Nava Limited (513023) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Nava Bharat Ventures Limited Q1 FY '22 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from DAM Capital. Thank you, and over to you, sir.

Thank you, Neerav. On behalf of DAM Capital, we welcome you to the Q3 -- to the Q1 FY '22 earnings call for Nava Bharat Ventures. On -- from the management side, we have Mr. Ashwin Devineni, the Chairman; Mr. Sultan Baig, CFO; Mr. GRK Prasad, Executive Director; Mr. VSN Raju, the Company Secretary; and Mr. Nikhil Devineni, Vice President, Commercial. Without much ado, I hand over the floor to Mr. Ashwin for his opening remarks, following which we'll have the Q&A session. Over to you, sir.

Thank you very much, Mohit. This is Ashwin Devineni, the Chief Executive Officer of Nava Bharat. 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 ended June 30, 2021, have already been filed with the stock exchanges and posted on your website. I hope you've had a look at them and trust they provide adequate information on our performance for the first quarter FY 2022. Given the above, we would like to now proceed with the question-and-answer session, and request you all to seek clarifications as you may desire. Thank you.

[Operator Instructions] The first question is from the line of Dharmesh from QG.

And I'm really very happy to be a shareholder for the Nava Bharat Ventures Limited. I'm watching this company since 2002. And I'm calling from Qatar at present, and in Qatar, we have around 10 or 15 investors who invested more than INR 3.5 crores in Nava Bharat Ventures since 2017. The thing is I would like to know from the Board of the Director that NIFTY made a new high, small-cap index made a new high, and we know that current valuation of the company is really, really, really very low, and we expect a very high stock price valuation. But we are not really understanding why the market is not referring to buy stock of Nava Bharat Ventures?

Yes. Mr. Dharmesh, thank you for your continued support. In terms of our valuation and stock price, unfortunately, we, as management, cannot speculate or discuss. I think that we have been reporting profit quarter after quarter, and all our operations are fairly healthy. So as management, we're doing our best to increase shareholder value and make sure that operations are sustainable, and we have a growth -- we have significant growth potential for the future. But in terms of stock price and valuation, unfortunately, we can't speculate or discuss in this forum.

Can I continue? Yes. Sir, that is okay. I understand because I'm also since in the market -- like 1990s or so, I'm in the market. So I know that the Board of Directors are not involved. But the thing is when the company is asking buyback offer at INR 100, it means company itself is assuming the price lower. For this, can you please give some clarification?

Sorry, I mean, what exactly is the question?

The question is the buyback offer from the company was at INR 100. And no doubt, that time, stock price was INR 70 or INR 75. But the thing is INR 100 also is very low price. So the company should expect price more because the company knows the value...

Dharmesh, yes -- no, I think this -- the buyback ceiling price was essentially a Board decision after much deliberation. We took into account where the stock was at the time we made the decision, and we thought the feeling that we had attached to the buyback was appropriate.

Okay. Okay. We'll continue investing in stock market. Today also, I have -- we have purchased NB Ventures during this call.

[Operator Instructions] The next question is from the line of [ Harsh M ] from DAM Capital.

My question is relating to -- what is the status of the Maamba tariff negotiations? And is the plant fully operational currently?

Yes. So I think I'll answer the first -- second question first. Both the units are fully operational currently. Unfortunately, one of the units was down for an extended period because of major overhaul and certain issues or damages we had noticed with the turbine diaphragms, but that has been resolved, rectified. And currently, both the units are operating at full capacity at Maamba. With respect to the tariff negotiations, that is taking a little longer than expected owing to the elections that are actually coming up next week on the 12th of August. So because of that, I think everything else has taken a back seat. But we expect things to pick up once the elections are done and during the later part of this year with respect to the tariff negotiations.

Right, sir. And in terms of the debt restructuring, is there any progress or an update that you can give us?

Well, the lenders are engaged in terms of -- they are favorable towards debt restructuring, but all that is dependent on, essentially, the tariff negotiations because if we are to restructure debt and agree on a debt restructuring proposal, it'll be very dependent on what revenues we would be recognizing on a monthly basis in the future. And that is directly linked to the tariff negotiations. So I think once we progress further on the tariff negotiation -- the future tariff negotiation matter, I think we'll parallelly start progressing on the debt restructuring, too. But that being said, the lenders are committed towards a workable solution.

[Operator Instructions] The next question is from the line of Sameer, an individual investor.

I have 2 questions. What went incorrect in current quarter as compared to last year's same quarter? And second thing, with respect to Zambian electricity, does -- are we receiving, at least, variable cost from the power purchaser who is just paying us 60% of our total billing?

Yes. Sorry, I didn't get your first question. Could you repeat the first part of the question?

First part of question is, what went wrong in this quarter, first quarter of current year, as compared to first quarter of last year or maybe Q4 of last year because of which there is a decrease in profitability?

You're talking -- I presume, you're talking on the consolidated basis?

Yes. Yes. Correct.

Yes. I think the major -- I mean nothing went wrong. I think the major reason for the decrease in terms of both revenue and profitability is the fact that one of the units at Maamba, Maamba Collieries, has been down for major overhaul. And this major overhaul was supposed to take 60 days. But unfortunately, when we opened up the turbine, we found about 6 diaphragms in the diaphragm casing damaged beyond repair. That led us to essentially order parts, which had a fairly long lead time. So after the fixing was done, the parts had arrived and so on, we were only able to recommission the unit on the 29th of July. So for the entire quarter, we had only one unit at Maamba Collieries running. And that -- and the cause of the second unit not running or -- was, basically, a loss of recognizing revenue to the extent of about $45 million. So that was one of the main reasons why your consol numbers are comparably lower compared to the last quarter or the year before.

Okay. And what about ferro alloys and silico manganese?

Yes. So I'd like to ask our Senior Vice President to talk about that.

Mr. Sameer, thank you for your question. I think ferro alloys, there were 2 counts for the reasons why the total realizations for this quarter are less than the preceding quarter. One was in terms of production volumes, we had taken a planned shutdown for one of our large furnaces for 15 days. Unfortunately, this -- the shutdown was prolonged due to the second wave of COVID, where there was an acute shortage of industrial oxygen, which we require for restarting activities. So this put together, we lost almost 3,000 tonnes of volume, which we didn't -- which we had in the last quarter. The second reason is, in the last quarter, we had a large opening inventory of almost 10,000 tonnes, which we were able to liquidate. So that's the reason for a higher realization in the previous quarter compared to this quarter.

Okay.

Yes. So I think you had a question on the -- if we're recovering the variable costs, correct?

Yes. Yes. Correct.

Yes. So in terms of that, we are, I mean, on a monthly basis, like you rightly said, we -- today, if you look at our cumulative billing, it's actually exceeded $1 billion from the time we've commissioned. We have realized about close to 60% of that. So on a monthly basis, we're getting about $8 million to $9.5 million every month. That is enough to cover our variable cost, and we've also been servicing interest with the lenders.

Okay. So basically, we are entirely covering variable costs and part of fixed costs or entire fixed costs?

We are covering the fixed and the variable in its entirety, but the only shortfall is to essentially service the loan and in terms of equity return.

[Operator Instructions] The next question is from the line of Dharmesh from QG.

Yes. Dear sir, I have checked the balance sheet. In 2014, we have fixed asset of INR 2,000 crores, and now we have around INR 6,000 crores because of -- we have increased the -- we have done the work in progress. The company was establishing some new plant. But according to that, the sales has not, we see, increased too much. Before also INR 1,700 crores, now INR 2,500 crores. So the sales growth is not in respect to the manufacturing capacity increase. So is our understanding is wrong? Or I'm not getting what is happening actually?

You see, I think the differential was on account of capitalization in Zambia, where roughly about -- we had a capitalization of about $700 million that was done in '15 -- 2015, '15/'16 financial year.

Yes. I mean to say that we have increased the manufacturing facility, but the numbers of sales is not in respect to the manufacturing capacity increase. So our understanding is the simple multiplication, INR 2,000 crores to become INR 6,000 crores. So sales should be triple, or at least, double, but it is not observed.

You see, the Maamba power plant got commissioned in 2016. And we started recognizing the revenues on a commercial basis in the last quarter of that year, that is, '15/'16. And as far as your point of sales are purely related to the power sales there. So those were being captured on a quarter-on-quarter basis since then on a consol number.

Okay. If I simplify my question, when the company will reach the sales target of around INR 4,000 crores, approximately?

See, we probably are talking about almost optimal performance, both in terms of subsidiaries here in Zambia, and at -- and in India, excepting from this slight aberration of plant being down for maintenance and all. So if you look at -- on an operative basis, the Maamba company will turn out revenue of about $200 million, $200 million to $210 million, while the Indian companies will make about INR 1,500 crores. That's how it is.

Okay. So we may see -- maybe in 2023, we may see INR 4,000 crores consolidated sales?

Yes, we were doing, but this year has been an aberration. But next year, yes, 2023 financial year should be again optimal.

The next question is from the line of [ Harish Shah from H S Investments ].

I, basically, have 2 questions. We have seen good performance from the stand-alone entity. And in the press release note, we have mentioned that the domestic power and coal business have been performing well. So can you share the guidance for the year, particularly FY '22? And what would be the trajectory in the coming years? That is my first question. And the second question is, what are the challenges on the production side phase and Tata Steel deal? And how does this impact our margins? Do we have a compensated incremental cost? So these are my 2 questions.