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MSTC Ltd
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Ladies and gentlemen, good day, and welcome to the MSTC Limited Q1 FY '21 Earnings Conference Call hosted by Equirus Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushabh Shah from Equirus Securities Private Limited. Thank you, and over to you, sir.
Thank you, Faizan. And good afternoon to everyone on the call. On behalf of Equirus Securities, I would like to welcome you all to the Q1 FY '21 Earnings Conference Call of MSTC Limited.From the company, we have with us key senior management team, including Mr. Surinder Kumar Gupta, Chairman and Managing Director; Ms. Bhanu Kumar, Director, Commercial; and Mr. Subrata Sarkar, Chief Financial Officer and Director, Finance.Without wasting the time, I would like to hand over the call to the management team for their opening remarks, and then we can open the call for the Q&A. Thank you, and over to you, sir.
Yes. Good afternoon, everybody. I'm S.K. Gupta, CMD, MSTC. With me are our Director, Commercial, Madam Bhanu Kumar; and Mr. Subrata Sarkar, our Director, Finance. We have declared our Q1 results yesterday in the Board meeting held, and the detailed presentation regarding the earnings and the revenues will be given by our Director, Finance. As everybody knows that this quarter is not very good for our company also as is for the economy at large. Although MSTC is an e-commerce company and our operations or e-commerce servers were all running all the time during this complete lockdowns or even partial lockdown, but the customers were not able to avail the services because of the restrictions for picking up the materials. So that is why the results are not encouraging in that sense. Similarly, for our subsidiary, FSNL, which is primarily based on steel plants operations, so there also because the steel plants operations were affected adversely because of this pandemic, so similar thing has happened there also. So their earnings have also been adversely affected. We all hope -- we all wish that the things will get to normal very soon. And the business climate has taken a beat, especially in the -- especially from the month of August. So hopefully, we are expecting much better business in the second quarter and next 2 quarters for the current financial year.So with these opening remarks, I'll hand over to our Director, Finance, for the presentation on the financial results, Mr. Subrata Sarkar.
Good afternoon to everybody. As our CMD has narrated that this was very difficult times not for only our company as well as for the whole -- economy as a whole. So anyway, we tried to do the best as we can from our side. So these are the certain highlights that I'd like to point out.First, the operational performance of the stand-alone. So let us go to the volume. During the quarter 1 '20-'21, the company grossed INR 57.43 billion in terms of value of goods transacted through its marketing and e-commerce vertical, which is 73% decline over the value of goods traded in quarter 1 '19-'20. And accordingly, the consolidated revenue was INR 1,017.93 million in quarter 1 as compared to INR 4,854.14 million in quarter 1 of the corresponding period of previous year. So decline is almost 80%, largely driven by our degrowth in the marketing business. This was a conscious decision of the management. The PBT is INR 4.58 million in quarter 1 as compared to INR 453.54 million in quarter 1 '19-'20.So in the business update part, COVID-19 pandemic and lockdown protocols have led to several disruptions during this quarter. Being an e-commerce service provider on infrastructure and facility front, MSTC was ready to provide the services. However, at recipient end, there were disruptions affecting both the turnover and the profit during the reporting period. Therefore, the performance of the company for this quarter is not comparable with the corresponding period or any period of previous year because it's a very exceptional situation that is prevailing in the whole ecosystem throughout the world.The scrap auctions were also not much during the period, which actually forms a substantial part of our earnings. However, there were auctions for coal, timber and iron ore, but the volumes were quite less and giving us a less remuneration.In the meanwhile, we have taken up a new endeavor during this quarter. MSTC has taken up the auction for molasses for sugar units in Andhra Pradesh, which we want to as a project -- as a new type of auction in the coming days to come.Now let us come back to the stand-alone financial highlights of quarter 1 '20-'21. The total revenue for the quarter 1 '20-'21 is INR 341.70 million as compared to INR 3,999.95 million of quarter 1 of '19-'20. Of this, the marketing stood at INR 116.20 million as compared to INR 3,495.76 million. E-commerce stood at INR 224.65 million as compared to INR 503.32 million. And others, INR 0.85 million as compared to INR 0.87 million. EBITDA pre-provisioning was INR 83.36 million as compared to INR 475.65 million. Provisions, as part of provisioning policy that the company has taken from the third quarter of last financial year is INR 25.83 million as compared to 0 out of previous year. PBT thereby comes to INR 27.23 million as compared to INR 387.18 million, down by almost 90%. PAT comes to INR 2.53 million, down -- as compared to INR 251.93 million, down by almost 99%. EPS, of course, on the same front, it is INR 0.04 as compared to INR 3.58, down by almost 99%. Cash profit comes to INR 35.6 million as compared to INR 255.74 million, down by 86%. And in the segment-wise, if you go, the revenue from e-commerce is INR 224.65 million as compared to INR 503.32 million, which e-auction was -- e-auction or e-sale was INR 181.87 million as compared to INR 396.15 million, down by almost 54%. E-procurement was INR 16.5 million as compared to INR 46.2 million, down by 64%. Other income, INR 26.28 million as compared to INR 60.97 million, down by 56.91%. Revenue from marketing, this was a very concerted effort and approach of the management to scale it down is INR 116.20 million as compared to INR 3,495.76 million, down by 96%. And of course, PBT is INR 27.23 million as compared to INR 387.18 million. And PAT is INR 2.53 million as compared to INR 251.93 million. This is for our stand-alone part.And if we go through our consolidated part. The total revenue is INR 1,043.69 million as compared to INR 4,915.43 million. Profit before tax is INR 4.58 million as compared to 453.54 million. Profit after tax is of -- is a loss figure of INR 27.69 lakhs (sic) [ million ] compared to INR 290.77 million. EPS is, of course, in the negative part as compared to INR 4.13. But we have had a cash profit of INR 60.78 million as compared to INR 229.78 million.And if you go through our summarized profit and loss statement. Revenue from operation is INR 335.78 million as compared to INR 3,960.38 million. Other income is INR 5.92 million as compared to INR 39.57 million. Employee benefit is INR 172.71 million as compared to INR 168.10 million. Finance costs reduced considerably, INR 23.03 million as compared to INR 84.66 million. Depreciation, INR 7.27 million as compared to INR 3.81 million. Provisions, as already stated earlier, as per our policy, is INR 25.83 million as compared to 0 of the last quarter. Other expenses, INR 85.63 million as compared to INR 55.58 million. PBT is INR 27.23 million as compared to INR 387.18 million. And PAT, INR 2.53 million as compared to INR 251.93 million.Here, we would like to point out one thing that this other expenses includes INR 5 crores contributed by our company to PM CARES Fund. So actually, we have contributed for the benefit of the nation as a whole, while maintaining our profit percentage also. This is towards our social responsibility and the greater cause for the nation.As compared -- in the consolidated part, revenue from operation is INR 1,017.93 million as compared to INR 4,854.14 million. Other income stood at INR 25.76 million as compared to INR 61.29 million. Employee benefit expenses, INR 415.74 million as compared to INR 438.07 million. Finance costs stood at INR 25.58 million as compared to INR 85.68 million. Depreciation stood at INR 47.93 million as compared to INR 38.51 million. Provision comes to INR 40.52 million -- INR 40.54 million as compared to 0. Other expenses stood at INR 439.39 million as compared to INR 476.84 million. And of course, PBT comes to INR 4.58 million as compared to INR 453.54 million. And PAT is a loss, INR 27.69 million as compared to INR 290.77 million. As a group, along with our subsidiary, we have contributed INR 10 crores to the PM CARES Fund for the greater cause of the nation.And that's all from our side. And I would like to request Director of Commercial to tell something about the highlights of the quarter.
Good afternoon all of you. As can be seen from the results, it's not very encouraging. But this was in the lines of our expectation. We all knew what circumstances the businesses are facing. And our operations were not completely stopped at any point of time. But then the transactions were not happening just because any -- none of our clients could operate anything -- carry out any transaction in our portal. So that is probably the reason that the figures are not as good as it could have been. Secondly, there were too many restrictions on the movement of material, though coal and minerals were exempted from the category of -- exempted category, essential services. But then the transactions were not happening because the businesses were still -- simply not there. But the silver lining is that the business has picked up to some extent in the second quarter. We are already about 2 months after the first quarter, and businesses have picked up. There is a ray of hope here. The iron ore prices have firmed up, the ferrous scrap prices. And overall steel market is showing signs of improvement. So we hope that the second quarter results will be much better, at least it will be at par with what it was last year. So that is an assurance that I can give about second quarter and for probably the next quarters -- 2 quarters also. So there's a line of hope, and we have to live on hope now. Thank you.
So we now -- this is all from the management side.
Hello, now you can take question-answer, please.
[Operator Instructions] The first question is from the line of [ Richa Jain from A&S ] Wealth.
Sir, I had a couple of questions. The first question was regarding your trading business. Sir, we've said earlier that we're going to stop the trading business from August 2020, but there will be receivables pertaining to this business till September 2021. So I wanted to know, sir, have we stopped the trading business? And if yes, then why would we see the receivables of the trading business in our books till next year?
See, we have stopped the trading business. Basically, we are not entering into any new commitments as of now. But whatever the receivables and the results -- some figures you see in the results, these are out of the previous commitments that has been entered by the company. So this will continue for quite some time, but the rate of decrease is very large, very -- I mean if you see the figures comparatively, let's say, quarter 1 '19 to quarter 1 '20, you will see there is a sizeable downsize. Even from the quarter 4 to quarter 1 -- quarter 4 of last year, quarter 1 this year, the figures are much, much less. So that is basically the strategy on which we are working. But these -- some figures will appear for a couple of quarters more.
So let me supplement, madam, what is happening over here, with the commitments are there, and there is a payment time also. So as already detailed in the presentation of our final -- Q4 of FY '19-'20, we are still -- that we are referring to, that this will -- these receivables will remain to sit in the balance sheet till September -- at least till September 2021, because some of the suppliers are still being continuing in our associate model. And this will keep on continuing till December, January. So then that is the payment period. And I think we feel that it will be there till -- at least till September 2021.
Okay. So sir, basically, we've completely stopped the trading business basically from August, but the receivables will continue is what you are trying to say because of the prior commitments, right, sir?
Yes, that's correct.
Okay. Sir, so what would be the receivable amount right now pertaining to this business? And if you could give a break up?
Basically the -- this -- the only P&Ls are get reviewed, I mean, for this quarter. So -- and you will come to know the exact reviewed figure when we publish our balance sheet in the month of September. So wait for a couple of months, we will get the exact figure when we publish our reviewed balance sheet for the September half year, okay? But as CMD [Foreign Language] has narrated, and we are telling it will be as less as compared to March 31.
Okay. Okay. Sir, but can you give some color as it's going to be more BG backed more on cash and carry or...
Yes, yes, coming back to that. If we -- it is basically it will have the same proportion as of March 31. It will be mainly of the BG backed and your associate model, which is backed by supplier's guarantee. So basically, it will consist of mostly secure portion than this unsecure one. And secure one that is what we have maintained that it will continue to remain for some time of the same level as in the month of March, that we have narrated to you.
Okay. Okay. Okay. Sir, my next question is regarding the e-commerce business. Sir, I understand we have 4 models in e-commerce: selling agency, e-sell, e-procurement and e-solution. So if you can give the breakup of different -- the segment-wise breakup as on March 31, I think the total revenue from e-commerce was close to INR 200 crores. So, a, if you could give me the breakup in terms of different models? And b, is how much of this INR 200 crores we can safely assume as a repetitive number or a repetitive revenue? And how much of it is like event-based kind of a revenue going forward?
See, madam, let me answer you one by one. First, so as such, so far, accounting is concerned, generally, -- we generally -- we go by the client-wise accounting. So a client may offer us some -- this event based. The client -- the same client may have some percentage-wise. So exact breakup is very difficult to say. But still, we can say that almost -- more than 50% we are getting out of this e-commerce and this scrap sales. Scrap sales becomes...
45%.
Yes. So around 40% to 45%, we derive it from the scrap sale, which is basically on the percentage base. And others are also event based and mix of percentage base. So like around 50% to 60% of that, maybe, because it's very difficult. We do not have that type of accounting over here. We go by the client billing basis.
Okay. Sir, so just wanted to understand, so on a repetitive or on a future guidance perspective, how much revenue can we assume -- will we have for a long-term and not like a onetime kind of a thing from this model?
In fact, most of the revenues that we are talking about -- in fact, I would like to correct you. Last year, the e-commerce revenue was about INR 183 crores, not around INR 200 crores. So out of that, about 45%, 46% is through scrap auctions. That is our major revenue earner. That is on percentage basis. And both of these agreements are on gradual basis, like, it's not that -- it's not any one-off kind of business. And in fact, almost 80% to 90% of it, we have been having for more than 5 to 10 years now.The second thing, as far as the raw material sale, we call the e-sale, that more or less is on percentage as well as event basis also. But there again, the agreements are for very long duration, at least 3 years. So there also, the business is there. The one-off kind of things happen especially for the government projects, like the spectrum auction. That's not a perpetual thing. It is more a fixed price with term. And it is event based. So these are government projects basically. And for coal auctions, we are charging [Technical Difficulty] basis, but the agreement is for a very, very long duration. So it is like we have the business in hand, and the revenue streams are defined in the businesses itself, whether it's going to be event based or percentage based. But the business is going to be there for quite some time. It's nothing like one-off agreement will carry out one event and then the business is lost. No. That's probably just about 1% or 2%.
Okay. So we can assume that -- yes, sir.
Well, I'll add to reply to your query -- on that query. As our Director, Commercial, has explained, most of the agreements, I mean, are long-term as the principals are normally renewing the agreements, right? But there may be few cases, one-off cases, where the requirements are not there or the people choose some other operator. But nevertheless, if we lose 1 principal, we get 2 new principals also. So I mean some churning out as in the normal business case will always be there, some principals will keep on coming, some will keep on going also. But by and large, our business is quite robust model, and this is giving -- the people are basically having faith in our business, in our e-commerce process, that is why they are coming to us again and again [indiscernible]. Not only the government clients, we won some few very big private clients also. Yes, please?
Okay. Okay. And sir, just one more question. This is a follow-up of what ma'am was saying regarding the spectrum auction and the coal auction under the e-solutions segment. So what kind of revenue potential you think these auctions have? Can you give some ballpark number or some light on it, sir?
So it is basically, revenues are depending upon the -- I mean the outcome of the auction. At this particular juncture, we are unable to tell how the auction will be successful, how much weak price will be there and how much auction we'll get. But there a lot of permutation and combination there. So it is very difficult to tell at this juncture how much revenue we'll garner. But that -- but it is a very prestigious auction so far MSTC is concerned. And we'd like to do it. And we have already taken all the initiatives, and we are prepared for the final call from the respective ministries.
So can you give any ballpark range or any number to it, if possible?
No, no. At this moment, it is very difficult to tell...
No. In fact, spectrum auctions, we are not looking at big numbers as service revenue. This was basically done so that -- it is a huge -- challenging job. We took up this challenge. Secondly, because of this experience, we are -- we'll be banking on it for our further expansion of e-commerce services to other clients also. So the numbers are not very big as far as spectrum auctions are concerned. Coal has been the mainstay of one of our e-commerce verticals, sub-verticals. So coal business will keep happening as long as coal mining happens.
Okay. Okay. And sir, just last question, if I can squeeze in. So what according to you is going to be the key driver in the e-commerce segment going ahead, say, for the next -- for a 4- or 5-year perspective?
See, the initiative of the Government of India, the Digital India, where all the transactions which were being done on allocation basis, first-come-first basis, the sale of natural resources, now everything is happening on e-platform. So obviously, that is a big driver for us. And since we have the requisite credentials, we are able to back those orders. So that gives us lot of confidence to take any kind of assignment from the government or from any sector.
The next question is from the line of [ Jeevan Patwa ] from Candyfloss Advisors.
So under your agency business, there are 3 types of business that we do. One, we were doing cash and carry business; second was bank guarantee; and third was associate. So are we saying that we have stopped all 3? Or we have stopped only cash and carry business, and we're going to continue the bank guarantee and associate model?
Cash and carry has been stopped since last April itself. We have not entered into this business since last April, that is April 2019. So we had been continuing with bank guarantee and associate suppliers. Even that has been stopped from this month onwards as committed in our last meeting. So there are no new engagements, no new procurement under these models also. We have stopped this agency -- trading business completely. We are just in the recovery mode. We are just trying to recover whatever receivables are there. And that will be the focus now.
Okay. And on last call, you said there was some INR 120 crore [ reserve ] in the cash and carry business, which maybe [Technical Difficulty] any update on that?
Sorry to interrupt you [ Mr. Patwa, ] your audio is breaking, sir.
Process is still there. One of the clients has again gone to NCLT. So the process -- legal processes are very long. We are just coping up with all the procedures that we need to. We are not sure as to what we'll be able to recover from those processes. It's too early to comment on that. But the volume is that much only. That's the maximum that is under stake, INR 120 crores or so. Nothing beyond that.
Okay. Great. In your annual report, you mentioned [Technical Difficulty] about 2 things. One is e-retail software, where you say that this sector holds a great opportunity and potential for MSTC in future. So can you just elaborate on this e-retail software, what you're basically talking?
Actually, so far, what we have been doing is we're [Technical Difficulty] lot of softwares and applications and hosting on our own server. So there were a lot of requests and requirements from our clients that they can host certain software in their own environment, their own servers or probably on cloud also. One such example is the online draw system that we have developed for the oil marketing companies, where selection of petrol pump and LPG dealership can take place. So the entire data and everything is done on cloud-based servers. So that is a retail software that we are talking about. Apart from that, we do have lot of internal applications that we are using ourselves. So the idea was to retain it so that our client can also use the software that we are ourselves using for quite many years. So we'll probably be packaging and selling that as retail software. That holds good potential, but then there are some challenges also. We are trying to address those challenges. And yes, going forward, we will be focusing in that area.
Okay. And second, you talked about e-waste and solid-waste management sector, which is sunrise sector. So are you planning anything on the e-waste and solid-waste management sector?
As of now, nothing is planned in that. Basically, we are providing the platform services, e-commerce services, and directly entering into that area except whatever we have our joint venture for end-of-life vehicles dismantling. There also we are dismantling, and we are basically checking out the spares and steel and whatever components are there. There also, we are selling to the authorized people, wherever authorization licensed people -- wherever licensing requirements are there, we are selling in the open market the spares or the steels or whatever arising are there. There also the -- like, this e-waste or plastic waste or let us say chromium waste, there we are not processing. We are only selling into such kind of licensed people. As of now, we don't have any business plan to enter into those areas.
Okay. Great. And on the e-procurement side, can you just explain me how you see the potential on the e-procurement side? Because I think like currency, this -- the note printing, I think, we're using your reverse auction and e-bidding software. So you're -- can you use it as a software-as-a-service? Or can you basically give it on the SaaS basis, software-as-a-service basis to other government agencies to use it for e-tendering and reverse auction?
As on date, we are not planning to retail that. What we are doing is hosting all those software applications in our own servers because this involves lot of safety, security, and we have the necessary clearances for hosting in our servers. For security printing, minting operations, we have signed this agreement and we were supposed to have series of training programs and all, but because of pandemic that has somewhat been slow. In this quarter, we are expecting that the actual transactions, the platform will be used by those companies. And it will start happening. But it is all hosted in our own servers, no doubt. It's not on their -- the client server.
Okay. So if someone -- some more companies, government organization want to use it, then it will be hosted in your own server only? They will basically use it from their site?
See, we have upgraded our e-procurement solution, and it is a very common and -- common kind of a platform where any government organization can just hold the events and whatever facilities they want, it can just be an add-on. So any organization can use the platform as it is.
Okay. And on the scrap sell side, right now, you say that it's almost 45% of your -- the e-commerce business. And it's mostly the government -- so PSUs basically are selling the scrap through you. Now you -- we are also onboarded few private clients like Reliance, Adani, L&T and all. So how much is the potential you see from the private players? So can the potential be same as whatever we are doing with the PSUs?
Absolutely. In fact, government scrap is much less compared to what is available in the private sector. So the potential...
Okay. So how much, if you can just give me some ballpark?
See, scrap market has never been -- there's no resource mapping of that. So if this -- I mean, we can't put any numbers to it. But the potential is huge, but there are challenges also. The scrap market is very, very unorganized in private sector. They do not have any kind of mandate to sell scrap. So things are just taken away by people who are associated with them for any kind of business. It's not an organized sector in private...
Right, but I think that's where the opportunity lies for us, right, because it's unorganized...
In fact, our biggest client is -- as on date is Bharti Group -- Bharti Airtel Group. Indus Towers, Bharti Infratel and Bharti Airtel, they are our biggest clients in private sector. In fact, even Reliance and L&T, they are not offering us so much as much as Bharti is doing. So that is one small telecom -- I mean, one telecom company I'm talking about. If we talk of other big companies, then the potential is very huge. Even Reliance, Adani and all, they are giving only a percentage of scrap to us. It is not that the entire country's scrap they are selling through our portal. So we are on the job to get -- increase the volumes with those clients first.
I will add...
Sure. Sure. I mean, last year, government also came up with a scrappage policy. So there were 2 types of scrappage policy. One was obviously the vehicle scrappage, which is yet to come. But then there was another scrappage policy, which is for industrial scrap, right? So government has already notified, I think, the policy for industrial scrap. Is it correct?
For shipping scrap, they notified a policy, that shipping is basically in India, that activity is concentrated in Alang, in the Gujarat port. So there also -- I mean, because it is all private market, there MSTC pressure is not there, although MSTC has tried in the past, but the people are very big players there who are already deep into the market and there entry is not that simple. But one thing I'll add what our Director, Commercial has said, essentially, we have entered into an agreement with this Daman government. They have a PSU OIDC. So with that as an intermediatory, we have started selling off all the scraps in their industrial area, for all the private industries. So there also, we are expecting some revenue. Apart from that revenue potential, that similar model we are exploring in other states also where the organizations -- the PSUs, which are basically coordinating with all these kinds of organizations, industrial organizations, if they can onboard those private organizations on our MSTC portal, then we'll be increasing our footprint in the private sector. But as of now, we cannot say much on that. Daman, we have -- we had a very good success, and it has been received -- appreciated at all the levels, at the top level. So we are hoping to replicate that model in other states also.
[Operator Instructions] The next question is from the line of Keshav Garg from Counter Cyclical Investments.
Sir, our e-commerce revenue was consistently increasing. In FY '16, it was INR 128 crores; next year, INR 162 crores; next year, INR 190 crores; then INR 213 crores. Sir, but in FY '20 first year where our e-com revenues declined from INR 213 crores in FY '19 to INR 202 crores. And actually, madam was saying that it is actually not even INR 202 crore, but it is INR 183 crore. But in your segment results, you are showing, on a consolidated basis, INR 202 crore last year, FY '20. So basically, what's the reason for this decline for the first time in the past 5 years last year? And this year, as things stand today, in your best estimate, you think you can exceed last year's e-com revenue this year?
I'll take up that question. Regarding March results, what I meant by INR 183 crores was, the regular billing is INR 183 crores and other revenue from the e-com segment, like we have some registration fee, some interest and all that. That adds on to INR 202 crores. So the basic revenue, the billing for e-commerce services is INR 183 crores. Now secondly, the thing is you asked about why it fell from the previous year. See the pandemic attack had started by late -- in fact, early March. March is our main business when most of the scrap is liquidated by almost all the clients. And the March revenue itself is sometimes equivalent to the entire quarter -- previous quarter results. So March was severely affected on all the sales that were supposed to be concluded in March did not take place. Most of the payments were -- there were defaults in that. And those sales have not taken place even as on today. So that's about 15, 20, 25 days what we lost in March. And many of the auctions could not be carried out also. Otherwise, I'm sure we would have been closer to whatever figures we had shown the previous year. So because the pandemic problem had started in late March itself, and that is why the results were somewhat affected. In fact, some of the billings also could not be done because there was complete lockdown and we had to stagger some billings. So those things only are appearing in the first quarter. Otherwise, first quarter, there were hardly any transactions.
Okay, ma'am. And ma'am, this year, ma'am, can we match or exceed INR 200 crore in e-com revenue?
This year, it's going to be a very big challenge matching that kind of revenue because the first quarter is already gone, second quarter may be as good as last year second quarter. Third and fourth quarter, it depends on how the industry reacts and how far the economy picks up from where it left. So we are hoping for the best, let's see. But achieving what we did last year is going to be a huge task. Under...
Sure. Sure. And ma'am, this government has a GeM portal to do all the procurement. So ma'am, are we managing that portal?
No, we are not managing the GeM portal. That is basically for the government departments and PSUs, so very standard, common goods and services, not for any specialized kind of procurement. So we are not in collaboration with GeM. And our services under e-procurement is also quite different from what GeM is offering.
Okay, ma'am. So ma'am, basically, ma'am, in the business that we are in e-com, ma'am, who is our competitor? Ma'am, for example, is [indiscernible] our competitor or that if we are not getting some contract, then who is getting instead of us?
There is one JV company, Mjunction Services, which is a 50% -- 50-50 JV of Steel Authority and Tata Group -- Tata Steel. That company was formed basically for [Technical Difficulty] marketing of the steel finished products. But then they are doing some of the activities that MSTC is into. So they are probably one of our competitors. Otherwise, all the others, there are some PSUs who are rendering e-commerce services like RailTel and ITI. But what they are doing is just taking the orders and giving it to a private player to execute. They don't have any infrastructure or software or hardware as we have. So that is why most of the government departments, PSUs, they are much confident in giving work to us.
Okay, ma'am. And ma'am, lastly, what would be your net debt as on date?
Net?
Net debt?
So debt, actually, this quarter, it is -- only [indiscernible] are getting reviewed, so for that figures, we have to wait for the 30th December, where we'll be giving the review of balance sheet. So of course, it will be on the reduced part.
Okay, ma'am -- okay, sir. So basically reduced from March level?
Yes, we're expecting. If everything goes in the way that we are expecting.
[Operator Instructions] The next question is from the line of Anurag Patil from Roha Asset Managers.
Sir, can you elaborate a little more on the competition...
Sir, this is the operator. We are not able to hear you. Please increase the volume of your phone.
Yes. Am I audible now?
Now you are audible, sir.
Yes. So sir, can you elaborate a little more on the competitive threat posed by the M-junction portal because they are backed by large steel companies and also their footprint is pretty wide in terms of they are -- around 17 locations they are present. So can you little bit elaborate on the -- more on that, sir?
Can you repeat that question? And can you be a little louder? I couldn't get it.
Am I audible now properly?
Yes.
Yes. So can you elaborate a little more about the competitive threat posed by the M-junction platform?
Competitive rate?
Threat.
Threat?
Right.
Actually, I can't see them as competition, though they have done a few assignments. But the kind of credentials that we have and the expertise and in-house confidence that we have got, I don't see them as very big competition.
Okay. And second question, ma'am, steel prices have started moving upwards. So in our scrap segment, can we expect it to benefit us proportionately?
Definitely. See, the steel market is picking up, so scrap market will also be pick up because scrap is a raw material for secondary steel sector. So as and when the steel demand goes up, the production in secondary steel units also goes up. And scrap being the main ingredient, the prices will pick up. So that will be -- definitely, it will be beneficial to us.
The next question is from the line of Vishal Jajoo from Tata Investment Corporation.
My question was, at least in last financial year, we saw addition of various clients to our portfolio, L&T, Adani Group, Bharti. And as madam highlighted, Bharti is emerging as one of the large clients in the private segment space. But obviously, Q1 had its own set of problems with regard to COVID. But of late due to these norms with regard to social distancing and other factors and online e-commerce picking up, do you see some inquiries or some traction, again, building up from the private sector space? And any new additions that we can expect from this category?
Yes, the volume from the existing private sector clients is definitely picking up, and we are trying to rope in more private sector clients. We are in talks with a few of them. And it will be too premature to comment anything about any such agreement. But yes, the private sector is looking seriously at MSTC for their scrap disposals.
Okay. And one of our subsidiaries has been identified by DIPAM for sale. So any further progress or development on that front?
Yes. It is totally done by the Government of India under DIPAM, as you have rightly pointed out. So it is in their hand. And whatever is coming, it is coming through -- it will come through this public forum only. They will have their own advertisement, et cetera, in their DIPAM website. So if you follow the DIPAM website, you'll get the day-to-day updates on that particular issue. It is in the public domain only.
The next question is from the line of Ankit Pande from Quant Mutual Fund.
My question would be, you spoke a little bit about the receivables and the issue with the trading segment and now, hopefully, it has been mitigated over a period of time. But at the end of FY '20 and FY '19, could you give me the receivables figure related to the trading segment?
Look, the trading segment, FY '19 and '20, it has already been discussed during our last con call. So we are -- as a company, we have consciously taken decision to wind up. Secondly, it is -- we are winding up our trading division. So the receivables are also coming down day by day. And as already pointed out during our con call in this particular session, so the receivables will stay in the balance sheet till -- at least till September 2021 on this segment and, of course, with a lesser volume. So volumes will be coming down. You can -- gradually, you could see from the balance sheet itself that the trading segment receivables are coming down. Because during -- in the e-commerce segment, our receivables are in the line of around 60 -- hovers around INR 60 crores to INR 80 crores. It will be between like that only, the figures -- gross figures. And that figure is around INR 60 crores to INR 70 crores. It hovers around that. So balance is in the trading segment. So it is coming down gradually. You can go -- when the balance sheet results are published, you can see from that. So we also expect that it will again come down and, ultimately, it will wipe out from the balance sheet because we're closing down the trade segment.
And then the scrap recovery and alliance shops, what will be the receivable amount, roughly speaking again, in FY '20?
It depends upon the performance of the steel plants because, in fact, this belongs to our subsidiary, Ferro Scrap Nigam Limited. And their plants are mostly steel plants. So it depends upon the condition of the steel plant. These are all secured base -- secured and they are government steel plants mostly. So it depends upon the cash flow of the steel plants, and I mean how they are bearing their cash situation. So it keeps on -- I mean almost it does not fluctuate so much. Of course, during 31st March, it has gone up because of the COVID situation where the disbursals were not there. So -- but it will -- again, we hope it will keep on depending upon the cash flow position of the steel plant.
So there has been no write-back in the cash and carry segment this particular quarter? We used to have a small write-back every quarter.
Write-back, we didn't have any write-back on the cash and carry segment.
Got it. Okay. And my second question is, if we do have a one-off, you did mention about the spectrum auction that they would not contribute in a big way. If we do have a one-off event-based auction this year of, let's say, INR 50,000 crores of spectrum sale, what is the ballpark amount of revenue that could -- we would garner?
Yes, yes, you're referring to the spectrum's auction?
Yes.
Yes. So basically, it all depends upon the government policy, when they are going to host the auction and all, of course, depends who are the players, how much the price goes up? So ifs and buts are there to add this sitting as we are -- we have already been selected as a service provider. We are ready -- almost ready with the preparation and all this thing as per the government guidelines. So as soon as the government gives the green signal that they will start the auctions and everything. So it's very difficult at this juncture to tell and project about the revenue stream from that particular thing. Nevertheless, we are eyeing this project as a flagship project to have a role model, a new type of model and have future business in this area.
The revenue could be just that sort of registration fee or could it also be dependent on the amount of the spectrum traded? What do you think? I mean I'm trying to bifurcate the issue.
When [ basis on ] -- it is very, very miniscule for carrying out when we are not really going to be paid very highly. This is more of a prestigious project for the Government of India, and we are doing it almost for free.
It will be a one kind of thing?
No, that's, of course -- it's between the -- agreement between the Government of India and PSUs. So of course, what our Director of Commercial means that -- we are eyeing -- not eying any much profit from out of this project that we'll have.
This is more of a -- it will give us more mileage for future business. But this asset is not a revenue earner for us.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Hello?
Yes, please?
Sir, I wanted to understand, first, on the e-commerce business, like over the medium term, so what sort of durability or the revenue potential you see in the e-commerce? So basically, just wanted to understand the opportunity size for us in the e-commerce over the medium term, let's say, next 3 to 5 years?
So as we were also, I mean, telling during our roadshows and, of course, during interaction with you people during the last year and plus, 1.5 years, so the potential is very -- I mean enough potential the business has. But as during this -- the interaction during this session, our Director of Commercial has pointed out, the revenue has not been mapped. It's a very unorganized sector till date also. But it is going to pick up because of the government's endeavor for Digital India and do all the transactions through digital means and, of course, the advent of GST and, et cetera, where all the transaction has to be routed through a certain particular channel and digital channel. So we feel that the -- in the medium and, of course, long-term also that this e-commerce business and that too the scrap. And scrap, so long as the industry grows, the scrap will keep on growing. And how they will sell? They will have to sell through digital means. So of course, this has got a positive potential, and we look forward like that only.
Okay. Can you quantify anything like INR 200 crores, would you want to reach like INR 500 crores, INR 1,000 crores kind of a revenue?
Again, I'll go back to our Director of Commercial's proposition. This resources mapping is not there. And that it is very difficult to sell, say, at this -- sitting at this point of time, what will be the quanta of that. But one thing we can always say that, of course, there will be a good amount of revenue churning out of that, Deepak.
I'll just add to that. In fact, in our roadshows, we had been saying that e-commerce revenue has grown by about almost 10% to 15% in the past. And we were expecting that kind of a growth for -- since last year, after the IPO. But then this pandemic happened and it has put a big spanner on everything. We have to start from almost 0 growth for the last year and take it forward. So that is the kind of trajectory that we are already on. But this kind of situation was not expected. So what future holds for us, we can't even predict now. This has given us a very big jolt actually. Otherwise, we were very confident that we'll grow in the same pattern.
Understood. Sure. And my second question is related to your cost structure. Now since your trading business is kind of -- you're stopping the trading business. So there might be some fixed cost that would be associated solely with your trading business. So just want to...
There are no fixed cost. There is no segmentation of fixed cost. It is all basically our employees' remuneration and some administrative overheads. So whether trading business or e-commerce business exists or not, the costs are going to remain the same.
Costs are -- so basically, in FY '20, the employee cost and other expense, other overheads, will be close to...
Almost -- as we kept on telling that if the -- for MSTC, around INR 100 crores, it keeps on fluctuating on that range also. So it remains constant for a particular sale of auction what -- in which area we are now operating. So it will remain. So if we go beyond that, of course, we will have an advantage and we will earn profit.
Okay. So even after like trading business, we are not doing any trading business, our fixed cost, let's say, employee costs and other overheads, will be close to INR 400 crores, like what we reported in FY '20 going forward?
No. INR 400 crores, where from you are getting?
It's employee cost and other expenses.
No, that is INR 100 crores. Less than INR 100 crores, in fact.
Employee cost, if you talk about the group as a whole?
As a whole or consolidated basis?
Of course, I got your point. If you go by the group also. So employee cost is around -- it is around INR 180 crores net to net.
INR 180 crores.
So -- and other costs are -- if you take around INR 40 crores, INR 20 crores and all this thing. So this almost is a constant factor and it is fixed on employee cost. Some are -- some people are retiring, some are being put -- it's almost hovering in the same pattern, you can see that, except for some jump in 2017-'18, where some provision has to be made for that change in the wage revision. So that part is also over. So now it will go -- hover around this figure only.
We'll take the next question from the line of [ Deepen Shah ], individual investor.
So just continuing with this expenditure discussion. In the current quarter, what we have seen on a stand-alone basis is that while the e-commerce business revenues are INR 22 crores, the expenditure is also INR 22 crores. But there is another unallocated expenditure of INR 25 crores. So what according to you should be this segment? Like this will remain at INR 25 crores per quarter irrespective of whether the...
Yes. Again going by that, in the stand-alone basis, we have got a overhead of around INR 100 crores, employee plus other expenses, okay? So almost it remains in the same range with the scalability of operation. And we hope this year, it will be also in the same range, it will hover around, leave apart certain abnormal or something, which will happen, I wouldn't see abnormal or something...
Okay. And going ahead, sir, apart from the telecom auctions, we have got also the coal auctions, which are probably coming up in the September to December quarter period. So on that -- in that also, it will be -- our revenues will be more on a commission basis? Or it will once again be event based where we will get some fixed fees?
I think you are talking about coal block auctions, right?
Yes, ma'am, yes.
Yes, that is on an event basis and on successful event basis. Suppose the coal blocks, there are no takers, we don't get anything. So whether the coal block auction is successful or not, that will determine the revenue stream. And that is on event basis.
We'll take the next question from the line of Rushabh Shah from Equirus Securities.
So I think -- 2 short questions. I think first on the part of Jaivikkheti portal, what we were talking, I think, for the last 2 quarters. So how has been things going on that part?
We have -- I think in the last meeting also said that we have joined hands with India Force for the last mile connectivity. We are in the process of assembling more logistic service providers. See, unless logistics is there in place, this B2C kind of a portal will never take off. So we have tied up the loose ends now. And hopefully, the transaction should take place within this year. I won't say within this quarter or next quarter. Within this year, it should be -- we should be able to carry out transactions. Next year, it will be a good revenue earner for us.
Okay. So just any ballpark, maybe not the figure I will be asking, but how will the opportunity maybe? Is that a -- would that be a very big amount or maybe just a small, miniscule gain for us.
Initially, we are not expecting because this is basically for the organic sector, and the organic consumers are a little niche consumers. So that is not a big volume. So initially, we are not targeting very high transactions here -- high volume of transactions. But going forward, yes, the focus is in that area. So institutional buyers will probably be roped into this.
Perfect. Great. Great. And the second last -- the last question would be, I think as receivables will be starting maturing and I think that the cash inflow would be very strong for the company, maybe about INR 1,400 crores, even if we make some sort of receivables mature in this year, I think the cash balance would be much, much higher. So are we planning how to utilize it? How are we planning on that cash proceeds?
So basically, as of now, we are concentrating on whatever debt we have to reduce that thing. That is our main motto. So we -- basically, if you see the balance sheet of 31st March, there are certain cash -- cash balances are there, their creditors are there. At the same time, some trade payables are also there. So we want to settle the creditors also. And we want to reduce our debt also. So looking forward, depending upon the cash flow -- of course, it will depend on 30th September number. So once on 30th September we have numbers in the balance sheet, so we will plan accordingly. But the basic philosophy, we like to reducing the debt and creditors.
Ladies and gentlemen, due to time constraint, we'll take that as a last question. I would now like to hand the conference over to the management for closing comments.
So thank you very much for patient hearing. We hope that we will keeping -- we will be keeping your aspiration for running the company, and we will get the support of all the stakeholders to come forward for a better result. That's all from our side. This is Subrata Sarkar, Director of Finance cum CFO.
Thank you so much. I'm really happy to note that you have been following up the activities of the company so closely, and remember each and everything that we say in our meetings. So that gives us a lot of confidence that our people have reposed on us. And thank you for all the support. That's all from our side. Thank you.
That's all from our side. Thank you.
Thank you. On behalf of Equirus Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.