Shree OSFM E-Mobility Limited (SHREEOSFM) Earnings Call Transcript & Summary

Good afternoon to everyone, and welcome to the investor meeting of Shree OSFM E-Mobility Limited. With over 2 decades of expertise, Shree OSFM E-Mobility Limited is a leading provider of end-to-end logistics solution for employee transportation. Its services include travel desk management, rosters, fleet management and event logistics, tailored to diverse client needs. Operating across 42-plus sites in 12 major cities, company manages a fleet of 2,700-plus vehicles, including sedans, SUVs, buses and eco-friendly offices, supported by 3,500 trained drivers. By leveraging a light-asset model, GPS technology and data analytics, it optimizes operations and enhance the user experience. Quality is integral to its operations with the certain protocols for vehicle inspection, driver screening, skill enhancement and fleet monitoring. Shree OSFM clients portfolio features top-tier corporations like JPMorgan, Morgan Stanley and Accenture. Its excellence is recognized through numerous awards, including award from Navi Mumbai Transport Department, IBM, Accenture and Wipro alongside our CRISIL ratings of 1B. For H1 FY '25, the company reported a total income of INR 69.89 crores with an EBITDA of INR 9.18 crores, resulting in an EBITDA margin of 13.33%. The net profit stood at INR 4.78 crores, translating to a net profit margin of 6.94% and EPS is INR 3.92. I now hand over the call to management to give future plans of the company. Over to you, sir.

Thank you, Sakshi, and thank you for the good introduction. For those who have joined new, Sakshi has already given us an introduction. For those who have been already participated in earlier conferences, they know what we are. And right now, today's meeting's focus is our road map till '25 for the next quarter. We have our entire team out here. My Managing Director is here, Mr. R.C. Patil; our CFO, Mr. Shivasandhi is here; our Finance Head, [ Kiran Malik ] is here. So this will be more in terms of -- I'll just lead -- start the thing saying that we are on a growth trajectory. We are going to maintain and do much better than what we did last year. But of course, from a detailed financials, if at all is required, Shiva will share in terms of what our road map is. Mr. Shiva will share what the road map is. So I'm handing it over to Mr. Shiva. Shiva sir?

Good afternoon, everybody. I'm myself Shiva, the CFO of Shree OSFM E-Mobility Limited. Going ahead, as our DNA is basically an asset-light model, and we are going to continue the same going ahead also. The next -- like last con call, we had an -- our team was preparing for 9 new clients to be across different geographies. Out of that, 3 are -- we have already finalized and the rest are in pipeline. And on the EV space, as we go ahead, we are -- each client-wise, we are looking at the requirement. Some clients have mandated that at least 20%, 30% of the fleet has to convert into EVs. So that we are working on a very strong note. But there are challenges on EV platforms because of charging, then the service levels. There are issues we are looking at, and we are interacting with the companies to how to go about it. Based on that, our investment will be majorly in EV platform -- EV vehicles as well as infrastructure going ahead. That is a rough plan going ahead for next 1 or 2 quarters. And our MD will like to add something. We can go with the questions, I guess, Sakshi.

Sakshi, would you like to open the forum?

Sure, sir. Yogendra ma'am, please.

Yes, Shikhar, sir, please go ahead.

So I'm sorry, I missed the opening remarks because of Internet connectivity issues. So if the question is repeated, I'm sorry. But just wanted to understand like what is giving us this -- you have so much confidence growing organically at 30% for the next 3, 4 years?

Yes, correct. You're right. So we will maintain the 30%. The aggressive growth that we are looking at, which is what we have started investing in it right now. Okay. Right now, in the sense, in the last -- see, we are into a B2B business when there are large transactions that happen, the selling cycles and the closing cycles are slightly longer.

Okay. Okay. So I mean, what exactly will be our moat? Let's say, if I compare us to any of our big competitors who are bigger than us and let's say, if both of us go to a particular competitor -- to a particular client to pitch for a new business. So I mean, what is our moat that we feel that we will be able to win that business versus our competitor?

[Foreign Language] So Shikhar sahab, I understand we are also completely focused on growth. Growth is -- see, our approach has always been conservative estimates and outperform. [Foreign Language] So we are on track. [Foreign Language] See, EV is going to be an investment model as of now. But we have been -- our approach is a little conservative approach in terms of, if we become too aggressive, okay, please understand for all stakeholders and for all, EV is a new elephant in the room, which is not just vehicle, it is also the ecosystem of charging and all. So if we, as a company, decide to do everything together, then the volumes will be low because you would have invested in the vehicles or outsourced in the vehicles or outsourced in the infrastructure, outsourced in the technology. So our model is we are focusing on our strength of outsourcing and [ picking ] parts which are fixed. See, we, as a company, have not kept the -- see, we are 4 months away from the financial year. But we -- as I said in the last -- I think you were there in the last conference call, right?

Yes, yes.

Because we need a longer horizon, we have a 16 months, that is '26 financials and a quarterly update to all our stakeholders, including our own teams. Because that's a fair enough runway for us to reach there. Sir, 30% would be a low-hanging fruit. [Foreign Language]

[Foreign Language] Like if we are saying 30% is easily low-hanging fruit, but the industry might not be growing at 30%, obviously, because that's a very high growth rate. So I mean, what is giving us the confidence of gaining market share so easily because our competitors might also be pitching to the same clients.

We have been in the industry for 21 years now, okay, 23, right? [indiscernible]. So we are -- see, where -- if you see our competitors, we started -- compared to them, we started with a low base and a high customer retention. Now if you see our pan-India kind of a thing, because we are Bombay based in our entire thing, top line, Bombay, our clients have given us maximum business in Mumbai. Pre-going public, because of the working capital availability, limited working capital availability, we spread across India, but with only select clients. Now in the B2B segment, how it happens is that the moment a good service provider is able to ramp up his capabilities in those particular cities, geographies where they want us as vendors. It's -- for example, now all the clients that we have, because we are a pan-India company, we are agreement signed pan-India. But operations, just the agreement, we are in a service business. For example, now Accenture, I've signed pan-India. [Foreign Language] It's not that organic growth. When we started, we would start a client with 10 vehicles. [Foreign Language] Because it's a service industry.

[Foreign Language] There might be some vendors [Foreign Language] that will -- that market share will come to you because you consolidate it.

Exactly. [Foreign Language] Post COVID -- post the pandemic, the financials of small vendors have really shaken up. And our clients have realized that in terms of business continuity plans, it is better to have bigger vendors rather than have smaller vendors. [Foreign Language] We took all the precautions. [Foreign Language] So these were all learnings from a client perspective. From a shareholder perspective, we are overcommit and then I underperform, that would reflect very badly on us. Secondly, EV is a new ecosystem completely. All of us understand that, right?

So EV, have we worked out some plan? [Foreign Language]

600 vehicles and 120 charging stations.

Okay. And what would that work out to be like 1 charging station would entail how much investment?

See there are 2 ways to look at it, Shikhar sahab. Vehicle is a 3 year, 3.5 years, 48 months [Foreign Language], but charging stations 10 years horizon, because charging stations are going to be independent of our business. Charging station is nothing. It is neutral. [Foreign Language] Okay. So that will be an independent line of business by itself. [Foreign Language] So that is exactly our future line of business with the support of the present business. So this is where we are right now. But it's expensive buffer. [Foreign Language]

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[Foreign Language] You are owning that vehicle?

No, no. We prefer. That's where it is taking us slightly longer. We are creating a pool of something called sub-vendorship model and sharing the responsibility.

So the taxi guy is the owner. Who is the owner?

Yes, yes. They will be the owners. We will be supporting there through negotiation with lease companies where we will have a collateral kind of a thing will be a 3-party agreement saying that business will be -- confirmed business will be given by us, okay? Vehicles will be owned by them, and we will support it in the event of that driver not able to run the vehicle or operate the vehicle profitably, we will arrange another driver or another owner for that.

You are getting some portion of the revenue?

Yes.

Sir, just one last question, Shikhar, this side. So just -- I mean, are we working out some dividend policy also because we are generating a lot of free cash flows. So I understand investments here. But at a company level, are we thinking of dividend policy?

Sir, it is under discussion right now because once our financials are in place, our CapEx and all that are in place, we would be having -- it is, of course, under consideration. The fruits of labor has to be distributed among everybody. But right now, it will all depend on our CapEx. As I said, we have 2 models. One is this. So just like sir asked, I think it is right, Mukesh JI. Yes, Mr. Mukesh asked us. So this is a fine balance between CapEx and OpEx. The model that I was talking to Mukesh sir was an operating model. If we are very successful in that, then we will be able to use that CapEx in creating the infrastructure, then we will have a sufficient thing. So the team is working on that, sir. I think by the time we have our next quarter, I think we should be able to do that announcement whichever way it goes.

[Operator Instructions] Mukesh sir, you have an inquiry?

Yes, because see, I'm investor in BluSmart. And there, they are saying to you the CapEx is high -- the model is like purely CapEx. And there, they are saying that they will make money only after 2 years or something like that next year.

So Mukesh sahab, you should have invested in us.

I'm just -- that's why I'm attending today.

Mukesh sahab, I understand there are 2 parallel industries going on the way EV is developing. One is a cash burn on a top line and one is a cash earn. 23 years, we have done cash earn. [Foreign Language]

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[Foreign Language] Just sharing of the revenue and you are getting that confirming business to them.

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I will come. I will come down.

[Foreign Language] See, we want investors who are informed investors. Thank you Mukesh sahab for giving us. [Foreign Language] So we don't want to make the same mistakes. Yes, ma'am?

Anyone else?

In the last conference call, you were mentioning something about an acquisition that you were looking forward to. So have we finalized something yet? Or are we still searching for it?

We are -- see, like I said in the last conference call, we want to buy it at the right price. Unfortunately, our success of IPO, those valuations, the companies feel that they should also get the same kind of a thing. That's why -- which is not in our part of this. Right now, it's not fitting into our budgets that we have made for acquisitions.

Yes, sir, that does make sense. And I have an opinion on the dividend policy. So I would actually like you to invest more into the company instead of forming a dividend policy because us being a small company, I would rather have us grow faster than pay out the money to our shareholders.

This is exactly -- thank you. Thank you for the guidance. And I'm glad that we have investors who think on both sides, right? And trust me, your money is in safe hands. We will take the right decision. We will talk to concerned people about which way to go. As you rightly said, right, everyone is right, nobody is wrong. But as you rightly said, we are not looking at a short-term horizon. It's just the beginning. So we will take the right call, sir. And I'm sure everybody will appreciate the calls. And if at all, we will justify why we took that call. You have a beautiful place.

Sir, there's one question in chat box. I'm reading it. Funding for the acquisition, which we are looking while -- I'm repeating the question. Funding for the acquisition, which we are looking will be for internal accruals or external sources? This question is by [ Ratnam Jain ].

Ma'am, we are -- see, right now, that's why I said in this conference call, I was continuously mentioning. It's like a walking on the thin rope and looking at both the options, right? Right now and that's one of the reasons why we are a little slow on the acquisition part of it because we feel that they are not rightly priced. They are overpriced right now. And if at all, we have to go for that acquisition, we would have used more of our money that would rather we use for our own CapEx.

Let me add that question -- answers that we are going to fund the acquisition through internal accruals only. We're not looking at, again, raising funds for any acquisition currently.

Rajiv sir, do you have any more questions?

Yes, I have a question. I'm also an investor in BluSmart. But unlike BluSmart, I'm very happy to see some positive numbers on your operating profit. And my question is to that, that are we planning any margin expansion plans because your profit almost looks like the Fibonacci series, it's even better than that. So if you can highlight that...

Sorry, I didn't get you. Aniket, can you just repeat it? Yes, I know profits look good because we are -- our DNA is profit making.

So any plans on margin expansion?

Of course. That's [indiscernible] That's why this balancing act of top line versus PAT, one thing I can commit to you and the entire group that we will not go in for a blind expansion at the cost of PAT. We'll have a healthy balance between expansion and PAT. Yes, which means your money invested in us is safe. One more thing I would like to inform all of us, our social media presence, our interactions not only through -- because everybody suggested that they would be more interested in knowing about us on a monthly or a basis, and we will be proactive to that. So the top management team is creating a good presence on the social media through LinkedIn or through other areas. We will continuously keep posting what our growth prospects are, what is it that we are doing on a monthly basis, weekly basis, 15-day basis. And the investors will not have to wait for a month or a call or 3 months or 6 months. As and when things happen, good or bad, we will keep our teams informed. Our stakeholders informed on a regular basis. And Sakshi and her team are going to be helping us to a large extent to do that, correct?

Sure, sir. We are very glad to be working with you.

Yes. Thank you. Thank you. Kirin Advisors has been a great help and they have speeded up the process. They are after us to be -- they chase us to do things, and that's really good. Thank you. Any more questions?

Shikhar this side. Just one last question. So I wanted to understand a bit more about operating leverage present in the business. So our -- I understand a lot of our back-end infrastructure might -- the current back-end infrastructure we have is good enough till reaching what scale?

No, we are investing heavily. See, right now, it's work under process. I think 90% is done. 75% or 80%, yes. So our back-end infrastructure is INR 1,000 crores.

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Shikhar sahab, it will be a continuous investment process. Now with technology, with every passing month or every passing 6 months, technology is being upgraded. Yes. So there is a must-do and there is good-to-have. We have gone through the must-do phase. Now we are into good-to-have phase.

Okay. Okay. Yes. So I mean, I was trying to understand like what kind of margin expansion we can look at it, I mean, with scale?

You're talking about margin expansion?

Yes, margin expansion. So some of our costs might be fixed. So I was thinking on those terms, sir.

Yes, I understand, Shikhar. But I'll be able to give you those exact figures. Right now, I'm in an open-ended public forum. It would be shared. But as I said, please understand all our investors, we are a profit-making DNA company. [Foreign Language] So thank you, shareholders. Anything else? Sakshi?

Sir, we'll conclude this call?

Yes, please.

Sakshi, please do the closing remarks.

Yes. Thank you so much to everyone for joining this call for Shree OSFM E-Mobility Company for today's investor meeting. For any related updates or any queries you have, you can reach out to us at [email protected]. Thank you, everyone.

Thank you. Thank you. Thank you, all. Thank you, shareholders, for taking time out. Thank you, [Indiscernible]. Thank you, all.