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MSTC Ltd
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Ladies and gentlemen, good day, and welcome to MSTC Limited Q1 FY '22 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. Depesh Kashyap from Equirus Securities Private Limited. Thank you, and over to you, sir.
Thank you, Melissa. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to 1Q FY '22 earnings conference call of MSTC Limited. From the management, we have with us: Ms. Bhanu Kumar, Director of Commercial; Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary. We'll begin the call with the opening remarks from the management and then we can open the lines for Q&A. I now hand over the call to Ms. Bhanu Kumar. Over to you, ma'am.
Okay. Good morning to all of you. On behalf of MSTC, I am -- I'll be taking up this concall, along with my colleague, Mr. Subrata Sarkar, Director of Finance; and our Company Secretary, Mr. Ajay Rai. Again, today, our CMD had to leave office for a very important, urgent meeting, where there is a parliamentary committee. And he has expressed his regret for not attending the concall for the past couple of occasions. So you'll have to bear with us this time also. Now with this, first of all, I would like to talk about the key highlights for the Q1 of '21/'22. So during Q1 '21/'22, the company crossed a revenue of INR 37.05 -- INR 370.52 billion in terms of value of goods transacted through its marketing and e-commerce verticals, which is actually 545.17% growth over the value of goods traded in Q1 '20/'21. Now actually, that's not a very fair way of representing things because Q1 '20/'21 was -- almost 0 transactions were taking place due to the onset of pandemic at that point of time. You're all aware of what happened in Q1 '20/'21. And here also, the growth in marketing is mainly because of the supplies that we have in the marketing segment for the gas authority and Indian oil pipe. This is in the associate model. So whatever supplies are done, it is back-to-back went to the associates. And the growth in the value of goods transacted through e-commerce also for a very good growth of 554.70%. This again was mainly because the value of goods transacted of iron ore, cotton bales and coal, to a great extent, contributed and in Q1 was very, very good in these sectors.So as far as financial performance is concerned that's consolidated, the details will be given by our Director of Finance. But the key highlight is the revenue of INR 17.1 -- INR 1,712.55 million in Q1 '21/'22 with a revenue of INR 341.70 million in Q1 '20/'21. Growth is 401.19%, largely because of the marketing business. For PBT of INR 371.70 million in Q1 '21/'22 vis-à-vis INR 27.23 million in Q1 '20/'21, which as expected was miniscule due to pandemic. Now as far as the new business highlights for the Q1, we had first time entered into new area where we disposed of large quantity of bio-solid fertilizers. This was for a private company called Bio-WMS in Tamil Nadu. So that's a new segment that's opening up for us. We also conducted a very successful event for SHAKTI B of the government of India for allocation of coal to private IPPs. Then we had a very customized portal for the Hindustan Oil Exploration Company for offtake of 1.2 MMSCD of natural gas. Now certain oil blocks were already allocated. And whatever the natural gas that's being produced from there, that again is being sold through very -- transfer and e-auction system, very complex kind of portal had to be developed for that. That was successfully done. And the bidding was a grand success and our client was very, very happy in that. The entire quantity of that, that was allocated was successfully allocated [indiscernible]. Now as far as the financials are concerned, standalone and consolidated, our Director of Finance, Mr. Subrata Sarkar, will explain on that.
Thank you. Good afternoon, everybody. Welcome to this investor meet. We are now going to have a discussion on the stand-alone financial highlights, Q1 versus Q1 of the current funding year of '20/'21. So total revenue, as it stands, in Q1 is INR 1,712.55 million as compared to INR 341.70 million. It consisted of marketing of INR 1,120.75 million; e-commerce, INR 591.13 million; others were INR 0.67 million. And then Q1 for '20/'21: marketing, INR 116.20 million; e-commerce, [ INR 224.65 million ]; and others, INR 0.85 million.As we can see that basically e-commerce has gone up by 163.14% and it has contributed a lot into that -- our PBT. EBITDA pre-provisioning was INR 474.83 million as compared to INR 83.36 million. Provisions, as per our provisioning policy, it was INR 83.35 million as compared to INR 25.83 million last year. PBT was INR 371.70 million as compared to INR 27.23 million last year. And PAT is INR 212.01 million as compared to INR 2.53 million last year. EPS is INR 3.01 as compared to INR 0.04 last year. And the cash profit is INR 299.70 million as compared to INR 35.63 million last year. Now let us have that segment-wise. But in case of the total value of goods traded through MSTC ecosystem, it's INR 370.52 billion as compared to INR 57.43 billion last year of the same corresponding period. Total revenue was INR 1,712.55 million as compared to INR 341.70 million of last quarter of the corresponding period. Revenue, e-commerce was INR 591.13 million as compared to INR 224.65 million. And revenue, marketing, INR 1,120.75 as compared to INR 116.20 million. Total expense is INR 1,340.85 million; PBT is INR 371.70 million; profit after tax, INR 212.01 million as compared to expenses of INR 314.47 million last year; PBT, INR 27.23 million last year; and PAT, INR 2.53 million last year. Let us go to the consolidated one. Total revenue of consolidated quarter 1 was INR 2,686.87 million as compared to INR 1,043.69 million. It comprises from marketing, INR 1,120.75 million as compared to INR 116.20 million of last year; e-commerce, INR 591.13 million as compared to INR 224.55 million last year; scrap recovery and allied jobs, INR 974.32 million as compared to INR 702.09 million last year; and others, INR 0.67 million as compared to INR 0.85 million of last year. EBITDA pre-provisioning, INR 685.57 million as compared to INR 118.63 million last year. Provisions and write-offs, INR 85.57 million as compared to INR 40.54 million last year. PBT, INR 538.08 million as compared to INR 4.58 million last year. And profit after tax this year, it is INR 335.57 million, coming into black as compared to a loss of minus INR 27.69 million last year. And EPS, of course, INR 4.77 as compared to minus INR 0.39 last year. Cash profit, of course, we have INR 467.62 million as compared to INR 60.78 million last year of the corresponding period. That's all from our side. Thank you very much.
[Operator Instructions] The first question is from the line of Dixit Doshi from Whitestone Financial Advisors.
My first question is regarding this....
Can you be a little louder? Can't hear you.
Yes. Can you hear me now?
Yes.
Yes. So my first question is regarding this e-auction we have conducted for Hindustan Oil Exploration. So I understand that now, every player has to do through e-auction...
You're still not very clear. Can you be closer to the mic?
Yes. Can you hear me now?
Yes.
Yes. So I understand that now, every player has to do -- sell the natural gas through e-auction. So is there any plans for adding the other oil and gas players as well, like ONGC, Oil India, if you can elaborate on that? And secondly, about this Hindustan Oil Exploration. So is this some one-time income of where we have built the platform, or every time the auction will happen, we will get some income?
Okay. Here, actually, DGH had floated one event, where they -- we also participated. They have impaneled 3, 4 agencies for carrying out this kind of auction for all the natural gas that will be produced from these gas deals. So the first achievements have taken place for Hindustan Oil Exploration. ONGC and there are a host of other companies who have got these gas blocks and who have started production, they are still in the nascent stage and they are yet to go in for e-auction. But apart from MSTC, there are 3, 4 other agencies who have been impaneled. So anyone can actually get this job. It's not necessary that MSTC will get it on nomination. So we will have to compete and get these projects from other companies. Secondly, as far as the revenue is concerned, we have already created a platform for such kind of events. So there will be uniformity. Some minor customization may be required for the -- wherever the client wants. But apart from that, it's a very standard kind of a portal that we have created. So we have already taken the cost for that kind of a standard portal. And now is the only event base, which is not very, very high. So depending on the number of events that they carry out, we will be actually having the charges. Now if somebody wants a huge amount of customization to be done, then there will be additional source of revenue as development cost. But otherwise, it's going to be just event charges and depending on the events, and that's again not very high.
Okay. And that event will -- so these auctions will be conducted every month?
No, it depends on the production. See, as I said, a lot of companies are still into -- coming into this e-auction for natural gas. It's not taken off in a big way. So as and when production happens, they have sufficient quantities for the gas. See, as you understand, it's all completely market dynamics. So when there is a good demand for natural gas from that area, then only the e-auction is going to be successful. So the clients will have to assess as to what is the quantity that is available, what is the need of the market in that area. And accordingly, the auctions will be conducted. So nobody has started. But once it starts, I'm sure that it will be on a regular basis.
Okay. And now that we have already done one auction for Hindustan Oil Exploration, so is it fair to assume that the next auction of Hindustan Oil will also be done by us?
See, this is going to be a project which the material of almost 1 to 2 years has been sold off. So whenever it happens after 2 years, it will be done through us only.
Okay. The second question is regarding our e-commerce revenue. So you highlighted in your opening speech that the revenue was boosted by the good e-auction of coal and also the iron ore. So is my understanding right that due to the second wave, there might be some impact on the sale of scrap?
Scrap was affected initially, but that was more or less compensated by the high rates. Actually, since last year's corresponding period, the rates of scrap has increased by about 15% to 20%. So even if the quantity traded was a little lower, the value has compensated for that. So scrap has also shown some growth. As you can see, the revenue from e-commerce segment is quite good in comparison to Q1 of '20/'21. And even by our normal adjustment, Q1 of this year has been quite good. So the major contributing factor has been iron ore, coal and some cotton bales also because that was a new line of business that was introduced for us. And scrap has also shown some good growth in this first quarter.
Yes. So you mentioned that there was some lower volume, but that was compensated by the higher prices of scrap. So can we expect that now that as the -- everything is opening up, so the volume should also come back from Q2 onwards and that should benefit even better?
You can expect that. One more factor for our such good Q1 results was the last year, first 2 quarters were affected, especially in the scrap area. So a lot of sales got pushed to the Q3, Q4. Q4 was very, very good. And again, some of the spillage was there for Q1 also. So all that accumulated scrap is now gone. Whatever is the pressure, I think that will come from Q2 onwards.
Okay. And one last question from my side. So on a stand-alone entity, when we are expected to move to the new tax regime? I guess, we are still paying 35% tax.
Your question is not very clear. Can you be -- can you repeat it and be closer to the mic?
On a stand-alone company, we are still paying 35% tax. So when are we planning to move to the new tax regime?
35% tax?
Which one?
Stand-alone.
On a stand-alone entity.
Yes. You are talking about taxation?
Yes, tax.
Yes. We are still sticking to our old regime because certain people see our annual results and all these things, the annual report will also be public very soon. We have got certain [ tax credits ] available. So for that, we are sticking to that old regime and overall effective tax, which is getting beneficial for us. So that's why we are sticking to that old regime. As soon as new tax regime is beneficial to us, we will switch over to that.
So how much would be the tax outflow, it will be 20%?
Let us see because on the year-to-year basis, which is even very difficult to say, that is on the year-to-date basis, last year, I think that the result is already there and we have taken a tax credit in the last quarter that you can see that results of Q4 as we can observe. So this regime is quite beneficial. So once that [indiscernible] are over, we may switch over to that regime, new regime.
[Operator Instructions] The next question is from the line of [ Harshit Jain ] from [ REH Investment Advisors ].
Congratulations for a good set of numbers. I was concerned about the cash component in our balance sheet. Can you please...
Sorry to interrupt, Mr. Jain. We are not able to hear you clearly. Can you use the handset mode while speaking?
Is it clear now? Yes. So I want to know that how much cash balance do we have at the end of quarter ending June 30, 2021.
Yes. Quarter 1, we have only published the financial results related to our P&L. So you have to wait until 30th of September when our balance sheet will be published, so -- you can see from our generation [indiscernible] positive generation of the cash. So you can easily derive out of that. But so far, balance sheets are not being audited and published during the first quarter. So we will be able to give you the exact figures as on 30th of September, when we meet after 3 months.
And can you please clarify that how are we deploying cash? Because as of March 31, we had net cash of around INR 700 crores. So can you please tell me that where the INR 700 crore of cash has been deployed by us?
So with all cash flow statement and everything, it will be published during this 6 months period on 30th of September result. Then only we can be able to give you that -- and until we will get a review from our statutory auditor, then we will be able to...
No, no, no, you are not getting my point. I am asking that as on 31st of March 2021, your Q4, had a net cash of around INR 600 crores to INR 700 crores. So I just want to know that where are the INR 600 crores, INR 700 crores of cash is being invested by us. Is it in bank accounts yielding FD returns of 4% to 5%? Or is it somewhere else?
Again, I answered you like that [indiscernible] this balance sheet portions and the cash portions have not been audited to give you during the first quarter. So I would be able to answer you very precisely and like a very particular manner as on 30th of September position, then I can give you the whole details, whatever you want. Because -- everything will be answered. Nothing will be left unanswered. So please, on that particular point of time, we'll be able to answer [indiscernible]
Sure, sure, sure. And my last question is regarding our e-commerce platform. So is the INR 59 crores to INR 60 crores of e-commerce revenues, which we have shown in Q1, is it sustainable for next 3 quarters? Or do we expect an uptick of 15%, 20%?
It is sustainable, definitely. Regarding growth from this, I can't comment right now. Because as I said, there is some spillover from last year. So that's why Q1 was pretty good. So we have [indiscernible] to how much of that spillover, what is that impact. And Q2, Q3 going onwards, this much, it is reasonable to expect that at least this much revenue will be there.
Okay. And one last question is regarding marketing revenues. So are we shutting down the marketing operations? Or is it still operational for this year as well?
Actually, as you are aware, there were three models of marketing business. And out of which, one we had already discontinued more than 2 years back. The associate-level model, we still have some spillover, though the contract is over. But because of our earlier commitments, some supplies are still going on. That, we expect to be closed by this year-end, after which there will be no transaction under the associate model also. Regarding the BG-backed team, some transactions are still happening and that will continue.
The next question is from the line of [ Srinivas Reddy], an investor.
I want to know regarding this FSNL subsidiary, your subsidiary -- news regarding that sale of that subsidiary. When can this thing happen? In this financial year, you're expecting it to be done?
Yes. Wanted to know about that because that the procedure, it is totally being handled by government of India, DIPAM, Ministry of Finance, Department of Investment and Public Asset Management. So they have full authority and they are, in fact, directly doing all these procedures and everything. So at this juncture, we are unable to tell anything whether it will happen this year or next year. So all depends upon the way that DIPAM does and things progress. It is totally under the control of the DIPAM.
Okay. What about these previous provisions which you have provided for the company? I mean, dues -- recoverable dues provisions, allocation, which you are doing every quarter, some INR 25 crores. Until when you're planning to continue these things?
Yes. As we were telling you the last time, earlier, it was -- cash and carry segment, it was around INR 100 crores. Now coming down, it is around INR 37 crores to INR 38 crores of [indiscernible] already it is now a lift. So [indiscernible], this may go -- we have to provide for that [indiscernible] in the cash and carry segment, INR 37 crores to INR 38 crores in that already in the results...
[indiscernible]
So that is likely to be done with this policy, maybe over [indiscernible]
So you're -- so for all the quarters of this year, we can expect this provisioning to continue?
This financial year, we are expecting to do away with because it's very [indiscernible], and we are getting some amount of realization from parties also. Although there is slower pace, so we hope it will be [indiscernible] by this year in the cash and carry segment.
So with this year, there will be no future need for this provisioning?
Correct. I think we are expecting that in the cash and carry segment, there will be no further provisioning. We are expecting as these things and this trend goes, we are expecting.
Okay. So any other provisionings you're expecting apart from this cash and carry?
Yes. Very, very miniscule in the e-commerce segment, very miniscule. Very miniscule [indiscernible] very miniscule in the like normal business, very miniscule for [indiscernible]. So it might happen during the [indiscernible]. But it's not that large magnitude as in the cash and carry segment.
Okay. Is there -- what is the total amount of debt for the company on a consolidated basis?
Which one, sir? Can I confirm?
Both for MSTC and subsidiaries combined.
Right now, sir, for this quarter, we have not drawn our balance sheet and get it audited. So we'll be able to give your -- answer to your question on 30th of September. After 3 months, we will be able to answer the final...
Okay. What about the debt at the end of 31st of March for both subsidiaries and MSTC stand-alone combined consolidated debt?
Sir, I have to go back to the paper. If you don't mind, if you can...
You can tell me approximately, sir. Approximately, you can tell me.
[indiscernible] I cannot go by the approximate, that type of thing. So far, [indiscernible] holding company is concerned, MSTC is concerned, the debt is very, very much minimal for 31st of March because we had a small piece of [indiscernible] from [indiscernible] on account of our office building. And that is that we didn't have any debt except that INR 143 crores, that is the spending on account of Standard Chartered that is there as at 31st of March. That [indiscernible] so far holding company stand-alone basis.
Okay. That includes your FSNL and your...
No, only stand-alone basis, stand-alone.
Only stand-alone. Okay.
That we are having a very small debt on account of [indiscernible] and INR 143 crores on account to Standard Chartered.
Okay. So if the sale happens by the government of India for FSNL, so the proceeds are going to come -- because it is 100% subsidiary to the MSTC only, whatever the amount?
Your second question is 100% subsidiary. But what will be the structure of the deal, how the money flow will happen, in which way each will form, it is yet to be done away -- and yet to be formalized, yet to be crystallized. So what will be the mode of demand or receipt, we have not yet aware of that.
Okay, sir. So any other business areas you're prospecting for the growth -- increasing the growth, sir? Because I have been asking you this question from past many, many years. As you are aware, we are growing at a very small pace compared to private e-commerce companies. So that is the only concern I have at present. So if you have any positive news, you can let us know on that aspect.
As far as e-commerce is concerned, we are now deliberating on various models, where we plan to have more associates because, as you said, we are a small company, and we can't be everywhere. So maybe we will onboard some associates. But that is still at a very, very nascent stage. We've not really crystallized as to what we want to do. That's an ongoing process. And probably in the next quarter, we'll be able to tell you something as to which direction we are going in.
[Operator Instructions] The next question is from the line of [ Vikas Kumar Dhaba], an investor.
Ma'am, I just wanted to understand, what is the -- I mean, your message for the scrapping policy that has been considered by the PM a few days back and its impact on the business that we are undertaking?
Can you repeat the question? Your voice is actually breaking.
Okay. I wanted to understand that the scrap company that we have quoted for doing the scrapping business in joint venture with the [indiscernible], what is, I mean, impacts and what is the business outlook for that company? Because just a few days back -- 2, 3 days back, our PM has announced a scrapping policy for the entire industry.
So what exactly is your question, sir? I could gather that...
Actually, it's outlook of the business, outlook of the scrap yard or the scrap business.
Yes, I think we had already disclosed in the past that we are planning for more collection from dismantling center -- the JV company is planning rather. So we are expecting that within this year, we will be coming up with another 2 centers at least. And the earlier centers also that they are showing some positive growth and positive results now. So it's good. And by the end of this year, we should be having at least 4 to 5 centers and it will go from here. And with the policy has just been announced, so the numbers of -- number of vehicles that yet [indiscernible]. Once we see that there is a number of ELVs that we will come to us as a little large, we will definitely have more such C&D centers.
The next question is from the line of Karthi Keyan from Suyash Advisors.
Continuing on the same question, madam. Just wanted to understand, if [indiscernible] collection centers, would the auction to be conducted by MSTC? Is there any clarity on that point?
All the dismantles and scrap that is generated after dismantling, as of now, we are only conducting the auctions. But there are situations where it can be directly sold to some foundry or some kind of a burner. Those models are also there. So it's not that every material that is dismantled or collected or scrapped is e-auctions only. If there is an industry, allied industry, which can use this as a raw material, then it is sent directly also.
Right. What percentage would you currently account for the total scrap auction?
What percentage?
Yes, madam.
That is very miniscule.
Scrap generated.
That's hardly anything as of now. Because I think we had discussed earlier also, the spare parts, wherever it can be reused as it is, it is being sold as a secondary spare part secondhand. And that is being used by the industry. So the material that actually comes from scrap is quite miniscule. And mainly, they're coming from C&D center in Greater Noida and Chennai. That also is not much, volumes are not really coming in. So with the announcement of this policy, we are expecting that the number of ELVs, which will come to us from scrappage will increase, then probably these volumes we can talk of. Right now, it's hardly anything.
The next question is from the line of Kunal Mehta from HNM Finance & Securities.
Continuing with the scrappage policy, I have just two questions. What is the capital that we will be looking to deploy in the JV? And you said -- the second question is you said 4, 5 centers by the end of the year. Madam, each center -- what will be the capacity? For example, Tata has announced in their scrappage center in Gujarat, they [indiscernible] 36,000 vehicle scrappage capacity. So these are the two questions from my side.
Yes. Basically, as you can see from the balance sheet of -- our balance sheet as on 31 March 2021, we had contributed some amount of capital to our JV company. And it is also generating some amount of cash. So at present, that is suffice to have certain centers in progress. Second, we are coming up with -- as earlier told by our Director of Commercial, we are coming up with a couple of more dismantling centers -- with the collection and dismantling centers and will be -- separately, that JV company will come up with all these details in a bigger way for the sake of the investors about [indiscernible] and everything. As the scrapping policy has already been announced in the latest [ investor summit ] [indiscernible] by the honorable Prime Minister, so we will be coming up with all these [indiscernible] and all these things in a very short year and where we will be able to discuss how much is the total things and everything. But still, what we can say, we are now capable enough to whatever are being procured from these sources and we are processing it in a very successful manner. As you can see that from our consolidated results that [indiscernible] has come down significantly from Q1 and from last financial year to this year. And it is -- and we are generating cash out of that also.
The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Just one clarification I have, the subsidiary, FSNL, which is supposed to be sold. So what we've seen in the segment of this entire scrappage and allied job-related segmental numbers, both revenue and EBITDA, is linked to that subsidiary [indiscernible] or we have other entities which also [indiscernible]
You wanted to know that scrap and recovery and allied jobs, this segment belongs to our consolidated results. This segment belongs to our 100% subsidiary FSNL. So this quarter, they have also done a little bit good. Because earlier, quarter 1 was not by the COVID effect. So these numbers are off that revenue numbers are of -- our 100% subsidiary, FSNL only.
Is there anything other than the subsidiary? Or is that just linked to purely 100% subsidiary only?
This scrap and allied jobs, this belongs to our subsidiary only.
Okay. And this is a subsidiary which is supposed to be sold, right?
Yes.
And for which you have sent a press release of about INR 100 crores worth that you are going to sell, right?
Yes. But if you can see the segmental result, like the entire quarter, segmental activity was INR 16.89 million for this quarter as compared to -- INR 16.89 crores as compared to INR 1.42 crores loss last year. So we can see this quarter in that consolidated segment. This is a subsidiary that government of India has already decided to sell.
When will the transaction be consummated?
Yes, it is very difficult. The DIPAM is directly monitoring the things. So it is -- and that's being monitored by at the highest level in the government of India. So the timelines, we cannot have -- not have any knowledge or control of our things as of now.
Okay. And does it affect the working on the operations in the subsidiary sold as in any way, linkage or operations of the e-com scrap division? Does it affect in any way?
No, no, no, this is totally independent subsidiary. It has nothing to do with our e-commerce business.
Okay. So just clarifying this, okay.
It is totally different. They're operating as segment only.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.
Yes. Thank you for the opportunity given to the management to explain everything. And I'm really glad that the investors are keeping track of all the activities and all the environment in which we work and ask very pertinent questions that keeps us motivated to do better each day. And thank you, stay with us. Thank you.
Thank you very much.
Ladies and gentlemen, on behalf of Equirus Securities Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.