Nava Limited (513023) Earnings Call Transcript & Summary

Yes. So I think in terms of dividend, sir, you need to realize that good times or bad times, we're one of the very few companies that are consistently paying dividend on a yearly basis. I mean same windfall dividend is a little relative, but I think we are proud of ourselves to be paying dividends on an annual basis. So whatever money we get, we definitely will have internal discussions and the Board will decide in terms of corporate [ actions ] that will benefit the shareholder.

Yes. That's encouraging to hear, but the company has been paying dividend not at a consistent rate. It goes up, it comes down, so if you keep the base of INR 6 this year as a base and go up a little every year or every quarter or a interim dividend, that makes sense. The last question was about this manganese buying in Ivory Coast.

Yes, we'll answer the -- I think I'll give it to Mr. GRK to answer the Ivory coast. But in terms of fluctuating dividend, unfortunately, our profits keep fluctuating. The commodity cycles keep fluctuating. So nothing constant and stagnant. So when we get the money, we follow our dividend policy and make the payment.

Ivory coast mine is concerned, currently, the exploration is on. We need to have the full assessment of the reserves, which could happen over the next 6 to 7 months' time by when we will also decide on next course of action as well as this mine is considered.

How much have you invested in Ivory Coast so far?

As of now, not much investment. It's only in a very early exploration phase. So.

In terms of million dollars?

Less than $1 million.

Less than $1 million. Oh, that's fantastic. Thank you. That will be all from my side.

[Operator Instructions] Next question comes from Nikhil Abhyankar from DAM Capital.

Just a couple of questions. What is the state of receivables at Maamba? And can you just give a trend of it for the last 2, 3 quarters?

So the current status of receivables, like we said after we revised the tariff for the month of May and June, we've been paid on full. So the outstanding amount has been -- essentially it's not been increasing. You want the $563 million is the total amount outstanding as of it.

$563 million, what was it about in December and March quarter?

I'm sorry, can you repeat it, sir?

What was it in the previous quarter, just last 2 quarters, if you can give us the number?

In the previous quarter, outstanding receivables was $550 million. The only increment in the current quarter is because of the April receivables. From May onwards, there is no increment in the receivables.

And sir, from when is the new arrangement effective? Do we need any regulatory approval and have we already received it?

No. The new tariff based on our discussions is effective from May 2022. We -- yes, it requires certain approvals from blenders, regulatory authorities and all which are currently underway. But I think the good thing is we've reached an agreement with ZESCO that while we work on these approvals that they will pay us based on the new tariff in full every month, which they have been doing.

Next question comes from [ Patma Sandhiya], an individual investor.

First of all, excellent set of numbers, congratulations for that. We see this result after a long time where in all the divisions have performed well. So I would like to know what's the outlook in NBEIL going forward? And I wanted to see would it remain an opportunistic play? Or there are some concrete plans which are being worked out for that as well?

Yes. So in terms of the 150-megawatt plant, which is under energy, as a company, we're still very bullish on the power market in India. But I think the biggest challenge we currently face is that of fuel. We, in Telangana, have seen unprecedented and very abnormal increases in coal prices. In fact, to the extent it's gone more than 100% within 1 year. And this is what the Collieries do when the tariffs go up. And when the tariffs go down, they still maintain their fuel prices. So we are looking at other alternates where we can procure fuel for the 150-megawatt, which will make it -- where we can run the 150-megawatt at lower tariffs. So while we are looking for a longer-term solution, such as a group captive scheme or so on, there are certain issues and obstacles that we need to pay, regulatory-based issues and obstacles that we are currently facing, which we want to overcome. So in the interim, we will need to basically trade on the IEX market or get into short-term supplies with state utilities. But I think the key thing here is trying to figure out -- or get a coal supply that will kind of guarantee us that we will be making money on the 150-megawatt once we light it up.

Right. Also wanted to know about your new arrangement with ZESCO? Like what is the new tariff rate versus what was earlier? And what would happen to previous amount receivable? Also wanted to know if the company is receiving any bonds or upfront payment. So -- and -- or any onetime settlement amount that as well. So I just wanted to know and have a bit of clarity on that end.

Yes. So in terms of the current deal, like I had mentioned earlier, the tariffs is now $0.0906 per kilowatt hour and this is effective from May, and they've been paying us in full on a monthly basis since then. With the outstanding amount, which is about $553 million, it is currently in the process of arbitration. So I think once the arbitration award comes out, which we hope will be sooner rather than later then I think we'll have to sit down with ZESCO and the government in terms of how they will be paying it either in the form of a lump sum or a reasonable payment plan. But what we have found, that being said, as times are and the situation is different currently than from what we were experiencing, I'd say, even from 6 months to 9 months ago. We have been seeing a certain level of seriousness from both the utility and the government in terms of resolving the situation to the extent where they are proactively also starting to talk to banks, financial institutions, DFIs and so on to take loans to kind of clear a lot of this outstanding amounts.

Okay I already asked that the company has reported good numbers. And I wanted to know like seeing your company, it has harnessed sufficient cash flows as well. So do you think that your company has reached a point wherein we can say the revised amount will be received in continuity? I'm repeating this question, but I would like to know finally what impact cash flows back to India, wherein can be used for further [ cater ] dividends or a buyback?

You're talking about the Maamba Collieries money?

Yes. I'm talking about the Collieries money.

Yes. So I think one of the discussions we are having with the lenders are to also kind of start [ declaring dividends that Maamba ] so those discussions are currently ongoing. Definitely, I think once we get the larger chunk we will look at it to kind of deploy the funds basically in 2 areas. One is corporate actions, which will benefit everyone. And two is also in terms of investing in growth capital because while we are comfortable now, we have to plan during the next phase, we finish 50 years, we really need to kind of plan for the next 10 to 50 years of the company. So we would definitely want to reserve a chunk of that in terms of growth capital.

Next question comes from [indiscernible], an individual investor.

Yes. Congratulations on a good set of numbers. I would like to know if the management would like to throw some light on the health care services we have poured into in the past?

Yes. So in terms of the health care, which we see to be extremely promising down the line, we've seen significant traction basically as pandemic has winded down, especially in Southeast Asia. Year-on-year, we've seen a doubling in terms of the top line. Although it's small, we have -- it is increasing significantly. The wellness centers are doing well. I think the company is evaluating plans in terms of multiplying a lot of these wellness centers in other metropolitan cities within Southeast Asia. And even the distribution side is experiencing significant growth. I think the point to be noted here is this gets us foot in the door in terms of the health care sector. Now the primary objective is tomorrow when opportunities present themselves in the health care sector, we can easily jump on that. So -- and that's basically the kind of objective we are trying to meet. I'll give you an example. When COVID hit, we saw diagnostic centers as a very, very profitable kind of business at that point of time. But without your foot in the door in the health care sector, just to kind of set up a diagnostic wing is very, very difficult. So this foot in the door to health care sector will allow us to really expand in other upcoming health care-related opportunities down the line.

Perfect. That looks to be a promising thing for the company then. My second question is, in the press release you had given, you had mentioned that we are yet to receive some receivables from the South African Power Pool. I think this was the press release, which was given regarding the tariffs revision. So have you received that money?

Yes, we received it. [indiscernible] month of May, we received that now.

Okay. So since the month of May, there's nothing pending from ZESCO to Maamba and whatever sales we have done outside ZESCO also we have received the money.

Yes.

Sir, would you also like to throw some light on the other land parcel you have other than the one in Hyderabad, I think the company also has lands in Dharmavaram?

Dharmavaram land parcel is with a 20-megawatt possession, which has been idle, so we need to have a proper plan to unlock that. One, of course, to look at the -- how the large [ sinter ] plan could be put to use or monetized. So currently, discussions are going on around that space, not probably in terms of outright sale or anything like that but how to put that land to better use than what has been the case.

May I know the extent of land parcel there in the Dharmavaram?

It's about 200 acres. That's, of course, that in 2 companies, one holding company and one subsidiary company.

Okay. And my last question, sir, is I think almost for the last 3 quarters or probably even 4, I think every quarter, we have sold our -- the order book for ferroalloys was sold in advance. So how has that been for this ongoing quarter?

You see whatever orders are there for exports, they are kind of prebooked. We have a long-term contract for exports on a yearly basis. So that's, that goes on. What has been -- there has been a slight dip in domestic order space, but even that also is being addressed as we speak. We see the order book positions to be very comfortable even with this current scenario going forward.

That's all, sir. I think the outlook looks good. Last 2 quarters stand-alone, we have recorded over INR 170 crores. So for an individual investor like me, that takes a figure about INR 700 crores which not many companies in the -- even in the mid-cap space churn. Thanks for entertaining my queries.

The next question comes from [ Abhijeet Shah], an individual investor.

Am I audible?

Yes. Please, go ahead.

So I just have 2 questions. I wanted to know what according to you might be the time frame one should look at when the land or parcel decision would be taken. So as an investor, we have seen that in past everything on the table, we have taken. But we -- but when we go back to square 1, what would the management here say that all these things mentioned in the release can happen in FY '23, except the arbitration things, of course.

It's -- I mean, it's very speculative to kind of tell you exactly when it will happen. Like in terms of the land parcel, like I mentioned before, this is a large piece of land. We as a company are not used to normally selling these, the large pieces of land. They have been -- it's the real estate firms that are the experts on this. So we will go as per the guidance in terms of how to sell it so as to get the best value. I mean, it is in our interest to get these things done as soon as possible, and we will strive for that, but these things take their own time. And that includes the arbitration. That's -- in London it's going underway in London, and it goes through their own process.

Okay. And sir just one more. It looks that we are [indiscernible]. So what's the delta on earnings we can expect in next 1, 2 years? I mean meaningful delta which not every decided of cyclical volatility.

You said right. So we have reached the peak and idea is to do a consolidation of these operations because -- whilst it has done, we are in a serious commodity business where hikes and troughs are pretty common place. So our idea is to see that we have a reasonable control on the inputs. That's where our concentration is at this point, which would help really to help the company sustain the margins as they are as normatively they are. So that is the plan in the next 1 year or so. Then I could say we could probably talk about other things, which actually could improve the delta and thereafter. So at this point of time, it is a consolidation phase, which the company is concentrated upon.

Next question comes from [ Srinivasa Rao], an individual investor.

Thank you. All my questions are answered.

[Operator Instructions] We're having a question from Naveen Jain from Florintree Advisors.

Yes. I had a question on our ferroalloys business. So obviously, the margins right now are extremely healthy and in the last few quarters, they have been really good. But we have seen in the past -- and this is a very broad question. So we've seen in the past that the margins in this segment has been very volatile, right? So given that there are some headwinds right now, as you said, steel prices are also correcting or have corrected. What do you think could be sustainable EBITDA per tonne or sustainable margin in this business going forward? I know it's a very broad question,, but your views would be appreciated.

You're right, actually. It's very difficult to put in number or anything like that. But if you see last couple of years have been pretty good in 2021 up to -- '21, '22 and I mean, current quarter, last quarter, too, which seemed to be the peak of the time as far as [indiscernible] businesses are concerned and of course, there are various reasons for that. But what we could expect is a normative kind of EBITDA could or around 25% that I think is our expectation. It should...

This is significantly higher than what it used to be, right? Just a couple of years back?

No. EBITDA has been around 20% to 25% but of course, net margin could be much lower.

Okay. Sir, other question was on the Zambian operations. So the first quarter's revenue was about USD 65 million and EBITDA USD 37 million. Just wanted to know if possible, if it is handy with you. What was the revenue number for month of May and June? And what was the EBITDA for those 2 months because that is something that you are now getting paid in full. So that is why I wanted to understand that. And that is based on the revised tariff.

Thank you, Mr. Jain. We'll revert back to you on the specific numbers. But just to confirm that we have realized the full revenue that we have built in the month of May and June.

Yes. Okay, sir we'll take it separately. And sir, finally, on the health care thing, I think you have earlier -- in the earlier call, you had mentioned that you plan to invest up to $10 million in that business eventually over 2 years, I think. So does that plan stays? Or are you looking to materially scale that up, given that you have more clarity on your [indiscernible] clarities are emerging?

Yes. So I think earlier we had kind of earmarked, but that is all subject to opportunities coming up. As a company, we always are very calculated in terms of investments that we make and how much will we make. So definitely, we've not used up that $10 million, not even half of it. So when the opportunities arise and it is well on certain expanding these wellness centers and so on, we could consider using some of that for those expansions. And tomorrow, when we see other health care opportunities that arise, we will deploy the rest to capitalize on them.

Okay. Okay. Understood. And are there like any other areas, more areas like health care, which you're looking at, at this stage?

Yes. So within agriculture, one of the things we are looking at -- I mean not looking at, but we are actually executing is growing sustainable fruits and crops at a fairly large scale, one being that of avocados, we see a lot of potential. Prices are just sky rocketing are avocados owing to increase in demand and reduction in supply because a lot of the countries that produce this fruit are going to need water supply and avocados take a lot of water. So the land we have, which is 10,000 hectares in Zambia which is 25,000 acres fits very well for it, it's a lot of water. So if we are looking at a 3-year, 5-year play, which is normally what you see when you get into the agricultural space, we see this area to be fairly promising in terms of up-and-coming sustainable foods also for fruits.

That would be the last question for the day. Now I hand over the floor to management for closing comments.

Thank you all very much, and I would like to also thank everyone for the kind words on the results. If anyone has any further questions, please feel free to contact our company secretarial department. Thank you, everyone.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.