MSTC Ltd
NSE:MSTCLTD
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MSTC Ltd
Earnings Call Analysis
Q2-2024 Analysis
MSTC Ltd
The company reported a solid growth in the e-commerce sector of about 10.33%, rising from INR 167.71 crores in the previous year to slightly more than INR 185 crores this year. Profit Before Tax (PBT) also increased approximately 9.60%, going from INR 145 crores to INR 159 crores. Notably, this growth occurred in spite of a 15% to 20% drop in commodity prices, specifically scrap, which remains a major income source.
The company resolved a significant legal issue with Standard Chartered Bank, freeing up previously attached assets by the Debt Recovery Tribunal (DRT) and reclaiming a sizeable INR 90 crore deposit. This resolution allows for a stronger balance sheet presentation. Despite commodity price reductions, the company's overall financial performance remained relatively stable, with PBT on a consolidated basis growing by around 3% to INR 158.56 crores.
The company is strategically focused on the e-commerce segment, which has seen sustained growth. New portfolios, customers, and commodity types are continuously added to the e-commerce operations. Furthermore, the implementation of the vehicle scrappage policy in multiple states presents growth opportunities, although the ecosystem is not yet fully developed. MSTC anticipates significant business potential in vehicle recycling, echoing a broader commitment to the circular economy and green initiatives.
Management has observed an 8% to 10% uptick in scrap prices post-monsoon and expects a further 5% to 10% increase, although they do not anticipate returning to the previous year's peak levels. Revenues, being a percentage of total value, are poised to benefit from this rebound. MSTC is exploring e-commerce growth through partnerships with software and SaaS companies, targeting significant long-term government projects, which implies that substantial revenue generation is expected in the future rather than the immediate term.
The disinvestment process for Ferro Scrap Nigam Limited (FSNL) is underway, with interested bidders shortlisted and transition advisers appointed. However, the company lacks concrete details to share, as these proceedings are primarily under the aegis of the government. As progress continues, updates will be disseminated through various official channels, keeping stakeholders informed of significant developments as per company and legal regulations.
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Ladies and gentlemen, good day, and welcome to MSTC Limited Q2 FY '24 Earnings Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference is now being recorded.
I now hand the conference over to Mr. Ansh Manek from Equirus Securities. Thank you, and over to you, sir.
Thank you, [ Rohit ]. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to the Q2 FY '24 Earnings Conference Call of MSTC Limited. From the management, we have with us today Mr. Surinder Kumar Gupta, Chairman and Managing Director; Ms. Bhanu Kumar, Director of Commercial; Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary.
We will begin the call with the opening remarks from the management, and then we can open the line for questions and answers. I now hand over call to Mr. Surinder Kumar Gupta. Over to you, sir.
Yes. Good morning, everybody. We are with you all today for our second quarter results, that is first half year of current financial year '23/'24. I'm delighted to inform all our investors that our main e-commerce business, we have got a growth of around 10.33% in our e-commerce earnings.
Last year, in the corresponding period, it was INR 167.71 crores. This year, it is slightly more than INR 185 crores. So that's a growth of around 10.33%. And our profit before tax is around INR 159 crores against around INR 145 crores last year. That's a growth of around 9.60%.
One factor I would like to bring to the investors is that this growth is despite the decrease in commodity price, like scrap is one of our good revenue source, main revenue source, which contributes significantly to our income. The prices were down around 15% to 20%. Presently also, they are around 10% down from the corresponding period of last year. Similarly, the iron ore prices are also -- were also subdued. They have just shown a reverse trend now.
And despite that downward trend in prices, we have been able to maintain good growth. And I can assure all our investors that in the second half year, as the commodity prices are going up and the worldwide scenario also, with this increase in prices, so will -- MSTC will show a significant growth in the revenues as well as the profits in the full year this year also. That is what my belief is.
And my Director of Finance is here with me. He will also brief about certain financial highlights. And our Director of Commercial will be joining very soon. She is in some urgent meeting, important meeting. She will also be joining and she will be giving the remarks.
Yes. Good morning, everybody. So like before we go to the financial highlights, I would like to appraise our esteemed investors of like what discussions were going on for last -- after the IPO for around 5 years.
So we -- this time, we are in a very comfortable position so far as the Standard Chartered Bank case is concerned and first time, we have also noticed that we have seen in our financials, our balance sheet this year, our assets that -- the fixed assets that were attached by DRT that has been released by DRT and we were able to get refund of INR 90 crore that was deposited for the appeal. And the appeal been allowed in our favor.
[Technical Difficulty] open price for only 2 original application is [ allowed ] against us. So right now, it is a very positive news that I wanted to share before I go to the financial highlights.
So the special financial highlights are like just basically growth. I would say it's the growth, although the figures -- sales are flatter figure. But as our CMD appraised, like despite the reduction of the commodity prices, we are able to maintain the same line of growth this quarter also as well as this half of this financial year also.
So during the financial year, during half 1 financial year, so far our volume is concerned, we have crossed INR 626.03 billion. And PBT is, of course, on a consolidated basis, it is up by around 3% from INR 154.55 crores (sic) [ INR 154.54 crores ] to INR 158.56 crores.
And so far as these business updates are concerned, MSTC has successfully completed the sale of Barytes on behalf of APMDC. It has also conducted the e-auction of Bluestone on behalf of HSIIDC. And because this Coal Linkage was one of the great earn-up, so 2.42 million MT coal has been also sold through linkage auction.
And in the state of Madhya Pradesh, 36 Sand Groups have successfully auctioned because it is almost the second replica of what we have done in the UP with has led to a large, large gain for the UP government exchequer.
So going by the highlights of the stand-alone, so total revenue H1 is a little bit lower, of course, in account of profit terms, EBITDA, profit after tax. PBT it is higher, INR 145.07 crores to INR 158.99 crores and PAT is almost in a flatter trajectory, INR 115.33 crores; this year, is INR 113.08 crores. And of course, EPS is also showing the same type of result which is INR 16.06 as compared to INR 16.38.
And now if we go to the segments. So if we go to the segments, you see like total revenue from e-commerce has grown from INR 167.71 crores to INR 185.03 crores. Marketing almost down, and it is a conscious decision. And profit before tax has gone up from INR 145 crores to INR 158.99 crores. And profit after tax is almost on the linear trajectory that is INR 113.08 crores as compared to INR 115.33 crores on consolidated basis.
Consolidated basis, PBT has almost -- is almost flatter but a little bit growth, INR 158.56 crores from INR 154.55 crores and profit after tax is a little bit lower at INR 105.95 crores to INR 117.97 crores. EPS showing the same trends. So that's the scenario on the consolidated part.
So I would now like to hand over for your questions.
[Operator Instructions] The first question is from the line of [ Aman ] from Aman Investments.
Yes. Sure. Sir, first of all, congratulations on good set of numbers and high margin. Sir, if you can just be comfortable with sharing, where is our trajectory going forward in terms of e-commerce and in terms of marketing? Because we have seen a huge dip. Are we seeing recovery over there?
And also on the scrap sales side, because we have added some verticals as well because of vehicle scrappage policy, how is it turning out to be? And any other allied industries which we are supporting through our platform? This is one. After I'll...
You see, regarding your question about e-commerce and marketing, let me be very clear that our main core focus presently is on e-commerce only. So market is a very small segment of our business. That is also a biggie-backed scheme. And we are not able to -- I mean, we are not basically, as a matter of policy, as a matter of decision, we are -- our focus is entirely on e-commerce.
And if you see in the last couple of years, we have got good growth in e-commerce. And we are maintaining that. And we are adding the new portfolio, new customer, new businesses, new types of commodities continuously in our e-commerce portfolio.
Regarding the vehicle scrappage policy, I can say that now many states have implemented that policy, and a lot of people are showing interest in that. But because of the complete ecosystem is yet to take roots, so the business per se is right now hasn't good basically profitability.
But in future, for the times to come, it will be a very big business. And MSTC is always looking for entering into the new areas as far as this recycling is concerned. So we are exploring possibilities in other recycling industries also. Thank you.
Sir, if you can just comment -- sir, one last question. If you can just comment on circular economy and how are we seeing opportunities over there. Because there is certain requirements of scrap being again and again used and the demand is there but the supply is unable to meet it.
If you can just comment on how are we going to structure it going forward in 1 or 2 years. What is our role as MSTC not just being a platform but also a service provider, as in what will our role be in the whole chain of circular economy?
Right. It's a very -- I mean it's a very pertinent and very relevant question that you have asked. Thank you for that. So far circular economy is concerned, we have taken a role of like you can say is a 3 tier role. First, like we are just there as a, I mean, big catalyst, so far as circular economy is concerned because of a lot of scrap have been auctioned through our platform.
Afterwards, since that vehicular scrap policy came into picture, so we had worked side by side along with MoRTH, NITI Aayog and our ministry to formulate a very, very conducive type policy for the facilitation of these type of vehicles. And that it goes through to the economy in a green steel manufacture in future.
So far, this new -- the MoRTH, that this vehicular policy is concerned, as CMD sir was explaining, it is the complete ecosystem will take a little bit of time to set in. While it actually sets in, so it will be a good thing and if this whole I think will be completed, and we has the role of auctioneer, we are already doing auctions for the government vehicles. And we have already opened the roads for private vehicles also.
So once the ecosystem is placed, this auction will also pick up pace. The second role that we, through our JV like the Mahindra MSTC Recycling Pvt. Ltd., we are doing -- we have already had a steep presence in whole country as a recycler of these types of vehicles. So we -- that is our second role.
And third, we time to time are having discussions with respective ministries and all these things, giving our inputs from -- that we are getting from our stakeholders like our bidders, like recyclers to the ministry as a bridge between them so that the work on MST framework and ecosystem takes place. So -- but as of now, we assume that it will take a little bit of time before it sets in a typical structure and system.
Sir, the time, if you can just be more clear? Is it beyond 6 months or these take 2, 3 years' time?
Basically, you see it is very difficult to give a timeline because in a financial projection, generally, we have a project report in place, DPR in place. And we can say -- we can tell you, again, just here as a stakeholder like, look, sir, this is the projections we have. But however, we have lot of stakeholders are involved, in particular states governments are involved, central government is there.
So it is very difficult. But that much what we can tell you, it has been the top priority of Government of India. And of course, MSTC, we're on the job. So it will take -- it has already taken up, lined up. So it will be very soon or later you will see, once the state governments are also roped in, so it will be a total ecosystem for the whole country as well, sir.
The next question is from the line of Miraj from Arihant Capital.
Sir, in the opening commentary, you did mention that commodity prices were down, mainly scrap being lower. Sir, you mentioned a couple of figures. Could you please reiterate? Is it 15% to 20% down in the previous quarter and 10% down in the current quarter Q3? Or if you could just clarify, I got it in that manner.
Yes. Good afternoon. This is Bhanu Kumar, Director, Commercial. Sorry, I couldn't join earlier, I just joined. So I'll address your queries. What has happened is scrap prices were a little down in the first quarter. Now it is picking up. Post July, August, the monsoon session, it is now picking up by around 8% to 10%.
The main issue that we had faced is in the reset of prices of iron ore. Last year, iron ore prices were really, really up. And thereafter from third quarter onwards, it was showing some drop. And now though it has stabilized, but it has not reached the levels of last year, the last year first -- H1.
So because of that, because our revenues are a percentage of the volume, so that also gets affected. But now that it has stabilized and it has been witnessed that the second half is generally a very good period for such kind of things, so we anticipate that there will be some more increase, though maybe not to the extent of 20%, 25%, but another 5% to 10% we can very -- we can estimate that there will be an increase.
Okay. So you mentioned, ma'am, the revenue as a percentage of volume or percentage of total value?
Value, value-wise.
Value, okay. And my last question before I get back in queue is, what are the current opportunities available in the e-commerce side? Because as we mentioned that, that is our main focus. So any new business avenues or products that we are currently mainly focused on which could come up in the next 1, 2 quarters or the -- in this current financial year?
See, as far as scrap and minerals and other products are concerned, where we are already operating, on a daily basis we are having new sellers, very small volume but drop by drop it is increasing, the number of -- the clients that we serve to.
In terms of, I think, the new products or new projects, immediate future, there may not be a substantial growth. But I think we had talked about this in the last year also. We are now in the process of engaging with other software developers and SaaS companies. And with their association, we are now planning to take up bigger projects for the government.
E-commerce, the whole potential has never been mapped. So there is a wide opportunity awaiting. It depends on being there, doing the right thing at the right time. We are exploring all the opportunities and -- but the results will come over a period of time.
This cannot be that we get a project and immediately we start earning from that. There are things that we have to do in association with other companies. These are long-term projects. So that will give revenue in the future, but not in the immediate future.
The next question from the line of [ Abhishek Kale ].
Am I audible?
Yes.
Sir, question regarding FSNL disinvestment. It's been 1.5 years since the EOI was floated. Where are we with the FSNL disinvestment? That's the first question. I have a follow-up. I'll ask them once I hear the answer.
Yes. So for FSNL disinvestment is concerned, like DIPAM is engaged with it. So time to time, you can get update in the DIPAM website. But as of now, as of now nothing -- we have not have nothing at our -- as far as MSTC concerned, in our knowledge, that specific something concrete has been yet been finalized. But I can tell, transition adviser and LA has been done, and certain interested bidders have already been shortlisted.
But so far, other things are concerned, like price deed, et cetera, et cetera, that is in the purview of Government of India. So as and when bidders would be invited and they are open and some result are there, so it will be on DIPAM website, our website, and of course, we will also let you know, and there will be, of course, certain formalities as per the company's law. So you all will be appraised on that.
So this was Chairman-sir, right? Sir, this has been the consistent answer from the management regarding FSNL disinvestments. This, as an investor, to me, doesn't give me anything. I mean, neither we are on this side. It's like a cat sitting on the wall situation, which side it would jump, can't say. I mean how, as an investor, do you expect us to continue to hear this update, right? This is the first comment. Okay?
And second thing, as an organization, do we think the FSNL disinvestment is in our interest? Or whether it is not in our interest? Because if I'm not mistaken, they contribute to about 30% on our top line and about the same in our bottom line side, right? So then whether it is in our interest to divest that stake or -- I mean, we will part ways with FSNL. So whether it is in the long-term interest of the organization. I would like to hear the management's views on this.
See, we have made it categorically clear that FSNL disinvestment is being done by the Government of India itself, DIPAM specifically. This is not a decision that has been taken by the company MSTC. And none of the activities are also done by the company directly. So we are also just a party to the entire process.
And when we are not in the decision-making position, there is no point in saying whether it is good for the company, back for the company, only time will tell. But if the government has taken a decision to disinvest certain PSUs and they have already made a roadmap for this, as a company, definitely, we are not going to question the decisions of Government of India or start analyzing their decisions.
Okay, Bhanu-ma'am. So basically, it's just -- since we are party to what the government does, we will have to go by what they are because we are a PSU. Am I right in saying that, ma'am?
Absolutely. Absolutely. You're right.
The next question is from the line of [ Raghav ] from Kredent Family Office.
So I noticed that our value -- total value of goods traded has nearly doubled quarter-on-quarter in the e-commerce business, but our revenue has not really gone up in similar proportion. So can you shed some light into it? And how can we like as investors, estimate for ourselves how this translates in the future as well?
You see, right from the beginning, we got ourselves listed, we have been stating that our e-commerce services, the service charge revenue that we earn is not actually directly related to the volumes. Some of it is related to volume. Most of it is not related to volumes. It is on event basis.
So the volumes that we are talking of, last year, we did more than 3 lakh crores through our e-commerce portal. And year before that, we did something like 1.5 lakhs. This year, again, it is likely to be in the range of just over 1.5 lakhs, 2 lakhs. We're not able to do 3 lakhs. But that doesn't mean that we will be earning less.
Here, there is no correlation between the volumes and the value for majority of these activities that we do in e-commerce. I'll take an example of spectrum auctions or the coal block auction. If a major coal block is getting auction, the annual revenue that accrues to the state, that is accounted for in our sales volume figures.
Now in a particular year, it may happen; in another year, it may not happen, but the revenue that I get for carrying out that event is constant. So the volumes actually don't have any impact. So there is no point in analyzing the volume. Just go by the service charge revenues, the potential that we are talking about. And based on that, you can have your fair estimation.
And one more question that I had was in the financial liabilities. So the other financial liabilities has come down by around INR 452 crores since March, and there is still about INR 924 crores left. So can you please shed some light into it? Because that's affected our cash -- net cash position as well. So how do we -- can you just shed some light on that?
Right. A well-analyzed sentiment. But one thing I must -- before I answer, I must tell you one -- I am giving you another input. If you see this net of liability our cash position, so it has gone up as compared to 31st March.
Now coming back to your question. So this type of liabilities, which are sometimes what we have already explained, some money comes and some money goes through our portal, so it keeps on fluctuating. So what we have to do, we have to analyze our net cash position. So that way, cash position has already increased. And it is a comfortable position, that much I can tell you.
It can keep on fluctuating. They're sometimes lesser, sometimes higher. So because of that factor that is -- as on cutoff base, what is the position this year. So that is the point here.
And can you clear some -- like what is the other financial liabilities? And you still have INR 924 crores left. So will that also get cleared up?
Yes, basically, what happens, like some kind of payments that has to be passed on to the principals. And that remains in our books. So that is the main type of things. So that keeps on fluctuating.
So as long there's some kind of payment that has not been passed on, that remains as a liability on that particular -- this is a financial liability. But if you see, you have to weigh this on basis of net cash basis, you see the cash balances and minus it and see the net cash position, sir.
Okay. I just had one last suggestion to make. So in the last quarter, you all had put up a slide about the RVSF business with the joint venture that we are in. But this quarter it was missing.
So I just -- my suggestion as an investor is, can you please give us an idea of the number of centers that you all have opened, the opportunities and the quarterly progress that you're making. So that would be really helpful in the end of life vehicle business and the circular economy that we keep talking about.
Really, thank you very much for your suggestion. We have noted it out. And just now, we will make a blank slide of that. And next year investor meet, we promise that it will be there for your consumption, sir.
The next question is from the line of [ Srinivas Reddy ].
Good afternoon.
Good afternoon. Spit it out.
My question is regarding the non-scrap e-commerce business growth. What is the percentage at present for the non-scrap e-commerce business you are doing? And what are the future prospects, sir, for the growth of that non-scrap e-commerce activities?
Almost 50% of our revenue is coming from non-scrap now. So we will be maintaining that because there is growth in scrap business also. So the growth happens in both the scrap as well as non-scrap business, which is, I think, a very healthy sign. Because our core operations all throughout in so many years has been mainly scrap business. That is the backbone of our revenue.
Over the years, we have just diversified to other products, other areas. And we are incorporating digitization in all the transactions. So non-scrap is also important. Growth will be there. But scrap is something that we will always be pursuing very, very vigorously because we are numero uno in that. We have a definitive advantage, so we will keep continuing with that.
My second question is regarding your subsidiary with Mahindra & Mahindra for the vehicle scrap business. So what will be the future growth prospects for this company in terms of can you quantify regarding the near-term and medium term growth possibilities?
See, if you have gone through the analysis in the last few quarters, there has been a scrappage policy, there has been a push by the government. A lot of institutional framework has also been set up to give an impetus to this area. But in ground reality, it has not taken that kind of the growth that was envisaged. It is still taking time.
And maybe the states are yet to come up with some kind of facilities, infrastructure and given an impetus to this sector. So unless that happens, the raw material is not going to come for a JV company. And unless they are able to break even or see substantial raw material inputs, the performance is likely to be muted.
So we are pursuing -- as a government organization, we have been pursuing with all the state governments, the central government, MoRTH. So whatever help is required from our side, coordination, we are doing. But finally, the decision makers are the state governments and the central government, right?
So like the case of automated testing stations, see, that is the first thing that is required for declaring any vehicle as ELV. That infrastructure is not available in the country. And for taking up that, huge investment is required, huge infrastructure is required.
It has to be on a PPP mode or as a private ownership mode. What is the kind of policy framework that actually is required? All the governments are still deliberating on these aspects. So it is expected that definitely it will come together very soon. But it is a slow progress.
Regarding this previous -- provisions from the past, you have cleared all those pending provisions? Or there are any left for the future from the legacy provisions?
As far as trading is concerned, we have already provided for all the receivables. As far as e-commerce is concerned, there can be 1 or 2 very small insignificant provisioning. So that will always be there. When we do business, there will always be some kind of a dispute as to whether the provision is there or not there and things like that. So that will be very, very miniscule. So more or less, there will be no provision going forward.
The next question is from the line of Harshit Jain from RAH Investments.
My first question would be regarding our cash balance. So as I'm able to see our cash flow statement, last year, we make an FD of around INR 520 crores. And this, in the first half, we have made an FD of INR 240 crores. So I just wanted to know that why we are putting almost INR 750 crore of rupees in FD and why not give the same amount of money either to investors or do a buyback just to improve return ratios?
Right. Sir, when I think whether you are following up our previous conversation or not, right now, so this cash balance is not to be seen in unison. It has to be seen with the liability that we are having, all right, but this quarter, of course, this quarter or this half, we have certain cash right now with us.
First of all, we have got back this INR 90 crores pre-deposit with Standard Chartered Bank along with interest. So that is our main thing and certain factors were also there and certain realizations were are also there.
So if you see that the late cash position is around -- net of other financial liability is around INR 250 crores plus. So that is there. And we have declared a dividend of 55% also. So as for the impact -- last year also, we have declared a dividend of 150%. So we are on that path, what you have suggested.
We are -- whatever we are generating, a good amount of cash is being distributed amongst our shareholders, number one. But certain things are there. And we have got -- we are already having -- we are trying to rope in some good infrastructure and offices at different places so that we can run a good amount of business from -- e-commerce business from that particular places.
But [indiscernible] around INR 250 crores or INR 240 crores of cash, I don't think, net of net cash, is too much of cash for this company. And we will be certainly looking after certain business opportunities and certain plans are being -- consultants are being roped in.
So after that, obviously, if after a certain level, as far as our guidelines, we will certainly share it with our shareholders. And of course, it will be distributed among the shareholders as per certain policy norms as and when it is decided. But so far as our dividend is concerned, we still is a consistent dividend paying company right now, sir.
Okay. And my next question would be regarding our creditor list. In our creditor list, I'm able to see Jai Balaji Industries standing around INR 81-point-something crores. So are we able to recover that amount because since the company past 2 years' performance has been amazing and the company is in profits now. So are we able to recover those INR 80 crores?
First of all, it is our creditor list right now, rightly pointed out, sir. And we are taking all the necessary steps as per law to recover it. Because you know that it is a legal process, and as I'm saying that -- because we see what happened in the case of Standard Chartered. It was a legal process.
We won through a legal process and we got our money back. So here also, it is a legal process. As and when the court decides -- it is now the ball is in the court. So how sub judice is, it is the matter. So how and when it is being done, it is, of course, depending upon the court decision.
But we will -- as and when -- like we can assure you, we will leave no stone unturned to realize the money from any source that is there and which is realization, sir. That we can assure from our management side. We are already on the job through legal process, sir.
And my last question would be regarding our joint venture with Mahindra. This quarter, we have shown a loss of around INR 2.15 crores. So any timeline for it to be at the breakeven stage, like probably this year or next year?
So like you see, just now, if you are following the comments our Director of Commercial have explained because that is the major -- because joint venture, first of all, our trust once we spread out across the country we will have our presence that phase is already on and we are there.
So -- but once this has been done, we have not been able to get that much of raw material for our RVSF that we must get across all around the country. So that is putting things -- because of that fixed cost that is putting into our losses. So until unless that infrastructure is set in, so we will -- I think we request you to at least wait for a year to see which way it goes.
So because government is putting a lot of impetus, we are also trying. So what happens next? But, I mean, as a positive estimate, I tell you is what -- a year of time has to be given to see what happens and which way it goes, sir.
The next question is from the line of Mustafa Arif from NRC.
Sir, my first question is a bookkeeping question. Sir, on Page 6 of the PPT, where you've given the breakup of the e-commerce revenue, so the total is up to about INR 165 crores. So there's a INR 20 crore amount missing. So what would be the contribution?
Pardon, pardon?
Can you repeat your question?
Page 6 of the PPT, revenue of e-commerce is INR 185 crores for the first half. So e-auction, other income and e-procurement, that is about INR 165 crores. So INR 20 crores what would be the source of that?
The revenues from certain projects that we are undertaking, AMCs and other charges that we get, I think that is not accounted in any of these 3 heads. That explains this difference.
And this would be a onetime kind of amount? Or...
It's actually -- it's not a one-time. See, we have development charges, we have AMC charges and it is linked to milestones. These particular projects is going for a few years, then it will be there for a few quarters. And if the project is just a onetime kind of an activity, then we get only in that particular quarter.
Like I'll give you an example of IBAPI. So we developed this portal, say, about 4 years back. But every second year, there is some event going on, there's some patch of work going on. So for that, we earn some revenue. So we can't say that this is a one-off kind of a thing. But it is definitely not a constant revenue stream.
I see. Okay. And the second question would be regarding -- so the Earnest Money Deposit, the revenue that you earn, what would be the contribution, say, out of e-commerce, how much would be revenue from Earnest Money Deposit? And how does this sort of work? If you could explain that.
Revenues of Earnest Money Deposit..
There is no, per say, direct correlation because it keep comes on, goes out, comes on, goes out. So we certainly -- administratively we do not earn that much. Basically, we earn -- basically, our main upgraders are in our service chargers, registration fee, other things. Yes, paltry sums are, of course, there, but it comes in and goes out, comes in and goes out.
It does not -- basically it does not make a constant revenue stream. It cannot be a constant revenue stream. Our revenue stream is our service charge, our registration fee and other allied activities and all these things, other transaction fees that of other service. So of course, it added -- adds to our top line but not as a -- we do not take it as a prime revenue earner.
The next question is from the line of [ Sanjay Nayak ].
I want to ask how many new scrapping centers opened in Q2 FY '24 and total scrapping -- current scrapping centers in a city? Also request you to mention the -- in investor presentation, whatever Mahindra MSTC Recycling Pvt. Ltd. regarding updates of the new scrapping centers and what are the developments are over there.
First, your second suggestion, that is well noted. Right now, just before you, some -- your fellow investor has also said. So we have noted it out. There will be, of course, a slide on that in the next revenue presentation center. So right now, we have got our presence as a scrapping center is at Noida, Chennai, Pune, Indore, Ahmedabad, Hyderabad, Bangalore and Guwahati, right, as of September. So that is our presence...
What's total scrapping centers? Total scrapping...
It has to be 1, 2, 3, 4, 5 -- 8.
Eight. Actually, there are a lot of collection units and feeder units for these 8 scrapping centers. These are the center for which we have already obtained the licenses and these are operating.
And new planned centers in next 2 quarters, is there any update on that?
Yes, we are exploring. But as of now, nothing has been crystallized. We are exploring because just now we told, that we have expanded. Now there is a paucity of typical raw experience. We are looking for like where there will be -- which states comes up with the policy. Depending upon that reaction of the state, we will go there. Because it's very -- now becoming thin, like we have to take a very important decision on that particular matter.
And present capacity of all the centers is around per annum, what is the capacity approximate? 15,000 vehicles or 20,000?
Putting it all together will be at least 1 lakh vehicles. But we are hardly getting even 10% of it. So that is the issue we have. It is a challenge that we are facing. Capacity is for more than 1 lakh vehicles per annum.
Per annum. That is including that total 8 centers?
Yes, 8 centers so far, the biggest being Noida.
Biggest is in Noida.
Yes.
[Operator Instructions] The next question is from the line of Aman from Aman Investments.
Sir, I have just 2 questions. And first question has 2 parts. Sir, I wanted to understand -- and this is regarding the coal auction. I just wanted to understand whether we are seeing private participation also because the government has opened the sector to private people and communities as well. So are we seeing participation there?
And secondly, I just wanted to understand on coal whether we actually require these amount of coal because the Coal India have told that they need 1 billion tonne of coal. And how much percentage will be routing through our platform, and whether the requirement is correct? And which industries do we see that this requirement will be going? And second, I'll ask after the answer, sir.
Okay. As far as coal auctions are concerned, I'm not very clear as to what exactly your question because you're asking of private parties.
Yes, for private -- the private people are also seeing you coal and keeping in our platform for auction? Or how are you seeing that environment building in private players as well?
No, no, no. As on date, it is mainly Coal India that is auctioning through our platform. Then we are also catering to some smaller organizations, like in the case of Jharkhand, Jharkhand State Mineral Development Corporation. We are doing coal auctions for the Government of Meghalaya. Then we are also doing some coal sale for Odisha Coal and Power Limited. So this way, there are other organizations, but largely it is restricted to state government entities or the Coal India.
And apart from that, the question that you asked regarding what is the percentage of the mined coal that will actually get auctioned, these are policy directives that are given by Ministry of Coal from time to time, depending upon what is the demand supply condition, the international market conditions, the grade of coal that is mined, where is a requirement, all those things are taken into account.
And there are various schemes under which the coal is sold. One is the retail sales, which we call the spot option. The second thing is the linkage auction. So all the user industries based on the sector in which they are operating, there is a linkage. And based on the FSAs that they have, they have certain quota restrictions. And so these auctions are carried out by MSTC. So this is basically something that's policy-driven. And this is done by the Ministry of Coal itself through Coal India.
Okay. And just to follow up, ma'am. Do we think are we in line with the target of Coal India's 1 billion? Or do we see bumpy roads ahead?
See, 1 billion tonne mining may be happening, but they already have long-term commitments to many entities within the country. That doesn't come under the purview of auction. So there is a certain percentage, 85%, 90% is given to the long-term clients, right?
So it is the left off portion, as from time-to-time policy directives, it comes for auction. So if the mining activity increases, there is more output, definitely, the volume that will come for auctions will also increase in a proportionate manner.
Okay. Ma'am, can you just tell me from which mine are we rooting these on our platform? Is any particular mine of Coal India, which we are rooting completely or proportionately? If you can just broadly give us the names of the mines and the sectors in which we are dealing with?
It doesn't operate like that, that a particular of mine is earmarked totally for retail sale, no, it doesn't happen like that. So Coal India also has about 7, 8 subsidiaries who are doing the mining activity. And they already have long-term commitments to the state government generators and other ancillary units, different sectors, captive power plants.
All these things are already there. These commitments are there for each of the collieries. So whatever that is, is beyond these FSAs or the commitments they already have, that is coming up for the spot auctions.
Ma'am, the second question I have to ask is regarding your experience in this financial year. Any surprises have you seen because we are mostly a facilitator type of business. Any surprises have you seen in our value chains or in our business verticals, which we had expected and it has got out to be very good?
Or any -- and also -- surprise is one part. Second part, any backdrops that we've seen we were very optimistic about, but we had seen a backdrop going forward? Or is it ongoing? Any of your experience on both positive and negative side, ma'am.
See, as far as e-commerce is concerned, nothing happens overnight. Yes, there can be some kind of a project that comes our way once in a while, like the coal block auctions or the mineral block auctions and things like that. But they are not very big revenue earners for the company.
So the revenues are actually coming from the e-sale of minerals, the forest produce, the timber and then, of course, the main stake is the scrap. So that has a steady growth. And of course, we are trying to add new and new clients, those who do have such material for sale.
As far as we are -- we can see that, more or less, most of the state governments and the central government have been onboarded. Now the volumes that they will actually transact through our portal is something that we expect to grow in the next few years. So the volumes will go up, our revenue will also go up because of these things.
From the private sector, last time also, as we had said, the iron ore auctions and sometimes even other minerals, people are trying out our platform. But when they have their own internal consumption or requirement, obviously, there will be not much sale.
The surprise that -- the negative side of the surprise that you wanted to probably know is one thing I can give, iron ore prices. Not just the prices have come down since last year, now in the recent past years also, witnessed that some of the private producers of iron ore, they have increased their consumption. So whatever is coming up for auction has reduced.
So that is also something that is a one-off kind of a thing. So as and when the production goes out, their consumption pattern gets a little more somewhat stabilized. Definitely, that things will come up for auctioning in a better way. Actually, all the organizations will do a balancing act.
Obviously, they have to see their internal consumption, their growth in that sector, plus whatever they can -- what surplus they have, whether they can mine more, whether they can adopt newer technologies so that the efficiencies are improved, so that they get better revenue by selling the material.
And the second question was -- well answered. The second question was, ma'am, I wanted to understand the push from the government on our -- on this PSU, NCLT. How is it pushed? And is the government checking targets for us we have to achieve this? And going forward, how is the government support energy? And what is your confidence in our business going forward?
There are 2 aspects to that. The government, as on date, doesn't support or tell anyone that they have to go to MSTC's platform. Whatever business we are getting is totally on the business of our experience, exposure, our merit, the infrastructure, our credentials, our past, everything. We are, on a daily basis, competing with our private sector participants, private sector organizations, and we do not get any major advantage of being in that.
The only advantage is, yes, we have been in this e-commerce for more than 2 decades now. So that gives more credibility, our credentials are improved. And the kind of the statutory liabilities or the compliance that we have to keep in place for carrying out any of the activities, especially e-commerce of natural resources, that obviously, we command a better position in terms of compliance-related matters, in terms of audit, in terms of any issue that can be faced.
We have faced a lot of scrutiny in the past. And each and every time our stand has been vindicated. And because of these credentials, even the Government of India, wherever they see that they can ask us to develop the platform, they are giving us the business. But not because we are a Government of India undertaking, but more because we have proven our -- our track record has been good. We have proven our credentials in the past 2 decades.
The next question is from the line of Miraj from Arihant Capital.
Questions regarding the scrapping business that we have, the JV that we have. I wanted to understand that the government has already put out notices and their push is going on from their side. But from our end and from the JV partner's end, what are our initiatives that we've taken or we are currently undertaking to increase the sales on that end?
Right. Because if you were following the whole series of conversation in this regard in this particular concall, there are 2 things that you might have heard. First of all, government has put some initiatives. Now that initiatives are related to only for government basis. And for that, we are getting little bit of benefit.
But the second part, that is the larger part, that is the private basis, for that, the state has to come up with the policies and the infrastructure, in particular, the ATSs. And we are saying like we are facing the paucity of raw materials.
From our side, we have increased our reach to each nook and corner of the country in the form of setting up centers and the collection centers and the collection facility also. So from our side, we are fully ready or all efforts have been made to get the things.
But since the ecosystem is not mature enough to give us that much of raw materials, not only through our JV and other players in this field, they are also facing the same kind of shortage. So just now only little bit when I answered to your fellow co-investor I just answered.
At least a year of time minimum is required to a watch which way that things go, how the infrastructure improves, how the state governments respond to the center's initiative. Because of course, vehicle is a state policy. And all the rules, regulations like RTO and all these things has to be amended and done from the state government only side.
Thank you. Ladies and gentlemen, we take that as the last question. I would now like to hand the conference over to the management for closing comments.
So it has been quite a good and engaging session, as always, and the queries that all the investors have been asking have actually made us improve our processes, performances. As you know, that we are all answerable to you at the end of every quarter. So we are diligently following up on each of the suggestions and suggestions even beyond these investor calls are always welcome. We look forward to them. Thank you so much.
Thank you from my side.
On behalf of Equirus Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.