishal, please stay connected while we reconnect you. Participants, please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding your lines. We have the line for the management reconnected. Over to you, sir.

Yes. Is everyone back on?

Yes, sir.

Good. Okay. Yes, Vishal, are you online?

Yes, sir.

Yes. So your question pertains to the tax being imposed by South Africa, right, on expose of chrome ore?

Right. Yes. So I was trying to understand how do you see the ferrochrome market once this tax is imposed? Because as I understand, there is no quantum which has been declared by the government of South Africa.

So see it's dependent industry, stainless steel is principally driven by China, okay? So whatever is the immediate impact of this tax and all would affect the persons who are importing the ore into, let's say, power players in China who are doing ferrochrome production, they could get affected. But as a market for ferrochrome, we see some kind of steadiness, though it went down even in last few months, but we see some kind of a rebound happening in ferrochrome, principally driven by stainless steel in production. So I think it will sustain. But today, if you see this hovering around $65 to $70, that's a range actually per tonne, everybody is expecting that could improve over a period of time, but it is just probably consider at the bottom level.

Okay. Good. Sir, my next question was with respect to -- last time when we discussed, we had mentioned that we would want to open another pit at Maamba Collieries and start supplying coal to third parties. So if you could throw some highlight on where we are with that respect?

Yes. So with respect to the new pit, which we call the Kanzinze pit, that is currently underway. It is in the process of being open, and we are going to probably start extracting coal from that newly opened pit next month onwards. And this is really helpful because our sales, our external sales of coal at Maamba Collieries is picking up if you probably seen our quarterly results and so on. The market demand is increasing and also the prices are holding up. So we look at this as some positive news because this will generate good increase in revenue and liquidity for the company, Mamba Collieries.

Great. And lastly, sir, there are some land adjacent to our 600 -- 200-megawatt -- 60-megawatt power plant at Orissa. So are there any plans to monetize that 200 acres land?

In fact, you're taking of Dharmavaram. It Is Dharmavaram, AP. We have -- we used to have -- we still have about 20-megawatt coalization power plant along with intact 200-acre plant, Dharmavaram.

So that's Dharmavaram in Andhra Pradesh, not in Orissa. So yes, we are looking at adding value to the land. I think what we have realized is in this market, selling it per se in terms of this outright sale does not make sense given the very discounted valuation. So we are looking at monetizing it more in terms of trying to attract new industry, especially in the manufacturing sector in various different verticals, to come and set up shop and set up their factories on that land. That's what we're looking at.

Sure. Something like an industrial park, if I would put it?

Exactly, exactly. It's probably different at different words that tomorrow we can also enter into.

And how long do you think it would take to fructify this plan?

Well, see, 200 acres. So it could probably be mix and match that already underweight in terms of discussions with some players. Nothing big, but in a small way. But I think you need to make first drive it in steps first. And I think those discussions are currently underway. So we are working on it, right.

[Operator Instructions] The next question is from the line of Harshvardhan, who's an Individual Investor.

Sir, your price in international arbitration towards ZESCO that is pending. So when you are expecting to take it up? Like, when it will be going to be solved?

Sorry, I mean, I can't -- sorry, Mr. Harshavardhan, I can't -- your line is not clear. Can you repeat yourself, please? Hello?

Hello.

Yes. Mr. Harshavardhan, can you repeat the question? Your line was not clear.

Yes, sir. Now it is fine?

It's fine. It's slightly clearer, yes.

Okay. Okay. Actually, you filed an international arbitration towards ZESCO, right?

Yes.

So when you're expecting it to be clear? Like when you're expecting to be hearing, and it will be in our favor for the time period?

Yes. So normally, an arbitration process that deals with the matter like ours, takes about 1 year to 1.5 years just because of the procedure involved. And a lot of it also depends on what ZESCO contests and what it does not contest. So it's hard for me to exactly indicate a definitive time period. But generally, such a process takes about 1 year to 1.5 years.