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

Ladies and gentlemen, good day, and welcome to Shree OSFM E-Mobility Limited H2 FY '16 Earnings Conference Call hosted by Atlas Capital. We have with us management today, represented by Nitin Shanbhag, Chairman and Whole-Time Director; Ramnath Chandar Patil, Managing Director; Mohiuddin Syed, Operations Director; SK Singh, Pan India Head; Kiran Mullick, Finance Head; and Mr. Rutul Shah from Atlas Capital, Company's Investor Relations advisers. [Operator Instructions] Please note that this conference is being recorded. I will now hand the floor over to Nitin Shanbhag for opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Atlas Capital, for organizing this call. Thank you, all shareholders and investors and possible investors to join this call. We at Shree OSFM E-Mobility are happy to be a part of this call and share our journey of the last year. FY '26 has been a steady-state growth journey with 15% -- we have recorded 11% growth on a year-on-year basis. We have to accept the fact that, yes, we have committed to the market about 20%, 22% growth. But as we are into the B2B space, some of the large contracts because of the size of the contracts are getting delayed because these contracts have to go through multiple approvals and those approvals could not come through before the financial year '26. And hence, they did not get recorded into this. Second, if you see anticipating these contracts, anticipating these large contracts, we had built up our CapEx expenses generally and our other expenses also shot up. We have a great team now to manage these large contracts. So the cost got reflected, but the revenues will get reflected in the coming months and -- I mean, in the coming years. So that is where you can see maybe the market perceived as that we could not keep up to our commitments. We are in an industry where we -- there are long-term relationships over the last 15, 16, 17 years, and that's what is the steady-state growth. So the growth doesn't -- the top line doesn't come down, it only grows. Now we can either choose to be very aggressive on the growth and thereby taking the other effects that happen on the EBIT positions or the PAT positions. We will continue -- we have learned our lesson in the sense like being conservative, we can commit to the market. We are actually sitting on a very explosive growth. But our future balance sheet or future P&Ls will reflect that. So I would not want to go -- I would want to commit and assure the market that we are on a steady state 15%, 20% growth. Now as far as the other financials are concerned, and I would like to keep it open. If you have any questions on that front, you can ask me. Otherwise, if you're going to discuss financials, I hand it over to the finance team.

Shall we open the floor for questions?

Yes.

[Operator Instructions] Shall we open the floor for questions? The first question comes from the line of Keshav Garg with Counter Cyclical PMS.

Sir, so the first question is if you could tell us that what was the reason for the fall in margins for the last quarter or H2, that would be a good start.

As I said, in my opening remarks, the expenses that we increased to be able to handle the large contracts, the cost stayed with us supporting revenue did not come through in the Q1 time line of the financial year. So the cost remained, but the revenue did not get reflected. It will get reflected in the coming months, in the coming quarters.

Sir, so for FY '27, you would like to give us some idea about your targets in terms of top line, EBITDA margins?

Our top line, as I said, we are a company over the last 22 years, we have had a sustained growth of 15% to 20%. We will continue to assure the market of that assured growth, as I said, assured. But at the same time, we are sitting on an explosive growth. Now that explosive growth is what we were expecting the part of that explosive growth to get reflected in FY '26. that will get reflected. But a 20% growth, 20% top line as well as the results on the EBIT and the corresponding ratios will be in line with that 20% growth.

Understood. Now sir, if we see, we -- I understand we have net cash of around INR 45 crores and our market cap is INR 55 crores. So basic -- sorry, our market cap is INR 85 crores, so INR 85 crores minus INR 45 crores. So basically INR 40 crores is the enterprise value of the business. And we are doing around INR 17 crores, INR 18 crores EBITDA. So basically, I mean, if the stock is available at such a throwaway price, then -- and considering that you had raised equity capital at around INR 137. So why not do a share buyback? So I think that will be in the best interest of the shareholders and will create huge value. So any thoughts on that?

See, as of now, the market cap, how the share price has moved is not under my control. There is shareholders like you probably who have not sold. Okay. There is a social media -- there's a message that is going viral that somebody would have invested INR 10,000 in Wipro in 1985 would be an owner of INR 70,000 crores or something. People only look at the figure. They forget that it was a 45-year wait. All these ideas are good. We will consider this. We are focusing on developing and growing our business. That's what I said. The markets will be shocked and surprised at the growth that are going to come in, in the next coming years.

Sir, now last year, there was a news item about some fund diversion in SME IPOs that SEBI had here in which our name was also there. So I think that has also gained the investor confidence.

Can you -- I think these are all rumors. Was our company name specifically mentioned there? [indiscernible]. Yes. Shiva will give a clarity on that, and Abhishek will give clarity.

Sir, that was a news item, but we -- as on date, we have not received anything from NSE or SEBI regarding that. So from that itself, it comes to know that it was a rumor.

Sir, understood. But sir, I'm just giving your feedback in good faith. I'm saying if our stock price is at all-time low, then it is just reflecting the market sentiment. Now I understand that these rumors are not in our control, but what is in your control, you can do that and doing a share buyback is in your control because you have a cash-rich balance sheet. Now the question is whether...

I'm sorry, I'm interrupting you. We are not considering that.

Next question comes from the line of Shikhar Mundra with Vivog Commercial Limited.

So my first question is like how many vehicles do we have in our fleet total and how many have -- which are being owned by us? Because I'm seeing the percentage of vehicles being owned by us, I think that's increasing in the last 2, 3 years because I can see your depreciation has really shot up. So -- and so can you explain me how many vehicles we have and how many are owned by us and how many you purchased this year?

Thank you. You've been a long-term investor and you have really -- it's a valid point. See, try and understand that we are 95%, 96% an asset-light company. But there are points presently, we own 315 vehicles. But as the EV market was exploring, the EV market has not gone into an asset-light ecosystem. If we were not to buy those vehicles on our books, we would have lost the opportunity from a client -- from all our clients. So just to keep that mandate on, we bought about 95. See, the total fleet that we have is presently 240 vehicles. 75 vehicles got added in '26.

Okay. How many vehicles I missed that? How many do you have?

That's 315 vehicles.

Okay. And it. And what's the plan for the coming year? How many vehicles we plan that?

See, right now, we are going to be -- we are assessing the market. As I said, the key is going to be the -- I'm sure there is news all around that the government is pushing and the government is encouraging fleets to move to electric vehicles, okay? And the electric vehicle market is going to really burst. I mean it's really going to be going. Secondly, the best thing that has happened is you have great vehicles earlier, there was a challenge. That's why there was a slowdown in terms of vehicle offtake. Now we have great vehicles, which are 400 kilometers plus and at a reasonable pricing. Customers are ready to pay us that price. But we continue to be and we will continue to be focused as an asset-light company. If at all, there is a contract, if the returns on investments are justifiable, then only we will go in for the asset-heavy model, owning the asset on the books.

Got it. Got it. Sir, my second question is on the margin. I understand we have got a big team, so employee costs have hit us. I understand that part. But if I'm just comparing the gross profit, which is revenue minus operating expenses, for March of this half FY '26 and March last year, I still see the gross profit has also decreased, like it's INR 14.3 crores versus INR 15 crores last March. But -- so why has that happened? Because operating expenses must be the variable cost. So why should that happen?

No, no. Exactly. Shikhar, you are correct in that. See, one is that, that large contract that we are See, I don't want to comment on that right now, right? But the client played it smartly in terms of that large contract benefit, they wanted to test it out whether it is sustainable. Okay. So they asked us to give that price benefit to them effective before the contract got signed. Because they had a little apprehension about how will the contract or will the operations be profitable or from the size of the contract for the discounts that we are looking at giving them, which we have already given to them. Okay. So they just wanted to test. But unfortunately, from a business perspective, we ended up -- so now we are 100% confident about that explosive growth because we have learned to sustain that particular benefit that we passed on to the client.

And Yes. Can you please speak about the team like -- I mean, you talked about hiring a new team and getting new members. So I mean, what kind of people you have got on board? And these are like employee cost, which we are looking at H2, that was all factored in all the hirings and all?

Correct. Correct. That was all factored in because of this explosive growth. Now Mohiuddin sir comes from a background of managing 10,000 vehicles, 1,100 buses for the corporate for the last 17, 18 years. In fact, we are lucky to have him on board to have joined the company because he's seen our direction very clearly. He's a very career-minded person. He's there in the room right now, okay? And post that, that is -- he joined us only because he sees explosive growth within the company and the capability of the company to achieve his career goals as well as the company career goals -- I mean, company's goals that are there. Then we have had a business development team across South. We have a business development team in Bangalore. We have a business development team in Hyderabad. We have a business development team in NCR, which are a major. All along, we were only focused and we did not create a depth in these markets, though we have businesses in these markets. Now we are creating depth in these markets.

So the employee benefit expenses of like INR 4.82 crores that for H2. So that's basically almost INR 10 crores in a year. So all these business development teams and the new hires, everything is being reflected in this?

Sorry?

Everything is being reflected in this, the INR 10 crore annual employee expenses, which we are showing right now.

Yes.

And a bookkeeping question about this balance sheet entry loans and advances, that has kind of -- I think that's in line with the proportion -- all right. Got it. And sir, last question about that -- so which was discussed, you have no plans of buyback. That's fair enough. We have expressive growth plans. But we also have to understand as a business, right now, our capital employed in the business is hardly INR 20 crores, INR 30 crores because if I remove the cash on the balance sheet, which has not been employed in the business, so -- I mean, our core ROCE of our business is very high. Like we are doing a revenue of INR 150 crores is a INR 20 crores, INR 30 crores of cash employed. So even if we have to double our business like 2, 3x from here, we still have a lot of cash, and we are generating a lot of cash every year. So going ahead, what kind of capital allocation plans can we expect? I mean...

Sir, we have conserved that capital for the explosive growth. As I said, if we were to -- if that explosive growth would have not recorded in the year '26, you would have seen our working capital requirements substantially higher, okay? Secondly, we also had inorganic plans. The discussions were on. But we did not find the deals are still not closed only because we find the pricing not reasonable or conducive to the plan that we have or the price that we are ready to pay. So we have taken the conservative approach of conserving the cash rather than going paying a high price for acquisition. So I think we are slowly gradually getting out of a very conservative DNA in the next 1 year or so. See, an explosive growth will get reflected. But from a commitment side, we are committing to you a 15%, 20% growth.

Next question comes from the line of Vinayak Kudva with Virtuous Capital Limited.

My question is specifically to RC Patil. RC sir, [Foreign Language]?

Vinayak sir, good afternoon. [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language].

[Foreign Language].

Next question comes from the line of Keshav Harlalka with BHH Securities Private Limited.

Am I audible?

Yes, you are.

So my few comments, investor presentation on NSE website should come on the same day as results are announced, and investor call should be organized on the same day or next day as results are announced. That is my #1 suggestion to you. Number 2 is, can we have results every 3 months? Because sir, yours is a business where we don't have cement. We don't have a lot of -- it's not an infrastructure business. It's a vehicle business where every day you know where your profits are, where -- what your billings are, what your bottom line is top line is, you know it every month, you have a billing, which is very, very effective. So for you to give us results every 3 months with an investor call and investor presentation, it will go a long way in inspiring confidence in investors to be invested in the company. And as you are saying, explosive growth is coming ahead. and you are primarily based out of New Bombay. So there's a new Bombay Airport also which is coming up. So are we going to participate in any tender? Is there any possibility of any good news from New Bombay Airport, any tender coming our way? That is one question. The second question -- the first to a suggestion. Second question is, what is the guidance? Can you give us some numbers, some guidance on top line and bottom line? And can you give us an update on Uber and Flex Bus? So last year, we had a pilot project, which was rolled out. So is there any uptick on the pilot project? Are we getting into -- is this going to contribute significantly this year to our top line and bottom line, Uber and Flex Bus? And yes. Yes. So depreciation, can you give us some update on depreciation for this year? Because last year, we had elevated depreciation.

Okay. We will ensure that we do the uploading and things so that as per the accord I understand investors should have -- so thank you for that suggestion. In fact, our CS, Mr. Abhishek is sitting with us. He has already noted that and our future conversations will happen accordingly. Secondly, your question was in terms of -- as I said, our guidance is conservatively 15% to 20% top line because the explosive growth is something that is definitely there. But instead of me committing and again, it's getting pushed. Now I understand there is some very good news that the possibility of a war and things like that is getting over now, okay? So I don't think so. In fact, one of the reasons was that the business that we are in, fuel is one of the main components. So today, I can understand -- and when I spoke to our clients, they said that in this kind of a thing, if you're taking up the contract, the large contract and then all of us are going to face that problem. So that's why one of the reasons why it got pushed the decision-making got pushed, the contract finalization got pushed, okay? What was one more -- what was the other question? So I've given you a guidance of 15% to 20% conservatively. -- explosive growth, yes, we will be the first ones to show from the rooftop, okay? And airport, Asha was handing that to he has a clarity. I think he's given you so much. I think you were a part of that. Navi Mumbai is an explosive growth happening. So airport also, the airport, let me be honest with you. Airport was something that got pushed on a fast track. So the entire infrastructure of airport compared to what infrastructure is presently available in Mumbai, that is the E1 and 2, that will take some time, not in a number of years, but maybe in the number of -- maybe in months. So right now, getting into those contracts because they are fixed price contracts, irrespective of what the numbers are, we'll end up paying a huge amount even before the revenue flows in.

Yes, sir, got it. So right now, our market cap at the current price is INR 85 crores. It's below the IPO price. And we have INR 55 crores of fixed deposit in our books. Is that correct? Less the loan, so we will be around INR 40 crores of fixed deposits. So the business value is only INR 45 crores. Am I right to make that statement, sir? Our market cap is INR 85 crores at the current market price. It's below the IPO price. And we have INR 40 crores of net fixed deposit in our books, the fixed deposit less the loan. So we have a INR 40 crores of net fixed deposit? Or is it a higher figure or a lower figure? Can you give me the numbers?

The balance sheet, which is reflecting the amount is the correct figure. If you can see the net worth is around INR 85 crores. Apart from this fixed deposit, there are also advances. If you will go through that thing, then the combined figure will be INR 85 crores.

So net worth is INR 75 crores?

Yes, it is equivalent to the market capital which is right now.

So we are basically getting the business free of cost right now. The asset value by NAV is INR 75 crores and the market cap is INR 85 crores, which is below the IPO price. Got it. Sir, just one last question I have. It's a little speculative. So BlueSmart has gone out of business. There are a lot of MGZS EV cars, which are less driven. So is there any possibility of our taking MGZS EV cars in our books, which has a range of 400 kilometers plus where we have a clear title present with no further litigation. Is there any possibility of considering that if we get the opportunity?

See, we were exploring that opportunity, but that is too complicated because the company has gone into NCLT and all that, okay? So we're getting into that mess would have further created a lot of problems for us. But yes, from a positive side, the vehicles are excellent. Part of our buying has been we have bought some ZS EV vehicles for our business and the results are excellent. Okay. So from a vehicle perspective, good. From a BlueSmart perspective, no. Those vehicles, no. But from a vehicle perspective, yes.

Got it. Sir, can you also upload the investor presentation for this current year because as we speak, it is not there on the NSE side, and that's all from my end.

The next question comes from the line of Dixit Doshi with White Stone Financial Advisors Private Limited.

Sir, my first question is, if you can break up out of our total revenue, how much is employee transportation, ETS and how much is a chauffeur driven car?

I'm sorry, can you come again with your name, please?

Dixit.

Dixit saab, we are basically 94%...

[indiscernible].

So 95% is [indiscernible] and 5% comes from the car rental business. Okay. I'm sure you are a part of the entire conversation. Part of our inorganic growth was to acquire a company which has been there in the market, has a very good name. We have very good business relationship with them. But because of the pricing, because of the valuation metrics, not pricing, valuation metrics, which we found was very expensive. But luckily, over the couple of conversations that we've had with the owners, we find that they have also come down to a reasonable level. So that will be one of -- so having -- we are going to be acquiring just to add that particular division at a larger scale. That will contribute about 20%. Our revenues will be 20% from that vertical.

Okay. 20% revenue can come from the CTS business because of this acquisition, if it happens?

Yes.

Okay. And in this employee transportation, which is 95% of our revenue, is it mainly done through buses or we do it through cars as well?

No. It is mainly through cars. It is mainly through 4 seaters and 6 seaters. Okay. And buses also, but buses, the number of buses I mean, in the entire thing, the buses would be about 7% or 8% of the total requirement. The rest is all small caps. Our fleet size is about 3,200 pan India.

Okay. 3,200 cars. Okay. And my next question is, I just went through your earlier presentation. We do have some relationship with Uber and Flex Bus. If you can explain that a bit?

Correct. Correct. This was -- we wanted to get into the B2C market. So we already have contracts signed with Uber as well as Flex is interstate buses. This is an international company with interstate buses. And interstate it's a very big market. So we got this opportunity. We launched both the verticals, and we have had sufficient experiences now. So as a part of -- so these 2 verticals are also as a part of our vertical expansion.

Okay. So here -- okay, this is for B2C and not this what we are doing ETS and CTS Uber, what will we will do basically? Because see, any cab for Uber partnership, partnership with Uber, what service basically we will provide? Because I think any cab driver who is the owner of a taxi, he himself can do -- himself can be a partner of Uber. So what...

Uber, as you see, one is the business part of it and one is, I'm sure all of us have used Ola or Uber or Rapido at any point of time, right? Over the period of years, you would have seen the quality of cars, the quality of drivers is deteriorating, especially the quality of cars, right? That's because of the control factors. It is very -- it is next to impossible to manage a large fleet of 1:1. So in certain specific segments like Uber corporate, they want to have high-quality vehicles and drivers. So that is a line of business that they are exploring in India, and we are a part of that business.

Okay. But currently, these 2 partnerships contribution in our overall revenue would be how much? Would be less right now.

I mean in the overall scope of things, probably it's about INR 1 crore or even less than that.

Okay. Okay. And my last...

I'll tell you, these were -- we were always into a B2B. We had to gain our own learnings on a B2C before we commit to the partnerships because these are large international companies. Okay. Now we are confident of taking it to the next level. But as we already have -- I mean, we have a huge possibility within the B2B space. We are not very aggressive on these 2 verticals as of now. But yes, we will continue to have those partnerships.

Okay. Okay. And my last question, in all the B2B agreements, so what we have seen recently is the price -- the increase in the fuel cost. So how does that will go ahead from, let's say, H1 of this year? How frequently or how easy to pass on this fuel increase?

See, the best part about B2B is it's a part of the contract. Any result on fuel increase is already incorporated in the pricing. So that's the last of our worry. Okay. It is directly -- I mean, usually, it is INR 50 to INR 1. Any hike by INR 50 or INR 1 automatically gets reflected into the pricing.

[Operator Instructions] Next question comes from the line of Sunil, an individual investor.

[Foreign Language]?

IT industry and airline industry.

Okay. Second question is, what is the average utilization rate of the vehicle fleet?

[Foreign Language]?

[Foreign Language].

Sir, average unit economics, [Foreign Language].

[Foreign Language] What percentage of revenue comes from the top 5%?

We have an equal spread of revenues across. [Foreign Language].

Okay. And what percentage of the fleet is electric right now? And what is the plan for next year?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language].

[Foreign Language].

Next question comes from the line of Anurag Gupta with [indiscernible].

First of all, sir, congratulations for amazing set of revenue growth that you have shown in this year. And I also believe that the increased expenditure on behalf of salaries of the people that you have hired for the future growth is also going to show beautiful color this year. I think Shanbhag sir and Patil sir, I think the best -- the only justification for the high cash reserve that you have right now, the only argument [Foreign Language]? Now sir, I feel that the next question is that [Foreign Language] there is some rumor [Foreign Language] so I just want your comments on that.

[indiscernible].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Operator Instructions] Next question comes from the line of Keshav Harlalka with BHH Securities.

I just want to add that this question what the earlier investor had asked is not appropriate because Nitin Shak, sir, has disclosed on NSE that he bought some 20,000 shares at INR 85, if I'm not mistaken. Can you give your comments on this, sir? Nitin, sir? That you have bought in your own name some 20,000 shares at INR 85. This was a disclosure on NSE website. So if you're looking to exit why would you buy shares of your own company?

Absolutely.

So can you comment on this? What exactly is the status? Have you -- how many shares have you bought at what price? Because this is something disclosure which has gone out to NSE.

I'll just give you the detail. [Foreign Language].

INR 85, right? Shanbhag sir has bought in his own name.

Promoter...

Got it. So this question itself is inappropriate, because sir has bought share, he has not sold any shares.

[Foreign Language].

[Operator Instructions] Next question comes from the line of Manish [indiscernible], and individual investor.

[Foreign Language].

Sir, regarding ONGC, [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language] I am betting on the fact that the TCS, the Wipros, the Accentures of the world, the cognizant of the world know much, much more better about their business than we know. We just support them. Okay. So the headwinds that are there, they are in a better position to face that. So if there is no alert or there is no what you call bad news from that sector, why should I be worried about this? Everybody in GCC is coming into India, it's a big opportunity. In fact....

[Foreign Language] so do we have a plan to kind of better mitigate that challenge? [Foreign Language]?

[Foreign Language].

[Foreign Language] Just a reiteration [Foreign Language].

It's well noted, sir, you'll see the [indiscernible].

We cannot comment on a quarterly basis, but yes, investor meetings will be regular.

Next question comes from the line of Apoorv, an individual investor.

Sir, I just have one question. In our books, we have around INR 20 crores of loans and advances. If you can explain what it is for?

My finance team is going to take over now to explain that. Loans and advances, right?

Loans and advances [indiscernible] include PBS, which has been deducted by the client that is the substantial amount that is 2% of the turnover. And another thing is the advances given to the vehicle towards the fuel. And another thing is GST, which is the figure of loans and advances.

Ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. I now hand the conference over to Nitin Shanbhag for closing comments.

Thank you, shareholders. Thank you, investors. Thank you, everybody. It was a very heartening and very good -- but my request to you is that we are on a good growth path. We have just started our journey right now from a stock market perspective. And we have 22 years of our time that we have spent in building this business. This is just the beginning. The company that you have invested it is in very strong hands, very capable people. And we are lucky to get very good capable people now onboarded. So the growth journey of this company is an assured growth journey, which will get reflected. So Atlas Capital, all shareholders, yes, we will keep communicating with you, meeting up with you. And definitely, we would like to meet our shareholder family in person, and we will shortly plan for that. So let's hope we have to catch up. I have a cup of coffee, just like Vinayak said, all those who can meet us in person, you're all welcome to come to our office. Let's have prearranged meetings and let's have a good, great business journey. Thank you. Thanks to all. Thank you very much. Have a great day.

Thank you. On behalf of Atlas Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.