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MSTC Ltd
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Ladies and gentlemen, good day, and welcome to the MSTC Limited 3Q FY '21 Earnings Conference Call, hosted by Equirus Securities. Joining us on the call today from MSTC Limited are Ms. Bhanu Kumar, Director, Commercial; Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Varun Bakshi from Equirus Securities. Thank you, and over to you, sir.
Thank you, Melissa. Good afternoon to everyone on the call. On behalf of Equirus Securities, I welcome you all to Q3 FY '21 Earnings Conference Call of MSTC. We have with us the management of MSTC.I now hand over the call to Ms. Bhanu Kumar, Director, Commercial, for the opening statements. Over to you, ma'am.
Thank you, Mr. Varun. Good afternoon to all of you. Actually, today, our CMD could not participate in this important con call. He had to travel. So apologies for the same.And I would now like to place the key highlights during the Q3 of '20 (sic) [ '21 ]. And first of all, let me share the financials. During the 9 months of 21, the company has crossed revenue of INR 500.23 billion in terms of value of goods transacted through its marketing and e-commerce verticals, but this is around 26.86% lower than the value of goods that was traded during the same period 9 months of '19/'20. And most of this can be attributed to the COVID-19 pandemic. As you all know and as we have said in the earlier investor calls also, that the first quarter was almost like wiped out. There was hardly any transaction that was done. So the second and third quarter have been a little promising. So we have still been able to catch up in the second and third quarter.As far as the financial performance consolidated is concerned, the revenue of INR 4,692.85 million was achieved in the 9 months 2021 vis-à-vis revenue of INR 10,375.54 million in 9 months '19/'20, a decline of about 54.77%, which was largely driven by the 84% de-growth in the marketing business and also to a great extent because of the pandemic. The e-commerce revenue slowdown is because of pandemic. But for marketing, as we have been saying earlier, it is a conscious decision to taper down this business. And because of this, there is a de-growth. The PBT of INR 759.34 million was witnessed during the 9 months vis-à-vis INR 1,464.41 million during 9 months of '19/'20.As far as business updates are concerned, during the third quarter, we were successful in conducting the coal block auctions for the Ministry of Coal nominated authority. And 19 coal blocks have already been allocated and the agreements have been signed. MSTC has also been assigned a prestigious assignment of carrying out the spectrum auctions for the country. It is now scheduled to be held on 1st of March, and the technical evaluation is going on. This was a very complex portal, and there were a lot of changes that were to be done. And finally, all this is done, and the STQC certification has been obtained as on date.We have also now -- as we had promised earlier, we are also enlarging our basket of private sector clients. And towards this end, one major breakthrough was the agreement with JSW Steel for sale of their iron ore. So this agreement was signed during the last quarter, that is the third quarter of this year. And the first auction also has been conducted very recently, which is very promising.Now regarding the financial results, I'll hand over the phone to Mr. Subrata Sarkar. He'll be talking about the financial figures. Thank you.
Regarding the -- good afternoon to everybody. Let us, first, have the stand-alone financials for the 9 months ended 2021. So as we compare from '19/'20 of the same period, we have got total revenue declined from 782 -- INR 7,827.68 million to INR 2,445.31 million. And it is basically a de-growth of 84.44% in the marketing segment, where it has gone down from INR 6,254.22 million to INR 973.22 million; and e-commerce, INR 1,509.71 million to INR 1,369.16 million. And others are, of course, INR 63.75 million to INR 102 million, it has gone a little bit higher.EBITDA in the pre-provisioning, it has also gone down by 29% from 1,555.42 million to INR 1,094.33 million. Provisions and write-offs are a little bit higher, INR 89.22 million to INR 348.41 million. It's almost 290.51% higher.PBT. PBT is also -- with these provisioning figures, PBT is down by 45.48 percentage from INR 1,230.91 million to INR 671.06 million. And PAT is down by 66.34% from INR 79.16 -- INR 791.60 million to INR 345.62 million. And accordingly, EPS is down by INR 11.24 to INR 4.91. But our cash profit is almost not as down by that much of percentage. It is around -- it is INR 714.86 million as compared to INR 892.23 million, down by around 19.88%.And in the segment portion of the stand-alone, we can see that revenue from e-commerce as already told that it has gone down from INR 1,509.71 million to INR 1,369.16 million. And major downfall is due to the e-procurement, which is down by 61% from INR 192.50 million to INR 74.10 million.And other incomes, of course, are also down by INR 144.21 million to INR 120.78 million. The marketing revenue, already discussed, it is down by 84.44% from INR 6,254.22 million to INR 973.22 million. And expenses are also correspondingly down from INR 6,596.77 million to INR 1,774.25 million. And PBT down by 45.48% from INR 1,230.91 million to INR 671.06 million. And PAT down from INR 791.60 million to INR 345.62 million. That is down by 66.34 percentage.And from the consolidated front, the total revenue is down from INR 10,656.49 million to INR 4,824.98 million, down by 54.73%, in which scrap -- and marketing already discussed INR 6,254.22 million to INR 973.22 million, down by 84.44%; e-commerce, INR 1,509.60 million to INR 1,368.98 million, down by 9% -- 9.32%; and scrap and recovery and allied jobs, which is basically the revenue of our 100% subsidiary company, down by INR 2,828.92 million to INR 2,479.87 million, down by 12.34%.EBITDA, pre-provisioning, down from INR 1,905.50 million to INR 1,319.36 million, a de-growth of 30.76%. And the provisions are, of course, higher from INR 89.22 million to INR 360.17 million.Profit before tax is down from INR 1,464.41 million to INR 759.34 million, down by 48.15%. PAT, down from INR 923.08 million to INR 371.33 million, down by 59.77%. And of course, with that, EPS is down by 59.80% from INR 13.11 million to INR 5.27 million. But the cash profit is not that much down, but it is down from INR 1,130.66 million to INR 874.76 million, down by 22.63%.And let us go by -- on the detailed financials. So in the stand-alone, the revenue from operations is INR 2,302.66 million as compared to INR 7,613.05 million. Other income, down INR 142.65 million as compared to INR 214.63 million. Expenses in the operational, consumable and purchases are down from INR 5,582.20 million to INR 672.36 million. Employee benefit almost remaining the same INR 504.66 million to INR 502.33 million.Finance cost down from INR 223.88 million to INR 54.03 million. Depreciation, a little bit higher from INR 1,141 -- INR 11.41 million to INR 20.83 million. Provisions and write-offs, they are up by INR 89.22 million to INR 348.41 million. Other expenses are down from INR 187.73 million to INR 173.96 million. And with that, profit before tax comes to INR 671.06 million as compared to INR 1,230.91 million. And PAT comes from INR 79.16 million to INR 34.56 million for the stand-alone part.And for the consolidated part, this revenue from operation is down from INR 10,375.54 million to INR 4,692.85 million. Other income, down from INR 280.95 million to INR 132.13 million. Purchases and other operational and consumables down from INR 5,943.75 million to INR 965.30 million. Employee benefit expenses is also down from INR 1,280.29 million to INR 1,271.93 million. Finance cost, INR 233.52 million to INR 56.58 million, down by 75%. Depreciation, up from INR 118.36 million to INR 143.27 million.Provisions and write-offs. Of course, they're up from INR 89.22 million to INR 360.17 million. Other expenses are down from INR 1,500.94 million to INR 1,255.93 million. With that, there is a share of loss from joint venture. Of course, losses has gone down from INR 26 million to INR 12.46 million. And PBT on a consolidated basis is down from INR 1,464.41 million to INR 759.34 million. And PAT is down from INR 923.08 million to INR 371.33 million.With that, I'll hand over the mic. And so this is all from us to present. I'll hand over the mic to Ms. Bhanu Kumar, our Director of Commercial.
Thank you, once again. Some of the highlights I probably missed out. I would just like to add a little more. We also have bagged this order from Cotton Corporation of India for sale of cotton bales, cotton seeds, et cetera, that again is a very complex portal, and a lot of the bidders have been onboarded already.We have also sold one decommissioned power plant on behalf of Chhattisgarh State Power Generation Company. That was also a good value that we realized. Whatever was the expected price, it was much higher than what was the expectation.Mangalore Refinery and Petrochemicals, they have also awarded us the work of creating a portal for all their export and import of products, similar to the Indian Oil portfolio that we had done about a couple of years back. That's still going on. We have also had a few tranches of auctions in SHAKTI B(III) coal linkage scheme. And these are linked for power purchase agreements. So these have also been successfully conducted.Now these are the Q3-specific highlights. One further point that I would like to highlight here is our joint venture company, MMRPL, for the first time, this -- in this quarter, they have shown positive results. So that is a very encouraging sign. And we are hopeful that this trend will improve in the days to come.So that's all from the management side, so we can now take the queries. Thank you.
[Operator Instructions] We have the first question from the line of [ Raj Mathur ] from [ Victory Capital ].
Yes. I had 2 questions. The first one was if you can articulate in detail what exactly will be your plan on the scrappage JV? The scrappage policy is now closer than earlier. And if you can detail out what exactly is the plan? How many centers you plan to set up? Is there any financial projections, et cetera, even rough cut, which you guys have made? And how the scrappage business should benefit the core steel auction, steel scrappage auction business also?And the second question was, it was surprising to see the e-commerce revenues flat. The steel cycle is on an upswing. And one would logically presume that even scrap steel is -- the volumes and the pricing is higher than what it was earlier. And if the volumes and the pricing was higher than earlier, then, logically, it should have translated into a better revenue on the e-commerce portal business. So if you could explain why the numbers have not shown that kind of a trend? So these 2 aspects, these are the 2 questions, which were there.
So if I understand, first is, what is the plan of action under the scrappage policy that has been envisioned by the government?
And how big this can be eventually for MSTC? Like can it be a massive driver for the business? Or is it not a significant driver? What do you think basically?
Okay. Fine. And the second is, basically, the e-commerce volumes and the service revenue are not actually in tandem with each other, is that right?
No. What I understood is, and maybe this understanding could be wrong, is that when steel, as a sector, is in an upswing, which it is in current -- as we speak right now, then logically, it should have translated into higher volumes of steel scrappage transacted over the -- to -- on the portal, and at the same time, should have captured it into higher service revenues. It doesn't look like both have happened. So is there a direct correlation with the steel cycle upswing which benefits MSTC directly? Or is there no correlation which really is there between the steel cycle and the revenues which we have on the portal?
Okay. I'll come back to that. But first of all, regarding the scrappage policy, I'll ask Mr. Sarkar to speak regarding what will be the impact of this and what we plan.
Well, first, thank you for your good and very -- I mean, very prominent question that is going out hovering in the country. So the scrappage policy for the government vehicles has already been announced in the budget. And accordingly, the rules are being framed.And as a first-mover company, we have got a JV company of Mahindra MSTC Recycling Pvt. Ltd., we are watching it at a very close level. And we are -- basically, the impact is yet to be find -- found out. But we are still on that -- our particular model with collection and dismantling model, and we are doing, and as already just now announced by our Director of Commercial that for the first time, our JV has locked profit during this quarter. So we look forward very much on this policy.And with the rules are being framed, and we expect that if these rules are there, and we will feel that the -- this impact will be there, and the availability of raw materials may increase. So again, we have to wait for a quarter to see the effect to come into the market with the clarity in the rules and the related benefits to the people who are availing this traffic.So a quarter is required to assess the position and how to -- we look forward in the coming days to come. But still, our strategy is to carry with the current model, and we hope that we will go ahead with this model and get proper benefits.
And is there a significant expansion plan lined up? Or at this point, we would just continue with the current setup and the current number of centers we have?
So the basic point is like that. I can -- just now, I think I've told you that we are watching the impact on this availability of raw materials of this policy in the market. So it all depends. If at all we see that it is there, obviously, we will augment our facility, and we'll go ahead with that thing. But always, we will have a first-mover advantage because we are already there in the market and doing all these things. And already with this thing, we have already locked a profit this quarter.
So what I'll add is, basically, we are waiting for fine-tuning of this policy. The rules have to be framed so that -- then only we will know what is the impact of the policy on the final people of the country who are using this. Because unless the numbers come in, then we can't be investing further. But the plan is definitely to increase the number of collection and dismantling centers based on the number of vehicles that will come to each of these centers. There will be a due diligence process that will be followed before setting up any further C&D centers. Now that is as far as the first question goes.Regarding the second one, as I understand, is basically the iron prices have firmed up, yes, I agree with you. But this has happened only in the last quarter, and it is still showing upswing. Now in the e-commerce, total volume that we are talking about, this is only a part of it. The volume of scrap that is sold or the amount of iron and steel goods that is sold in the entire volume that we are talking about is a very small percentage because half -- more than half of this volume is coming from the e-procurement business, and it doesn't actually limit itself only to the iron and steel products.So the volume and the -- what is the condition of iron and steel sector, these are not really directly correlated. Yes, it has some impact, but not to a very great extent. So what we are actually doing is we are having a plethora of products that are being transacted through our e-commerce portal, iron and steel being one part of it. Regarding...
Ma'am, one last question then would be, what would you think is the realistic growth potential in the e-commerce business? Should it be like single-digit growth over a 2-, 3-year window? Or can it be higher than a single-digit growth in the -- in a medium-term scenario for the e-commerce business?
See, we are being optimistic. And the -- because of the aftereffects of the pandemic are still to be assessed, as of now, we are not able to actually forecast. We are just reeling away from the effect of the pandemic. In fact, all the industries are just coming out of whatever effects they had to face. So I think, after this quarter, we can probably have some assessment of how the next year is going to be.Yes, iron and steel, the sector is growing, and the prices have firmed up. That is translating to better revenue for the scrap that is being sold. But as far as other products are concerned, I'm not too sure as to whether it will keep improving or not.Secondly, we are increasing the basket of services and goods and even the volume of goods that is being transacted. But the numbers as far as the service revenue is concerned, that is still a very miniscule percentage. So it's, I think, too early. Yes, we are optimistic that it should be double digit, at least 10% growth. But I will not comment that it will happen.
We have the next question from the line of Dixit Doshi from Whitestone Advisors.
Sir, my first question was -- so in the earlier con calls, you used to mention that there are some INR 100 crore of receivables in the trading business, which are kind of a cash and carry in the risky receivable. In this quarter, we have provided for INR 30 crore provision. So are these INR 30 crores provision from that risky receivable or some other receivables have turned bad?
Okay. Fine. As far as this provision is concerned, bulk of this INR 30 crores is from that same model. To be precise, it is about INR 22 crores or so. The rest of it is from the e-commerce business also, which these are receivables more than 3 years old. So as per the existing provisioning policy, we have provided, but all efforts are being made to realize that also.So the first question, I think I have answered your question, out of the INR 100 crores, INR 110 crores that we were talking about earlier in our con call, about INR 22 crores is out of that only, nothing new.
So the remaining INR 78 crore has been received? Or it is still under the receivable and risky?
It is still under receivable. It is not INR 78 crores. It will be to the tune of about INR 85 crores to INR 90 crores. I recall that we had said a figure of INR 110 crores to INR 120 crores figure earlier. So this is close to about INR 85 crores to INR 90 crores is still receivables. We are fighting in various forums. The NCLT processes are going on at various forums and at various stages. So we are just waiting because we will be receiving only as operational creditor. And in the waterfall mechanism, we are probably the last to get. So we are not really sure of how much we will get or how much actually we'll have to provide for.
Okay. And how much is the trade receivable from trading business now, now that we are scaling down the business?
So basically, these trade receivables, what -- in the risky segment, what we can say, as madam pointed out, it is in the tune of INR 85 crores to INR 90 crores. That is in the risky. Balance are basically secured and backed by bank guarantees and other guarantees. So basically, in the red zone, it is around INR 85 crores to INR 90 crores. That is in the red zone. And that -- we feel that we might have some kind of [ ancillary ] rate in the realization, might have. And we are fighting for that in the various forums.
But as far as the trade receivables are concerned, they are more or less secured. So we will be able to receive them.
But ma'am, just one question on this e-commerce receivable, which has turned bad. So basically, if I understand correctly, recently only we have started in going into the private sector. So if this is a 3-year-old receivable, it should be from PSU or government. So why it has turned bad?
Earlier also, we were actually providing for receivables in e-commerce more than 3 years old. These are basically receivables from defense department, government department. And in many cases, it is a question of, sometimes, the things go in litigation. Sometimes, there are disputes in respect of the actual delivery of the business. So these things keep going on. To be on safe side, we provide for all such receivables more than 3 years old. So it's not -- nothing new that we have added. E-commerce also we have been providing for earlier also. So this time, it is to the tune of about INR 7 crores, which is about more than 3 years.
And the litigation is not with MSTC, with the government department. It is basically litigation in case of delivery. So if the deliveries get delayed, so our services sometimes get delayed. And it is the accumulation of -- more than 3 years' run, it is the accumulation of our services that we have earned, so if -- you can get INR 700 crores to INR 800 crores in the past some years. So it's basically a very, very miniscule percentage, and it is just -- basically, because of screening of that receivables and because of the food and the household taxes that has been provided for. It is at a very, very, very miniscule percentage.
Okay. Now, in terms of...
So, we are following up for those service charges also, so these are also receivables. It's not that the efforts will be stopped. But just as a prudent accounting practice, we have provided for this.
Okay, okay. Now coming to the scrappage policy. So obviously, you can talk more in detail once the policy is finalized. But have we done any back-of-the-envelope calculation, like how many vehicles or what kind of a market size it could be annualized? And what kind of revenue the JV can run rate?And secondly, correct me if I'm wrong. So in the scrappage business, we will be having the 2 benefits that one is our JV with Mahindra that will dismantle the vehicle and whatever profit that JV will earn, and second is that whatever scrap will be generated at the JV level, that will eventually get auctioned at the MSTC portal. So our e-commerce business will also benefit. Is that understanding right?
Yes, to some extent, it is right. But what happens in the C&D center is, it is not just the scrap that is getting generated. There are a lot of spare parts that are being sold. So that is not through MSTC's e-commerce portal. That is through an app and some software that has been developed by the JV company itself. So that, in fact, is -- has received very good response. And they are able to generate good revenue by selling those secondhand spare parts.Now as far as the scrappage policy is concerned, as we told the earlier caller also, see, a lot of things need to be fine-tuned. So unless these kind of incentives and disincentives are -- come out in black and white, we are really not able to assess the number of vehicles that will come in any part of the country as to how much -- many vehicles will be there? What will be the cost because of that? And what will be our revenue? What will be the profit out of that?This kind of calculation can be done only when the numbers are -- somewhat can be gathered. So we are waiting for this. Then thereafter, we have to see as to whether it actually percolates down to the lowest level. And then people will have to come forward for this scrapping -- voluntarily scrapping their vehicles. To start with, as I understand from the government policy, is that there will be more or less scrappage of the government vehicles. So once this -- the rules are framed properly, then the government vehicles, probably, some numbers may come out based on which we can probably formulate some strategy. But as of now, it's too early to say anything.
Okay. And ma'am, just last question from my side. So we have been talking about eventually closing down the trading business, which may happen some time in the next year, okay? So just correct me about my understanding.So once the trading business is closed, on a stand-alone operations, we will have our e-commerce revenue. And you used to mention that the e-commerce stand-alone company have a fixed cost of approx INR 90 crores to INR 100 crores. And anything above that -- revenue anything above that will be -- comes straight to the bottom line, and on a consol level, we will have FSNL JV. So is that understanding right, once the trading business is over?
Yes. But...
And we have got -- in the consol level, we have got a 100% subsidiary company for Ferro Scrap Nigam Limited. That is also there.
That is it. So basically, in consol, we are taking 100% subsidiary companies' results as well as the 50% share of the JV company.
Okay. And after the trading business is over, on a stand-alone, we will have e-commerce revenue and a INR 90 crores to INR 100 crores of fixed cost?
It may hover around that. It may hover around that.
Yes, as on date, it is INR 90 crores to INR 100 crores, but it may have some -- there will be some -- there can be some scalability.
Yes. But since...
More or less, as on date, yes.
We have the next question from the line of [ Jeevan Patwa ] from [ Candyfloss Advisor ].
Madam, one question regarding what you said earlier. So can we assume that there will be no receivable or provisions on the e-commerce business? Because you said these provisions are 3 years old. But is it safe to assume that there will be no provision, henceforth, for the e-commerce business? Or there will be some provision in the e-commerce business?
See, whatever -- when we do the data analysis, whatever is above 3 years' receivable, that will be provided for. Of course, they are at 100% secured. But as I pointed out, there are a lot of litigations also keep happening, and -- which is not in our control. So unless these processes are completed, we don't earn our -- we don't get our service charges. So that is why, as a prudent practice, we are providing. But at some point of time, we expect that money also will come. So there will always be some very small miniscule amount of provision under e-commerce also, but the values will be much, much less, not even to the extent of INR 7 crores.
Okay. Second is we have developed a plethora of products, as you've mentioned. And I see that the company is working at 3 levels. One is central government level, second is state government level, and third is PSU level. So on the central level, we have got spectrum auction or coal mining auction. On the state government, we have started working with few state governments like Jharkhand, Odisha. Then we have some recent agreement with the UP government, and then the Rajasthan government, and then Telangana government of sand mining.So we have basically started working with a few state governments with maybe a small project or 1 or 2 projects. So how do you see this opportunity on the state government level? There are almost 28 states. And each state will have multiple opportunities. So how do you see these particular opportunities, the state-level opportunity the best one?
I'll just clarify for your understanding. We have been offering services to a lot of state government entities also for the past many years. What you have been pointing out is the umbrella agreement that we have with the state government where all kinds of e-commerce services are brought under one single agreement. But that doesn't mean that we are not operating in the other states. In almost all the states, our e-commerce services are being availed either for scrap sale or for some kind of e-procurement or some kind of e-sale like timber and other raw material.So almost in all the 28 states, some activity is going on. I will not rule out any, in fact, even in Lakshadweep to Andaman and Nicobar Islands also, we are offering our services. So -- but we do not have any umbrella agreement with these states. So some departments, some utility, some government PSU, they may be availing of our services, but our presence is there.
Okay, okay. Sure, ma'am.
So what we are doing is we are trying to expand that area of operations. If suppose only a transport corporation in the state is utilizing our services, we see to it that the other government departments, the other PSUs in that state also avail our services. So that is the kind of strategy that we work at -- work out. And that's why we -- in the last 3, 4 years, only we have expanded, and we have opened many offices in almost -- now we have 16 offices to cater to all these smaller entities in the states.
Great, madam. So basically, how do you see this -- so apart from just the scrap -- the scrappage part, the scrap auction and all, how do you see this particular vertical growing? So in terms of the platform that we're developing, how do you see these opportunities to offer to this platform...
Yes. So what has happened in the recent past is MSTC has established as a very e-commerce software developer in a very niche sector, like very customized portals we have started preparing. And the main threat that is coming up now, especially as far as the e-procurement services is concerned, is the GeM. So the government has been laying a lot of emphasis on using -- usage of GeM portal for all the procurement, not just by the central organizations but even by the state organizations.So that is one threat that we are seeing. In fact, if you see the numbers, the e-procurement service revenue as well as the volume has gone down mainly because of the emphasis in GeM. So that is a real threat that we have. But what we are planning to do is customized solutions. See, GeM is not a one-stop solution for all kinds of goods and services. So wherever you need customized solutions, where we are there, and we are trying to make our presence felt with almost all the organizations, in especially the government sectors. So we have to now -- slightly, we had to change the strategy. Earlier, it was a very common kind of a platform that we were preparing, but now it's going to be a niche product.
Okay, okay. And secondly, the -- second is your JaivikKheti portal or e-RaKAM. So how do you see those are scaling? So do you -- are you getting good response from the farmers or the consumers on that?
See, JaivikKheti, as far as project is concerned, the portal is concerned, it has been developed. It has been -- it is already operational. But the main challenge that we have faced, especially in the agri sector, not just us, in fact, the entire country, is the logistics.See, what is happening is the farmer is sitting in a remote village. He -- I don't expect that he will be able to come to some particular center to actually -- and disperse the goods from there. So I need logistics to pick up the stock from farm gate and actually deliver to the consumer, the customer. Portal is ready. But the logistic services, the cold chain, these are not available as and these are not mature enough in the country. And we have been trying to open not just India Post, we have had an agreement with India Post, but that also is not actually serving the purpose because the last-mile connectivity is turning out to be a challenge.So this is a very long-drawn kind of a journey, and it will take quite some time for us to show some numbers and transactions in this portal. Portal is ready. There are lakhs of farmers already registered. But the actual transaction is still to take place. It has good opportunity. It has good potential. But the lack of support system is what is actually discouraging.
Sure, madam. So is it -- so are you thinking of working with maybe some strong partner like Mahindra or, say, Coromandel, who has got maybe strong rural or farmer reach? Will it help?
Yes. So Mahindra logistics are there. In fact, we have tried to open as many logistics service providers as possible. But the kind of services that are required, they are not able to give all the entire basket of services, right from picking up from the farm gate to the delivery. So the entire chain, nobody is able to establish. So what is happening is there are multiple levels, there are multiple gaps in that entire chain. That needs to be fixed before we can actually see some transactions happening.
Sure, sure. Just one suggestion, if you can just put a press release along with the result explaining the results, that would be great because your tax rate, it's difficult to understand the tax rate and the provisions. So if you can just put a press release along with the results, that should help.
We will deliberate on this internally.
We have the next question from the line of Hardik Jain from Whitestone Financial Advisors.
So most of my questions are answered. Just one thing, so this, you mentioned about JSW Steel that you have tied up with them for selling of their iron ore. So in this contract, will we get a percentage fee or it's a kind of a fixed fee contract?
It is a percentage fee. It is a percentage fee. So as far as the volumes are concerned, see, we have probably had the first auction only yesterday. So -- see, auction is still happening. But unless the material gets lifted, we don't get the service charges. So we are just keeping our fingers crossed as to -- that materials should actually get -- the payment should be realized, the material should get delivered. Thereafter, we can see our service revenue coming in. And to start with, they have started in a very small way because everyone wants to test the waters, and they want to be comfortable with the entire system. So the actual numbers will take some time to get stabilized.
Right, ma'am. And it's -- out of the INR 60 crore revenue from e-commerce, can you bifurcate it for us, how much is for -- from e-procurement and how much is from auction?
I think it is already there in the presentation.
Okay. I missed it. I'll check.
You can check it out. Segment results have been given, yes. So out of INR 136 crores, e-auction and e-sale is about INR 117 crores; e-procurement is about INR 7 crores; and there's some other income of about INR 12 crores.
We have the next question from the line of [ Vilin Doshi ], an investor.
Ma'am, I have 2 questions. One, what is the current status of our subsidiary, FSNL, disinvestment? Last, I understand that government has appointed a registered valuer. So what is the current status? And what is the time line that you envisage by which it will get completed?
Well, this is -- technically, the project is being handled by the Department of Investment and Public Asset Management that is the DIPAM. So we have got -- I mean, we do not have any further information as to what is the time line or when it will be done, what other things. So it is being handled by the DIPAM itself. So they are handling it directly.
Okay. Okay. And second, what I understand from prior discussion is that after our trading business is shut down, we'll primarily have e-commerce and JV, and obviously, subsidiary probably once it get divested, it will not be part as well. So is it safe to assume that if I take current quarter revenue run rate, we will have approximately INR 240 crore, INR 250 crore run rate in revenue and fixed cost of approximately INR 100 crores. So we will have a profit before tax of around INR 150 crores broadly. It can be -- it can deviate, but I'm just saying, based on current quarter, can we safely assume it will be INR 150 crores profit before tax?
Well, the basic point is that, see, the -- there is a -- there are a lot of things to happen. We are standing in the month of February. So here, March is yet to come. Last year also, we were standing in the month of February when we had the con call, we never knew that the pandemic will come and 6 months will wash out. So it's very difficult to tell anything. So if everything goes well, okay, fine, then you see that our revenue from e-commerce in the -- that 30th September quarter was INR 55 crores, now it is -- during this quarter, it is around INR 58 crores.So it hovers with these current terms and conditions. So how the market will behave and all these things -- because we are doing the secondary thing. First is how the scrap prices are performing, how the other industries are performing, accordingly, they will sell their scrap and their surpluses and everything and how the government -- I mean thinks on the capitalization of its mineral reserves. So it all depends upon the things.But so far you're concerned is we are around this growth path of INR 55 crores to INR 58 crores. So that is all available from here. And so far the cost front is concerned, at this scalable operation, with this scalable operation, so of course, these overheads will stand as it is, and we are maintaining this level of overheads, sir.
We have the next question from the line of [ B. Srinivas Reddy ], a shareholder.
Yes. Sir, I have 2 questions, regarding the provisions and write-backs, sir. Earlier, your MD was telling in earlier con call regarding the -- every quarter, INR 25 crores of write-off sort of thing you're planning for the next few quarters. So how much more -- how many more quarters it might take for that write-off, sir?
Yes. Mr. Reddy, as already we had -- are discussing and deliberating on these earlier things also, we have got around INR 90 crores of strictly -- trade receivables in the cash and carry statement, which we feel that might go back, but we are trying our level best to do the things there on the -- this risky zone because of their vulnerability in nature and the parties involved, trade receivables are involved.So as for our provisioning policy, we have formulated a provisioning policy which looks after all these things. So how much it will take is very difficult. But of course, this INR 80 crores to INR 90 crores that we are -- that is standing in our book, this will be the max-to-max provision in the trading segment. Otherwise, balances are in our -- this associate model and in the 110% BG model. And so far, as of now standing, we feel that it is secured with BG and certain guarantees. So that will not happen bad and affect our books. But so far this cash and carry segment is concerned, of course, there is the matter of [ indiscernible ] there in the past, and it is happening. So this much of provisions are max to max can happen.
Sir, in that case, can we assume, shareholders now, that in case of FSNL divestment or privatization, all the proceeds, the company can use to write off all the provisions or bad debts, whatever it is so that they can also make the company 0 debt? Can we expect that happening?
There are 3 things. First, you talked about 0 debt. So right now, except that FSNL, it is Standard Chartered debt and a little bit of term loan from SBI. So we are right now in a 0 debt position, except for that thing. Number two, so far FSNL is concerned, it is being dealt. Already I told, it is being dealt by DIPAM. And what will happen to that cash and how it will be dealt with, how much it is sold, it is a totally contingent thing. We never know. See, we tell it will be sold and what will be happening to the sale proceeds and all 3 things. It is a decision on the part of the sovereign government and accordingly, it will be dealt with.
No, no. Sir, that is 100% subsidiary of MSTC, no?
Agreed, agreed.
So the Board and the management has complete authority to decide about the proceeds, I guess?
Yes. Agreed, everything is agreed upon, but overall, it is still in the Government of India undertaking. And everything has to be decided by the government, specifically DIPAM only. DIPAM takes care of all these type of investments and utilization of funds in case of government companies.
But the Board, I think, and the management will decide in a tax-efficient way and a sense of trying to adjust to that process.
Of course, the Board will deliberate. Of course, you are absolutely right. On the juristical front, it is -- the Board has to take a call. But of course, Board has got a government nominee director. So they're then -- this is clearly defined, and it has to be the call of the government only.
Okay, sir. And my second question, regarding this B2C business. As you know, sir, I'm an old shareholder pre-IPO, I have been attending many AGMs. But I'm always surprised that we are unable to -- as a -- MSTC as a company, is unable to scale the B2C, whereas other competitors like metaljunction, they are scaling like 50% every year in revenues. So B2C like NPAs for bank NPAs and farmer things or any other B2C e-commerce businesses, do you have any plans for scaling those business verticals?
First of all, I'll update you regarding the bank NPAs. Last year, I remember very well, I had said that we have signed -- we have, in fact, developed a portal for all the NPAs of the bank under the SARFAESI Act that were to be auctioned, it will be done through a single window system of the IBAPI portal. So this is already in place in last December. In fact, the Honorable Finance Minister inaugurated that portal.First 2, 3 months, there were not many transactions. But after the pandemic, once things started moving, we have had very good results as far as the NPA sale is concerned, a lot of properties are coming on that. And I'm sure metaljunction or any other service provider is not in this area at all. In fact, every day, if you see, all the mega auctions being announced is MSTC's win.Regarding B2C, as I said, our focus was more on the organic agri products for which we had launched the JaivikKheti portal. There, these are certified portals -- certified products, and it has to pass through certain systems so that the authenticity of the product remains intact. So for that, we needed all the end-to-end kind of service provider, which we are yet to get. As I said, there are a lot of gaps in between. We are not able to identify one single vendor who can actually pick up stuff from the farm gate and actually go to the consumer.Regarding other products, I'm not too sure as to what products metaljunction is offering on B2C models. We do have our own B2C models, but that is on a very, very limited scale. We have not opened it for the general public or any kind of -- we are not going -- or actually competing with Amazon and Flipkart for our services -- for e-commerce services. We are in a different sector altogether. Our space is very well defined.We are -- we started off as a service provider for the Government of India. And of course, whatever the government or the PSUs are giving to the general public, there, the B2C models will definitely be enabled. But we are not shut to the idea of not having B2B, B2C kind of this thing. I would say, once we open our logistic partners, we will definitely be expanding this area.
Yes. One last request, madam, regarding this reporting of numbers in annual report as well as in numbers, why don't you change from millions to crores so that like all other companies, it will be easy for us to comprehend.
That is a suggestion we'll definitely deliberate upon that. Because during IPO, we started off with millions. So we somehow continued with that. So we'll deliberate, and this is a good suggestion that you have given. Yes, we'll definitely look into it.
We have the next question from the line of [ Vikas Yadav ] from [ Moonshot Ventures ].
Yes, ma'am, I want to know that how much of e-commerce revenue are annual recurring in nature?
Annual recurring in nature?
Yes.
E-commerce revenue, it is -- more or less it is static. As we said, as we increase our operations, the revenue will increase. But the -- whatever clients we have in the past so many years, they've not left us, so it is more or less static. So as we expand our operations, bring in new clients or if the volumes go up, then the increase will happen. Otherwise, it is more or less -- almost all of our clients are there for quite a good number of years.
So we can assume that more than 90% is annual recurring in nature? So the revenue...
Yes, exactly.
The revenue can keep increasing from here?
I said the threat is coming from the government itself, like what had happened with our e-procurement model. GeM is -- which is being promoted by the Government of India, is turning out to be a threat for us. So if the government comes up with some other portal where what kinds of products will go there and they promote that, then tomorrow, I cannot say that this is assured business. But as on date, yes, as with the existing policies, this is more or less 90% is assured.
Okay, ma'am. One more question is that you said that some of the scrap is there and some of the spare parts are sold by someone else. But how much part of steel scrap is from our side that can be sold?
How much -- can you repeat the question?
How much of the old vehicle cost per se can be sold on our MSTC portal?
So you are basically talking about whatever is being collected at the -- ELVs are being collected at the collection and dismantling center of the sub-JV company, how much of that scrap we are selling?
Yes, yes.
That is very miniscule. As I said, the numbers are very small. We are having as of now only 3 collection -- C&D centers in the country. And not many people are aware of the kind of ELVs or the kind of incentives that they will get. So people are not voluntarily coming with their vehicles for scrappage. Unless this number increases, the volume is not much.
My question is that, let's suppose you have 50,000 of scrap of cars. So how much of this scrap can be further sold on through our MSTC portal?
It is a very subjective kind of thing because this kind of clientele base, the JV company wants to take their scrap. So whether they are on both MSTC platform or not. So they try from every angle. So if it is sold through MSTC, it is sold. If it is available at their factory gate, some person comes and takes away from the factory gate. So that is there. They try all the avenues. So it is very difficult to quantify or say that it is being sold through MSTC portal or through -- on the open market. So that way, that quantification is not possible.
Okay, okay. And further, one more question, ma'am, if we have to expand our collection and dismantling centers, everything can be -- I assume that this can be financed from internal accruals?
From?
From?
Internal accruals.
It's all -- these expansion plans and all these things, it is all -- just half an hour ago in this -- during this con call, we are telling, it was deliberated that it all depends upon how much numbers of vehicles supply increases in the system. So it will all depend upon that thing. It is very, very contingent thing that at this moment it is very difficult. Most probably, if everything goes well, we will be able to answer you in the next con call how the things are going to happen and what will be the strategy coming forward.
We have the next question from the line of [ Dipen Shah ], an investor.
I had a couple of questions on the scrappage policy also. In a couple of con calls in the last few days, some of the commercial vehicle manufacturers have said that they would like to tie up with companies which have got scrappage facilities. So would you be one of the candidates for tying up with, say, CV manufacturers like in Ashok Leyland or Tata Motors going ahead? Or is that a process which has already started for you?
So all of this exploration and all these things are going on through our JV route. But as of now -- so far, we are exploring the possibility. So as and when it comes up, and obviously, we will let you people know.
Okay. And also the government is now looking at asset monetization, which will obviously include selling of several assets of either PSUs or maybe the state government. Any color which you can give us on how big an opportunity can this be? And if at all, some work has started on that?
See, I would like to update you on this. Actually, I was updating the highlights of only Q3. I should not be talking about the current business. But as far as asset monetization is concerned, already DIPAM has awarded this work to MSTC on nomination basis for sale of all such assets through our platforms. So we are the ones -- we are the chosen ones who will actually be selling all these assets.
So when has this happened, ma'am? Is it already happened a couple of quarters back? Or is it recently done?
No, no, no. It's just been received a couple of days back only. And see, the assets have to come from DIPAM. Thereafter only the services will start.
So these are all the assets of PSU companies, right, maybe selling out building or land, et cetera, all of that will come to you?
Yes, yes, yes.
Is railways also a part of this? Railway land...
Railways is not a part of this.
So railways is -- so all the PSUs will be a part of this?
Yes.
Okay. And ma'am, lastly, can you just give us a couple of examples of how are you operating for, say, private companies like a Bharati or a Reliance, which we understand are your clients for selling out their scrap?
So it is the same as PSU clients, I mean, nothing different. See, the auctioning -- bidding module is the same. It's the same engine that we use. It's the same software that takes care of everything. Only thing is that some kind of MIS reports or certain customizations are required. That we'll keep doing as per the requirement of the client.
We have the next question from the line of [ Mayank Joshi ], an investor.
I think some of my questions were answered already. I would just like to maybe understand the difference or the size and scale of revenue from the software development activity versus the e-commerce activity, which is more -- which could be more recurring in nature or which is more based on the volume sales on the platform. So the platform service business, the platform business versus any development business that we do for specific plans?
See, it is not actually 2 different things. Basically, we customize the software. We develop the software. The platform ownership is with us. The data remains with us. Only the output is given to the clients. Probably, what you are referring to is a retail software where we develop software and put it in the client-end server. That is a miniscule business as of now.As far as the customized portals are concerned, it is in our own platform. So e-commerce platform and customized software is not two different things. In our own platform, we keep customizing as per the requirement of the client. These are separate subdomains created in the main platform.
Okay. So I think, currently, in our current report, we had new contracts with new clients. So these customized platforms, even though they are developed by -- developed in a customized format, the revenue from this will still come based on the volume sales that you do, and the customization fee is just a one-time charge that they will get?
Yes, yes, yes. You have understood it right.
Ladies and gentlemen, due to time constraints, that was the last question. I would like to hand the floor back to the management for closing comments. Please go ahead.
Thank you for this opportunity, and the questions that we got were really very encouraging and insightful. It's really encouraging to see that so many people are interested in our activities. They keep a close watch, and they are able to recall whatever they -- we said in the past, so that's very encouraging. And definitely, this kind of associationship motivates us to do better. Thanks a ton. And Mr. Sarkar can probably say a few words.
Thank you very much to all who participated in all these questions-answer session, and we are really grateful to our investors that -- who have put faith in our company. Thank you very much. Thanks a lot.
Thank you. Okay.
Thank you, gentlemen. Ladies and gentlemen, on behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.