MSTC Ltd
NSE:MSTCLTD
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MSTC Ltd
Earnings Call Analysis
Q3-2024 Analysis
MSTC Ltd
During the first nine months of the financial year, MSTC Limited has seen a significant operational uptick, transacting goods worth over INR 1178.23 billion through its e-commerce and marketing verticals. Contributing to its favorable performance, the company reported a pre-tax profit of INR 233.37 crores, marking an appreciable year-on-year increase of about 7.01%, which encapsulates approximately INR 15 crores in additional profit.
MSTC has strategically entered the auction of critical and strategic mineral blocks by presenting 20 mineral blocks and conducting associated roadshows. Furthermore, the company has solidified its presence by forming an alliance with the government of Bihar to oversee the e-auctioning of major mineral blocks within the state, successfully auctioning 77 blocks so far.
The company is evidently focused on consolidating its business across various sectors and pushing for greater automation, reducing human intervention in its processes. The introduction of user-friendly features is expected to improve operational efficiencies and bolster MSTC's performance in successive years.
On a stand-alone basis, MSTC's financial performance has been somewhat mixed. The company has seen total revenue decrease by 13%, falling from INR 367.49 crores to INR 216.23 crores. However, e-commerce has bucked this trend, increasing from INR 244.86 crores to INR 268.05 crores. Despite revenue contraction, MSTC's profit before tax observed a rise from INR 206.71 crores to INR 216.63 crores. Contrarily, the Profit after tax (PAT) witnessed a downturn due to heightened tax rates, plummeting from INR 163.17 crores to INR 152.41 crores, with a corresponding decrease in Earnings per Share (EPS) from INR 23.18 to INR 21.65.
When evaluating the company's performance on a consolidated basis, the revenue trajectory has not been as favorable, with a reduction from INR 646.79 crores to INR 324.78 crores. On a brighter note, certain segments have seen their contributions surge significantly. Despite the fall in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) from INR 255.29 crores to INR 172.44 crores, MSTC's pre-tax profit increased from INR 218.09 crores to INR 233.37 crores. Again, a higher tax rate has pressured the PAT, decreasing from INR 165 crores to INR 155.92 crores, resulting in a drop in EPS from INR 23.44 to INR 22.15. The company also experienced a decline in cash profit from INR 202 crores to INR 135.87 crores.
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Ladies and gentlemen, good day, and welcome to MSTC Limited Q3 FY '24 Earnings Conference Call hosted by Equirus Securities.[Operator Instructions] I now hand the conference over to Mr. Deep Modi from Equirus Securities. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to Q3 FY '24 Earnings Conference Call of MSTC Limited. From the management we have with us today, Mr. Manobendra Ghoshal, 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 we can open the line for question and answers. I now hand over the call to Mr. Manobendra Ghoshal, over to you, sir.
Good morning, everybody. This is Manobendra Ghoshal. I'm the Chairman and Managing Director of MSTC. A very nice to be talking to all of you. I would like to start with some initial key highlights of the quarter Q3, which -- and the last 9 months of this financial year. Operationally, we have during the first 9 months crossed a level of INR 1178.23 billion in terms of the value of goods transacted through our e-commerce and marketing verticals. The consolidated financial performance for the first 9 months has been at a level of PBT of INR 233.37 crores, which is an increase of approximately INR 15 crores over the same Y-on-Y PBT of last year, an increase of 7.1% -- 7.01%, I'm sorry.
Over the last quarter, some of the key areas that we have gone forward in option of critical minerals. So for the auction of critical and strategic mineral blocks, we've 20 critical mineral blocks have been put up for auction. And we've held a road shows for the first tranche of these critical mineral blocks options as well. We've signed an MOU with the government of Bihar for e-auction of major mineral blocks in the state. And of the 77 blocks have been successfully auctioned so far. In November, 23,we had also held a real estate conference in collaboration with the CII. So basically, this was about exploring synergies in the real estate sector and finding out areas where we can work with upstream and downstream players and leverage this sector.
Many senior leaders from leading groups had participated, along with our senior officials of the government. Newly developed integrated webpage for our various property auctions, which are conducted by MSTC was also launched during this conference. Now I'd like to hand over the mic to Mrs. Bhanu Kumar, for her short update.
Good afternoon, everybody. And I'm really delighted that the investors have reposed their confidence in our company for quite some time now. And the kind of queries that we all have been raising in this forum as well as in other forum praise worthy, which is what is driving us to keep our services at a very good level, probably beyond expectations sometimes. So towards that end, we are in the process of consolidating business in various sectors as also going for more automation, reducing human intervention and bringing in a lot of user-friendly features. So that is where the focus is on right now. And all this will definitely help us and giving better performance year-on-year.
And I'll be taking up all the queries as and when it comes. So maybe we can have a detailed interaction at that point of time. I'll hand over to Mr. Subrata Sarkar regarding the financials of the company.
Yes. Good morning to everybody.
Yes. I'm sorry, I think the call dropped. At what point did it drop? When Mr. Sarkar was already speaking or...
Very good morning to all of you. So let me start with the stand-alone financial highlights. Like we are using the first comparison of 9 months '22/'23 versus 9 months '23/'24. Total revenue is down by 13% from INR 367.49 crores to INR 216.23 crores. And as you can see that the e-commerce has shown just not -- just steady rate. It is increased from INR 244.86 crores to INR 268.05 crores, and of course, other [indiscernible]. And with that results, EBITDA pre-provisioning has come down from INR 289.12 crores to INR 221.76 crores. Profit before tax has come down -- has, of course, gone up with a bitter net margin from INR 206.71 crores to INR 216.63 crores.
And PAT has gone down from INR 163.17 crores to INR 152.41crores with tax -- higher tax rate. And EPS accordingly has gone down from INR 23.18 to INR 21.65. And the cash profit has also shown a declining trend to INR 157.54 crores from INR 245.49 crores. And so far segment is concerned, the total revenue is INR 367.49 crores of the previous 9 months, and current year it's INR 316.23 crores. And that e-commerce revenue is INR 268.05 as compared to the same period of 9 months is of the previous year is INR 244.86 crores. The current year's [indiscernible] from e-auction and e-sale comes from a major chunk of the e-commerce revenue that is INR 203.46 crores. E-procurement, always a small shareholder here. So it is INR 3.41 crores and other income, of course, INR 61.20 crores. And the marketing has also declined revenue and the total expenses also declined. So PBT therefore stands at INR 216.6 crores as compared to INR 206.71 crores. And profit after tax has gone down from INR 163.17 crores to INR 152.41 crores. So far, the consolidated financial highlights are concerned for the 9 months '23/'24. Our total revenue has dropped from INR 646.79 crores. And of course, the other element sitting in the same quarter as MSTC.
And so far, the segment from [indiscernible] contributing to that hosted revenue has gone up substantially from INR 304.31 cores to INR 324.78 crores. EBITDA, of course, gone down from INR 255.29 crores to INR 172.44 crores. Share of JV, minus 5.68 as compared to minus -1.65 by previous year.
And of course, PBT has gone up from INR 218.09 crores to INR 233.37 crores. That has, of course, fall down with a similar reason from stand-alone INR 165 crores to INR 155.92 crores, and EPS [indiscernible] effects from the EPS [ 2015 ] that has reached INR 23.44 has come down to INR 22.15 and cash. And cash profit [indiscernible] has shown trend, it is from INR 202 crores to INR 135.87 crores. So this is summary of the output result in the statement in our presentation. So this is all from our side. We can have a question and answers session now.
[Operator Instructions] Our first question is from the line of Dr. Amit Vohra from the homeopathic Clinic.
Sir, my question is regarding the scrap business. I think our scrap business has increased from INR 101 crores or something to INR 252 crores or something. I'm not sure of the exact figures. Am I correct in that?
Not really. Not really. I don't know from where you're getting this figures. Scrap has not increased.
Scrap, recovery and allied jobs in our subsidiary company, that has increased. You are right on that particular thing.
So yes, this is actually an activity of our subsidiary company.
Okay. I'll just get back again after I find the exact figures in the line.
Our next question is from the line of Ayush Agarwal, an individual investor.
So I wanted to know like when you're looking at a decrease in year-on-year revenue for December 2023, and even if you look at the sequential 9 months, there is a marginal decrease. What are the primary causes of that, especially since [indiscernible] also resulted in a reduced amount of profitability?
Pardon your last slide was not clear, sir. Can you just repeat your last sentence...
Yes, sorry. So I was saying that we -- not only have we seen a reduced revenue, we've also seen reduced profits. So what is the main cause for that?
It's a very pertinent question, sir. If we talk about PBT, so overall PBT has increased. But if you talk about PAT, that -- which talked about overall profitability, that's decreased and we've seen very well. From that last year, there was a taxation -- list rate of taxation, average rate of taxation was laid and [indiscernible] because of the PAT last year, we had some write-off of bad loans.
So that we [ sought ] income tax benefit that was a taxation rate benefit as far as PAT is concerned. But you can see the PBT, it has shown a little higher trend. It has increased. But of course, on a strategic research. We are also -- I can supplement add one thing here that the e-commerce revenue if you look at it has also not shown that much of growth because our main bread earner is the e-commerce growth -- e-commerce revenue. So if that increases, we increased it so to cater [indiscernible] we also want to cater [indiscernible]. So that's the main reason for that.
So when we talk about increasing e-commerce revenues, what are the steps that you need to take at the current situation to improve the profitability in that segment?
Basically, e-commerce [indiscernible] we are always on the lookout for newer clients, adding the basket of our clients. And one major factor that has come across is scrap rates that have gone down. If you see the year-on-year rate, it has gone down by almost about 10% or so. So that is reflected in this. So to compensate for that, we are always on the lookout for expanding the volume so that this reduction is arrested. So we are on pursuit and we are hopeful that in the last quarter, we see some growth.
Okay. So when we talk about scrap, I understand that scrap is not the only business vertical in e-commerce that you're currently working on. And you also have some e-marketplace and auction level outside of the scrap trade. So where are we standing on that right now?
In fact, for other areas, it is more or less -- I won't say it is bad. It is not showing the downward trend so it's a little flatter. One major thing that we have to see here is the iron ore, we are now trading bigger volume, but there are some stress on reduction of the charges. So that is also one of the contributor to the reduced e-commerce revenue. But there, we are sure that the volumes are really going to be so high that the reduction will be duly compensated.
Understood. And my last question is regarding your joint venture with Mahindra for vehicle scrapping. What is the status of this JV? And what are we expecting going forward in the next 2, 3 years?
I'd like to take that one. Our JV has been in operation for the past 5 years on. And at this stage, it has been -- the industry itself has been missing. It's in a growing phase because there has been a substantial amount of regulation, which has been -- which is coming in at this point of time as guidelines, which have been set out by the Ministry of Road, Transport and Highways.
Now different states are at different stages of implementing these guidelines as policy -- as a policy framework and which is still happening. It is not yet complete. So once that framework is in place, the incoming of end-of-life vehicles will get streamlined. So we are at the consolidation stage. It is happening.
There are challenges, especially in terms of the issues in the portal itself, pending views on vehicle, challenges from the unorganized sector, which naturally when we look at digitalization and putting the entire process on a digital framework. So these challenges have been coming up. Testing infrastructure is yet to come up in a lot of areas.
So all of these have been resulting in constraints in flow of vehicles. We have the capacities in place to cater for the flows. We are very lower to the breakeven point. And we expect that over the next 2 to 3 years, there would be a substantial settling down and therefore, increasing the number of vehicles, number one. Other than that, the government has also been considering the EPR policy, which should also again change the overall outlook for the industry as a whole. That definitely [indiscernible] would also be beneficiary.
Right. So I just wanted to clarify, when you say breakeven, do you mean that the venture is currently not exactly profitable, but you expect it to become profitable going forward?
That is very true.
Yes. And so could you tell me what is the current capacity of your staffing units? And what levels will it go up when we go forward?
This is not on a scalable model. So it will not be correct to talk about exact capacity there. But yes, it is adequate for the load battery there at present and also for consumable load battery we may get over the next 1 to 2 years.
But you could give me a sense of numbers, like say, 10,000 units per month or 100,000 units per year.
I'm sorry, it would not be correct for me to talk about numbers at this stage, all right. May I again reiterate that we have adequate capacity for the vehicles that are getting generated at this point of time and also over the next 1 to 2 years of expected loads.
Our next question is from the line of Pritam from [indiscernible]. I think the line from Pritam sir has been disconnected. Forwarding for the next question. Our next question is from the line of Mohit from [indiscernible] Network Capital Limited.
Sir, my main questions are pertaining the vehicles scrap policy. There are 2 ways where MSTC can contribute to this emerging tree. One is through JV, wherein you get vehicles to scrap. The other steam that I can think of is the scraps that flow from JV business to the MSTC portal where you can earn commissions on the value credit.
Sir, there are 2 questions. One, what kind of revenue we can think of when these vehicles come to our portal? And the other registered scrapping vehicles that are there in the market, is this scrap from those RVSF will also flow through the MSTC portal? Those are my questions.
Okay. So the first question is in the set of scrap that was generated out of processing of the ELV by the RVSF, Mahindra JV company, right? So that is definitely going through our portal, but the second part is not true. The other RVSF, which are processing those ELVs are generating scrap. They have some tie up directly with the melting units or the furnaces.
So that is not happening through our portal. But the main thing that you had started off your question was, there are basically 2 aspects of this ELV business. The first is the option of the ELV assets. MSTC doesn't get all the vehicles [ daily ] company doesn't get the all the vehicles directly just because MSTC is handling the auction.
They also participate in our bidding process and only a fraction of the vehicles, they are able to build. So MSTC is generating some revenue out of the auction of process. And definitely, after processing in the JV, there will be some revenue to the JV company. But as I had said earlier, only the scrap that is generated through the JV company that is traded in our -- that is auctioned off in our platform. The rest of the RVSF are not auctioning or transacting any business through our portal.
Understood. So even in the future, there is no possibility of the these RVSF transacting through your portal. So that will be directly merchant to merchant.
Yes. Most of these people are having some direct arrangements with these end users or the melters or the services. So I do not expect -- in fact, some of the RVSF were the big ones like the Tata's and all they can melt directly. They have their own foundries and all. So it doesn't come into the market.
Understood. Now just 2 follow-up questions. One, how much would be the recovery from scraps when a car or a vehicle is scrapped? How much can be recovered from that?
You mean to say the Ferro Scrap ? Or I can't...
.
When a vehicle is scrapped, how much recovery potential is there?
See, there are all kinds of scrap that can be recovered from a vehicle and it depends on the kind of vehicles. There are 2 wheelers, 3 wheelers, 4 wheelers, trams, commercial vehicles and all kinds of vehicles. So it depends on the make, model everything.
[indiscernible] talking about 4 wheeler, that is scrap. Can we expect around 25%, 30% value recovery?
See, basically, what scrap is the metal content only has some value. The plastics and other things that are there doesn't have any value. So whatever is the market price for the metal that we are definitely getting.
Our next question is from the line of Surbhi from [indiscernible] Capital.
I have a couple of questions. The first one being -- sir, can you tell us when will the sale of your subsidiary, Ferro Scrap Nigam Limited likely to happen? And what could be the range of valuation? At what stage the sale is right now?
Ma'am, let me clear, that in our earlier phone call [indiscernible] has been organized and managed by department of investment of public asset management that is [indiscernible] finance under the Ministry Of Finance. So -- but any update in [indiscernible]. So as of now there is a -- process is going on that much we can comment. So as far as valuation is concerned, we are basically not going to comment right now at this -- it may not be appropriate for us to hit so because -- if because like we formalized the sale [indiscernible] everything is there, updates are [indiscernible]. So it would not really be appropriate for us to comment on anything on this issue at this stage.
Okay. Okay, sir. Okay. Sir, another question is that will you be handling the sale of spectrum, which is likely to be auctioned?
Yes. Spectrum auctions, we have been doing for the past 3 years. And today also, there was a news report that some more sequences also will be auctioned. That also will be carried forward by...
Okay. And ma'am last question is, can you explain the reason for increase in other expenses and employee expenses for the quarter?
Yes. It is due to [indiscernible] that has been depreciated with our certain section of the employees.
Sorry, sir, for the interruption that your voice is not clear.
Can you hear me, ma'am?
Yes, it's better now.
So basically, so far, the other expenses, it has not shown that much of jump. It is [indiscernible] attend our conference expenses and et cetera, that has been come up. But so far, employee expenses improved, right, it is there, mainly contributed by certain [indiscernible] that we have extended with our employees. So one portion will be the [indiscernible] for onetime and others will be some [indiscernible]. But of course, we are -- as we are coming, we are trying to maintain it around total overhead and around [indiscernible] around we are trying to maintain it but [indiscernible] maintaining.
Sir, can you just repeat the amount of the overhead that you said. It was not clear.
Yes, we are trying to maintain right from the day one that we are [ telling ] our investors, which is around 100. So with the [indiscernible] that are coming up, so it will be around 110 to 120 and odd, it will be going and that we were trying to -- with this scalable operation with the operation that we are doing right now, we are trying to maintain that way. And the second to supplement that we [indiscernible] to the subscription of the employees.
Sir, from the management line, there is a little airy sound coming.
Now, right now it is clear?
Okay, sir. Our next question is from the line of Miraj from Arihant Capital.
I have a few questions. Firstly that, I wanted to understand that you have taken part in the real estate conference. So just wanted to understand what kind of scope is possible here? And what are we planning over here? So exactly what will be the layout? Will there be state properties or land plots coming up for sales to our website, our platform? And if so, then what would be the revenue model that we planned?
As we have been highlighting in the past also from time to time, many of our clients, both in the government sector and sometimes even in the private sector or post monitored processors, they have been approaching for a good and a very dynamic auction platform for all kinds of renewable properties.
So about a couple of years back about 3 years back, rather, we had the agreement with the Department of Financial Services, and we created a dedicated portal for all the NPAs of the bank. Based on the substance of that model, we wanted to enlarge that basket, and we thought we will be approaching the liquidators, the assets under [indiscernible] assets under IBC [ processors]. And then there are a lot of development authorities like [indiscernible] they had participated in the DDA.
In fact, every state has its own development authority. So all these people are also having some kind of sale, some kind of auctioning and there are requirements that come to us from time to time. Apart from that, the government has also been focusing on monetization of assets for our peer groups.
So we have been doing a lot of asset sales for this time -- this ticket sale for Air India, BSNL and many big Tier 2s. So in order to bring all this to the knowledge of the public and also to take a feedback on how we can improve our services, how we can automate it, how we can bring in more transparency and how we can expand the basket, we had organized -- they are for real estate.
So our focus so far has been only on B2B segment. Now we would also like to be in the B2C segment. So towards this end, it was more of a awareness campaign, plus to go into the business opportunities that are available. So it's just one of the series that we will be starting. In fact, a couple of years back, we did have a conference for the mineral sector. So sector is, we are now going to focus so that all opportunities can be tapped and we kept grow our profit. That is the idea.
Understood. So now over here, just to sum it up, we are also focusing on the B2C segment in terms of sales. And there has been a positive feedback from PSUs as well regarding the sale for properties and through IBC, the insolvency and bankruptcy versus what are the properties are there? There's been a positive feedback from their side as well for sale of that?
I won't say positive feedback, but that is also, from time to time, we are doing it, but it's not a very structured mechanism. So we just wanted to focus what kind of infrastructure we have, so that anyone in this area, looking for a good service provider is aware that we are there.
Understood. Understood. Okay. My next question is regarding the vehicle scrappage policy and our role in it. I wanted to understand what kind of triggers are currently present because there are a lot of moving parts, I believe, over here. I wanted to understand what are the main triggers and what kind of volumes we could do over here.
As far as our triggers are concerned, Miraj, one of the major issues that any of the RVSF are facing, of which MMRPL is one. The fact that there are still a lot of states which are in nascent stages of implementing the policy framework, which was visualized by the MORTH guidelines.
Now the availability of vehicles then becomes dependent on that particular state, having that framework in place. And would the beta also being populated in the Vahan portal because as per the guideline now, vehicle can be accepted only if a certain amount of data is available on the VAHAN portal. If it is not, then even if the vehicle is available, it cannot be accepted for scrapping.
So that is a constraint, which we are facing at this point of time, which is being sorted out state to state. And once that is done -- and there would naturally be other smaller issues of pending deals on end-of-life vehicles. So that is actually is disincentive because if a pending deal has to be [indiscernible] it is essential that it needs to be cleared before it can be scrapped. So that acts as a disincentive for the sellers, for the individual who is then handing it over to registered vehicle tracking facility.
Other than this, there is a major challenge from the unorganized sector, which has been working in this. I mean, they have been the people who have been working in this area for all this time. And naturally, since compliances are not so much of an issue in that sector. So that puts an initial organized vehicle scrapping -- scraper at a disadvantage, at least in the initial phase.
To take care of this, we have been trying to develop a completely digitalized platform right from the initial phase of -- when a customer logs in, gives us the vehicle details and then the entire process to be digitally seamless with what has been the model that we have been working on. Apart from this, stakes are also putting up testing infrastructure, which is a major requirement for being able to implement this policy.
And the third thing, which I had mentioned earlier is that the government is also thinking of coming in with an EPR policy, which will also substantially increase the size of the market because that puts a substantial amount of responsibility on the [indiscernible] for scrapping vehicles which they have manufactured at the beginning of life and using that scrap material for manufacturing their new vehicles.
So once that entire process also gets formalized -- the policy gets formalized, it will be definitely a benefit to the organized and ethical players in those sectors.
Understood. Understood. Just on the end-of-life vehicle part that you mentioned from a previous con-calls, I believe that in FY '25, you were supposed to receive a large chunk of government vehicles that were coming in for scrapping. So can you just reiterate the number over there? And is there any hiccups on that part?
See, these numbers are coming from different states at various points of time. But as Sir has just now pointed out, these also have to follow this process only and the challenges of ecosystem, the digitization, the issues and the uploading of details in the Vahan and encumbrances on these vehicles. These challenges will have to be addressed so that these vehicles can actually come for scrapping.
Understood. Okay. So can you ma'am if -- sir, if you could just tell me what is the cash balance currently on books?
Sorry, can you repeat?
The cash balance currently on books?
Sir, that much we can tell that like this time, we have not drawn up the balance sheet for the limited review, so it is -- the deal for in their mark. But the cash portion is quite enough to run the day to day operations as well as for the future expense and that much we can secure. And we'll come up with the exact balances as on 31st March, that expects in the next conference.
Understood. So in FY '23, I was just checking the numbers. We had -- from our portal, we had scrapped 2,000 vehicles. And we had mentioned that we are expecting another 15 lakh vehicles to be scrapped in FY '24. So will that figure be coming in FY '24 or '25?
It looks little difficult even in FY '25 because of all the reasons that we have just pent out couple of minutes back.
Okay. So it looks to be difficult to be executed in FY '25, right?
Yes.
Okay. Perfect. No worries. And my last question before I get back in the queue, could you just help me with the guidance going forward what are the guidance that we might give for FY '25?
I think it is little early to talk about that...
"
And Miraj, besides -- I mean, it would not be appropriate for us to talk about any numbers because that would be speculative. But yes, we are looking for consolidation in our existing areas of business as well as looking for new clients. As ma'am had talked about a short while ago, I mean that is a continuous effort to scale up the business that we have available with existing clients and to increase our basket of clients, particularly in the e-commerce sector.
Our next question is from the line of Rushabh Shah from Anubhuti Advisors LLP.
Sir, my first question is basically, we have historically seen post quarter volumes to be significantly higher than the rest. So just wanted to understand how have the trends been for us till date for fourth quarter? And also how the scrap prices have move around?
Can you repeat the last center?
How the scrap prices move around as of now? Have they been on a better side? So just wanted to understand how has the e-commerce business been performing in the fourth quarter?
E-commerce business has shown slight improvement but more precisely from a flatter trajectory. The scrap prices, if you want us to otherwise then a 9-month basis compared to last year, it has shown a downward trend by almost about 10%. So that has actually made this e-commerce revenue a little flatter. But as far as the other subsegments of e-commerce is concerned, there we have seen better revenue.
Another thing that I had pointed out was regarding the iron ore. The iron ore volumes have gone up, but somewhere -- it is not translated to revenue mainly because we had -- we were stretched to reduce charges. So the volumes have gone up. So it is a little flat out as of now. But as the volumes build up in the coming months, the revenue receive will also be a little better.
Understood. And going forward, which are the new areas that you are targeting to drive the e-commerce business? And if possible, can you share a broader long-term guidance at which the e-commerce revenues could continue to grow?
Actually, we are working on a few things right now. It will be a little premature to talk about it. So maybe in the coming months, we will be able to address this?
Okay. And we are seeing the whole segment as in to grow in double digits over coming, I think, 3, 4 years to the lease. That would be a correct interpretation?
The past trends have been like that. We also hope for that to continue.
Our next question is from the line of Vinay from Headway Investment Private Limited.
Yes. I just wanted to know the 3 segments that we have, the scrap -- the vehicle scrap and your e-auctions and marketing. Now if I can just get a fair bit of an understanding that e-auctions, you again have some of iron ore auctions and spectrum auctions and various things. Do we have -- what exactly is the profitability model for the e-auction? You get flat fee or you get the commission of the value traded or how is it?
Actually, it's a mix of both. We had addressed this in the past with the con calls also. So in certain areas, we go on a percentage basis, but in certain -- like spectrum or coal auctions, it is an event basis, even say mineral block. So it is a mix of models and the revenue streams are also quite different. Sometimes, we charge the seller, sometimes we charge the buyers, sometimes it is just a transaction cost. So there's no one fixed model.
So as an investor, how do I kind of understand what would be the sustainability of this revenue going forward because this is one of your major businesses, right? If there is no figure I can go with, is there any ballpark figure that you look to say that at least this much is what the company is supposed to earn out of this?
See, if you have seen the subsegment, we have a scrap, iron ore, coal, e-procurement, et cetera. So scrap is more or less, which is about 50% of our total e-commerce revenue, that is on a percentage basis. So if that is up, then obviously, the revenue is also up. As far as e-procurement or the coal is concerned, that is on event basis. So right now, we can't say how many events will be to carry out or how much coal will be traded or what will be the income stream from that? So it is a mixed back. When it is a mix back, it will be very difficult to say which particular subsegment will do well.
And this e-commerce as a whole would be, what, around 70%, 80% of your business even going forward?
Mainly -- yes, yes. E-commerce is our main business, the trading of which we are practically any one particular model, where again, the volumes are not really coming up. So the focus of the area is definitely is e-commerce only at this point of time.
Yes. And that would be approximately what part of the business because in the segment revenue, I can see that, but is there -- is that likely to be the trend even going forward?
Yes. As of now, yes.
Okay. And then on this vehicle scrap policy also, you have a center in Noida, right, where you can -- where you have this. Is there a locational [indiscernible] sorry?
The JV company has a center.
Yes, yes. That company where you have a JV. The only thing is proximity to various places important? Or how does this go? I mean do we have to get all the vehicles to one place and get it here so transportation cost will get added? How competitive would you be in that sense by having it so far?
Here, I would say that it is a general radius of maybe about 100 or 200 kilometers, which is a catchment area for a particular center. So transportation cost within -- almost any distances within that or not substantially different.
Okay. And how many centers like this we have?
At this point of time, I think we have 7 centers at this point.
And all of them are equally, what you call, busy or is there...
41 collection centers.
41 collection centers? Okay. And in this case, the modest apparently is you have to pay something to the -- I mean, how is the profitability model here? How does this work? Like you said in scrap, it is percentage of -- here, how does this work, the profitability?
This is completely that -- it's an independent thing that is being done by the JV company. It is -- we are not actually involved in the day-to-day operations of this company.
Okay. But you get 50% share of that.
Yes, because we are the management. That's it.
Okay. And -- okay, fine. So I would not know how exactly is that value because that is going to be a major stay going forward?
That would be a significant part going forward over the -- as I mentioned, that the industry is still nascent, the guidelines and frameworks is coming into place. So we definitely have hopes of this area becoming a very significant area for us in the future.
So as an investor, would I know what kind of profitability model that significant portion will have going forward? Is it percentage? How is this -- I mean, I just can't understand how that works.
I would not talk about numbers that would be speculative...
No, not numbers, not numbers. I just want -- I mean, is it -- how do I put it? How do you value that business going forward?
Let me supplement, sir. Like you -- so we're talking about the profitability and the revenue model where we are simply like [indiscernible] we are buying the scrap vessel [indiscernible] scrap out of that, still that in the market purchase and sale price difference. Simple manufacturing where we can collect. It's like a simple manufacturing activity, not just getting scrap out of that junk and selling to the market. So that's...
I got it. So it is basically you buy the vehicle, scrap it and sell the scrap. That's it...
Scrap [indiscernible].
Our next question is from the line of Bharat Shah from ASK Investment Managers Limited.
This is in line with the previous questions. Can you drop a conceptual map of the predominant business today of e-commerce, the kind of opportunity, long-term kind of evolution of that activity, the challenges and the positives that you see. Along with that, again, a conceptual map of many new opportunities, which are either at a drawing board or which reasonably are conceptualized and we can think of what it can represent.
I'm not necessarily seeking any precise numbers, but I'm seeking philosophy, thought process and how you are considering the overall opportunity set for your business, both your existing as well as the ones which are kind of -- which are being done, but work in progress and the new opportunities that are being conceptualized. If you can present a picture of that in broad details with possible size of opportunity, if you can throw in, that will be very helpful.
See, as we have said earlier, the focus is on expanding our e-commerce business portfolio. And for this, at least in the last 4, 5 years, you can see that scrap has been the main focus area. More than 50% to 55% of our revenue is coming from sale of scrap. Now whatever scrap we are selling is more from the government sector. So that we have, in the past, also talked about our foray into the private sector scrap.
And we have been adding almost all the big names in our portfolio, and that is a focus area. We will definitely be hanging more scrap from the private sector, that is our untapped area. Second thing is digitizing any commercial transaction that obviously has been the strength of this company. And because of these strengths, because of what we have done in the past, we command a fairly good credibility in the market.
And we are getting opportunity. So we are now actually working on various models -- yes, each and every model cannot be translated to business immediately. So we are still contemplating as to which are the focus areas that we need to work on. So maybe after a couple of months, we will have a clear focus on where we want to be and what we don't want to do.
But I'm sure, given the fact that it is an operating business and some part of it is fairly clear in OPS and concrete. Why is that our roadmap ahead is something which is still something to be drafted. Why are we not able to articulate on that?
See, we can articulate once we are very clear in our mind. We are working on various models, as I said very clearly. Let me have the -- let me -- let us all come to a consensus internally. After that, maybe I can spell it out to you. But right now, it's a little premature to talk about this.
Okay. On the existing activities, can you -- by segment, by segment, can you throw light on opportunities and challenges on each of them and the potential size of opportunity in that area?
I would take some more time to answer this query. I mean maybe I won't be able to answer it today. Maybe in the next con call, we will have some clear insights in that area.
Yes, that would be helpful because as the earlier participant also was raising questions. How do we get a picture into the -- dreams into the future, one is not looking at numbers, but one is definitely looking at the thought process and opportunity mapping so that we can formulate our own view as to how that may happen, what can be a potential road map on that. But if itself is something not really articulated, then it becomes very difficult to formulate a view on the business.
I understand. At this point, what we would like to say is that, of course, e-commerce, even areas where we would -- which is our core area of operations at this point of time. So scaling up as well as looking at different sectors where e-commerce is not the norm at this point of time, would be a large part of the way going forward. Apart from this, for exponential growth, we would -- we have been examining multiple other scenarios internally, but we would definitely not come to a final conclusion about the 3 or 4 particular sections that we would like to go forward in. And that is something which is in process at this point.
May I request and expect that when we have this call again, say, in 3 months' time, can we have a more meaningful and detailed discussion on existing activity and mapping. Is really the potential road map on the new opportunities, which are -- even if they're at a conceptual stage or thought process stage, if you can articulate that will be helpful.
We'll certainly try to do that. We'll certainly try to do that...
We will try definitely.
Our next question is from Dr. Amit Vohra the homeopathy clinic.
Yes. So my question is regarding the segment results, the segment profit. It was the first marketing, e-commerce and others. And then there's the scrap recovery and allied jobs. Wherein this quarter, we have shown a result of INR 25.87 crores as compared to last year's INR 10.98 crores and the preceding quarter, that is optimal for the INR 10.94 crores. So what has led to increase in business in this part of -- or is it seasonal?
Yes. let me explain doctor sir. Like this scrap and allied recovery job, which is basically from our subsidies, Ferro Scrap Nigam Limited, right? So this year, this additional -- this quarter has done a better results because of this operation. So that's why that thing has gone up. That's the first question, right? That has gone up.
So can I repeat once again. Is it because the Ferro has done better, that's why this quarter is showing better results...
Scrap recovery and allied jobs is mainly done by the daily company. And because of their increase in revenue, the figures are reflecting that...
JV company is one with Mahindra, the same JV company you're talking about?
No, no. This is Ferro Scrap Nigam Limited...
Got it. Sorry. Yes, one more question. We have recently read in the [ spring ] paper that government of India is planning to remove some 8 lakh old buses and replace it with e-buses -- electric buses. So this -- can we see opportunity in business of those 8 lakhs buses which are regular buses diesel or petrol buses to be scrapped?
Which particular news report are you talking about?
It was in Economic Times around a month back that government of India is stalling to remove all the state transport buses, which were of petrol and diesel and replace it with around 8 lakh electric buses, e-buses. It was in the Economic Times.
Yes. That is definitely an opportunity, but then this is just at the planning stage, and you will appreciate that replacing such a large volume of vehicles, will not happen overnight. So this will definitely coming in a phased manner over 2 years...
5 years or something, definitely I agree that. But as we see like now gradually buses are being replaced by e-buses, do we see an opportunity in the old buses for ourselves?
Yes, yes, definitely.
In terms of scrap and other businesses?
In fact, all the road transport corporations, the end-of-life vehicles we are selling and the vehicle scrap also, we are only selling so that is an opportunity for us.
Okay. Even the other parts of the vehicle like the mirrors or the FM radios and that also, we see -- if we auction, we have a margin there also. I would compare [indiscernible] that we can have -- if we get that option -- so if we are getting that option, then we can have a margin somewhere around 25% to 50% in the -- apart from the scrap?
Yes -- vehicle sale. One is the vehicle being sold as ELV. So there, it is going through our platform to the RVSF. Now RVSFs are the dismantlers of those vehicles, who are removing those parts and which can be sold in the spares market. So this basically is an activity of the RVSF and one of those is our own daily company. The parts are not auctioned in our platform directly. So this is actually a product that comes out when the dismantle is happened.
So the JV company, whatever parts are there so it is an activity that is being done by them. And they, of course, do sell all these parts in the market.
Yes. Apart from the part, the remaining part also have good margin value in around 25% to 30%, 40% margin.
It depends on the demand supply conditions. If some vehicle, which is really old and those parts are not at all required by anybody in the market -- the inventory just like that.
Okay. Anything else that you see in future business opportunities, if you can discuss your -- anything apart from whatever you mentioned from e-commerce and the scrap? Anything else that you foresee?
We have been maintaining that the e-commerce nobody has actually mapped the potential that is there in the market. So anything -- any transaction can be converted to an e-commerce activity. So as and when we come across any activity that can be digitized, we are focusing on that area and developing our software or doing transactions in that area. So that is why it is very difficult for us to make a strategy for one sector and then go around that sector only.
We are seeing all the opportunities and whatever is possible immediately without much of developing that entire sector that we are able to put in our hold. But going forward, the opportunities are infinite, and we would definitely want to staff each of these opportunities that come our way.
One last question about the Standard Chartered bank. We've got some refund of around INR 90 crores. Can you elaborate on that, if possible?
Yes, yes. Actually, we have told in the earlier conference that [indiscernible] our DRAT appeal. So we had to deposit that INR 90 crores in the DRAT. So consequence upon the DRAT order, accepting our play, we won the case against the bank. And the INR 90 crores were recorded along with interest. That is appearing in other income in our books and is appearing in the our financial statement that as we put in the second quarter and the third quarter as well, sir.
Okay. Any further amount we recovered from that JV -- not JV, from that case?
Yes. It was not -- firstly it was deposited and the full amount that was deposited that has been recovered right now...
So currently, INR 90 crores has been recovered. What -- how much extra is expected?
Yes, it is -- the case is [indiscernible] that this time it's different for on slide that we have mentioned in the honorable High Court of Bombay and DRAT and of course, at Calcutta court. So we cannot comment right now on any further gain out of that case...
Our next question is from the line of Gurvinder Singh from [indiscernible] Advisers.
I have a quick question. Strategically, I wanted to understand why would you be wanting to sell Ferro Scrap Nigam Limited with the same business as your core business. I'm unable to picture the strategy behind that sale process to initiate it?
As I mentioned earlier, this is a decision which has been taken by the government. So it's not really appropriate for us to ask us to comment on that, if you please.
Ladies and gentlemen. That was the last question for the day. I now hand the conference over to management for the closing comments.
Thank you for the such inquisitive questions on our results. And some of the questions that people keep raising from time to time have actually given us some direction into how we should work and what are the areas that we should concentrate on. So please continue supporting us like this. And thanks for the continuous betterment.
Thank you very much. And as we discussed during this con call, there will be a lot of areas where we need to really customize what is the way forward for us. And it is discussions like this, which actually push that agenda forward and put it on the front further. So thank you very much for that.
Thank you from our side. Thank you.
Thank you. On behalf of Equirus Securities that concludes this conference. Thank you for joining us, and you may now disconnect your lines.