MSTC Ltd
NSE:MSTCLTD
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MSTC Ltd
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Ladies and gentlemen, good day, and welcome to the MSTC Limited Q4 FY '21 Earnings Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Depesh Kashyap from Equirus Securities. Thank you, and over to you, sir.
Yes. Thank you, Melissa. Hello, everyone. On behalf of Equirus Securities, I welcome you all to 4Q FY '21 earnings conference call of MSTC. From the management, we have with us Ms. Bhanu Kumar, Director, Commercial; Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary. We will begin the call with an opening remarks from the management, and then we can open the line for Q&A.I will now hand over the call to Ms. Bhanu Kumar for opening remarks. Over to you, ma'am.
Good morning to all of you. The year bygone was really a very tough year in terms of business, personnel and operational matters. But I'm really happy to note that the results have actually been very promising, and we have witnessed some of -- good growth, which was not [indiscernible] even during the midyear.Now some of the major achievements that we could carry out in the last year, especially in terms of business. As you know, we ventured into a new project for the Rajasthan government for allotment of liquor licenses. As you all know that MSTC has been a pioneer in offering customized e-commerce solutions for our clients. So opening this basket to other sectors, now this is one new challenge that we face that we had to do this in record time of 15 days only. And there were about 7,500 shops that were to be offered on license. So this was done in the record time, and the results were there for everybody to see. The Rajasthan government is extremely happy with the results. And the earnings or the figures that you can see, INR 11,227 crores, INR 77 crores from these options to the government of Rajasthan, has actually paved way for us for approaching other state governments to adopt this model for liquor licensing.Now another major area into last year was selection of an agency for sand operations in the Andhra Pradesh government. Sand has always been kind of an area which not many people wanted to touch because of the inherent culture that is there. Now Andhra Pradesh government decided that they will adopt their e-commerce platform for selection of such an agency who can actually render these services in a very transparent way. So MSTC was the obvious choice for this.And we again did end the year. Our role was not just limited to giving the platform services. We were more like a transaction adviser right from the big documents to MOU to finance agreement. Everything was done by MSTC. So that has actually given us a new [ force ] that our role can be a little more than the normal e-commerce platform or software service provider roles that we have been doing for such a long time. So this will definitely -- this experience will definitely pave way for us for our future ventures in this area.Then as you all know, the coal block, which was opened up for commercial mining, they have been put up for options. The second tranche was also conducted. And now there are about 67 mines that have been put up for auction in this year also, out of which the various stages are going on from our first level e-tender processes there, and this is likely to be completed by about September or so.Then properties is another area where MSTC has brought in a very strong foothold. Last year, if I remember -- recall correctly, I had [indiscernible] of the [ IP ] portal, where we have given a very robust integrated platform for sale of all the NPAs of all the national banks, about 40 banks or so. And now this year, in fact, most of the volumes at -- volumes and e-commerce, the e-sales figures that you can see are basically from the sale of such properties. Though the performance in that sector is just as expected, we are now in the process of taking it to the next level.And based on these factors, we have also offered our services to the Custodian of Enemy Properties in India under the Ministry of Home Affairs. So they also have [indiscernible] and they are interested on this job. Apart from this, the e-commerce is also in the process of selling a lot of properties of the PSUs and government sector for which we are preparing another customized focus.And now apart from that, you all know that the spectrum auctions were conducted in March, and it was done for the first time by MSTC. This was actually a major challenge in respect of software development. But to the satisfaction of all agencies, this was done in a very, very smooth manner, and it was loaded by all companies, including BOP and the entire Cabinet and the government of India as a whole.Now these were some of the few highlights that actually translated to such a good e-commerce performance. Trading, as we have been promising earlier also, we are tapering it down. So some of the revenue degrowth that you can see is basically because we have taken a conscious decision of not doing much volumes in the trading segment because of our past experiences.Now with these opening remarks, I'll hand over this to my colleague, Mr. Subrata Sarkar, Director, Finance, to explain to you the financials. And thereafter, we'll be ready to take your questions. Thank you.
A very good afternoon to everybody. So as highlighted by our Director, Commercial, it was a very robust performance that's driven by this e-commerce growth. So let me go to the figures.So the company has crossed this volume of INR 1,289.86 billion in terms of value of goods transacted through its marketing and e-commerce vertical, which is around 1.25% growth over the value of goods traded in the same period that is financial year '20. Growth in the value of goods transacted through e-commerce vertical was higher by 2%.Revenues. So far revenues -- consolidated revenues were INR 7,804.66 million in FY '21 vis-a-vis revenue of INR 12,313.99 million in FY '20, a decline of 36% largely driven by degrowth in the marketing business. PBT is around INR 1,358.84 million in FY '21 vis-a-vis INR 1,667.43 million in FY '20.Now let us go to the detailed results. Stand-alone financials, FY -- full year '21 versus FY '19/'20. Total revenue stood at, this year, INR 6,391.33 million as compared to INR 8,922.08 million. The breakup of, this is marketing, INR 4,062.61 million as compared to INR 6,463.57 million last year; e-commerce, INR 2,212.36 million as compared to INR 2,019.99 million last year; and others, INR 116.36 million as compared to INR 438.52 million last year.EBITDA pre-provisioning is INR 3,739.17 million as compared to INR 2,303.72 million. Provisions and write-offs, last year, it was INR 731.90 million; this year, INR 2,498.65 million. Profit before tax, INR 1,146.81 million. Last year, it was INR 1,294.91 million, a little down by only 11%. NPAT, it is INR 1,010.70 million as compared to INR 752.03 million, growth of 34.40% as compared to last year. And naturally earnings per share is INR 14.36 compared to INR 10.68. That is a growth of 34.50%. And the cash profit, INR 3,534.17 million as compared to INR 1,486.28 million of last year.And if we go to the segmental reporting of stand-alone. It is a total revenue of INR 6,391.33 million as compared to INR 8,922.08 million. And the revenue of e-commerce is INR 2,212.36 million as compared to INR 2,019.99 million. The e-auction/e-sale comes to INR 1,952.50 million as compared to INR 1,660.83 million last year. E-procurement, INR 75.28 million as compared to INR 170.63 million last year. And other income remains almost on the same level, INR 184.58 million as compared to INR 188.53 million last year.In the revenue segment of marketing, it is down by 37% from INR 6,463.57 million to INR 4,062.61 million. And the expenses are also down from INR 7,627.17 million to INR 5,244.52 million. PBT comes to INR 1,146.81 million as compared to INR 1,294.91 million. NPAT comes to INR 1,010.70 million as compared to INR 752.02 million last year.And if we go to the consolidated financials. So it remains the total revenue is INR 9,940.79 million as compared to INR 12,959.98 million. Marketing is down by 37% from INR 6,463.57 million to INR 4,062.61 million. E-commerce is higher from INR 2,019.72 million to INR 2,212.16 million. And scrap recovery and allied jobs, it is basically the segment of our 100% subsidiary company, Ferro Scrap Nigam Ltd. It is a little bit down from INR 4,098.87 million to INR 3,649.68 million. And others are down from INR 377.82 million to INR 16.34 million.EBITDA is higher by 43%, INR 2,882.17 million as -- to INR 4,137.67 million. Of course, it is pre-provisioning. Provisionings and write-offs, INR 761 million -- it is INR 2,520.59 million as compared to INR 761.35 million last year. PBT on the consolidated basis is INR 1,358.84 million as compared to INR 1,667.43 million. And profit after tax on the consolidated basis is INR 1,129.59 million as compared to INR 970.14 million last year. And on the consolidated basis, the EPS is INR 16.05 as compared to INR 13.78. And the cash profit is INR 3,836.95 million as compared to INR 1,897.64 million.And if we go to the summary financials. First, to start with stand-alone. Revenue from operations is INR 4,277.45 million as compared to INR 8,307.08 million. Other incomes are INR 2,113.88 million as compared to INR 615 million last year.Expenses. Purchases and other consumable stocks and shares, it is INR 1,746.07 million as compared to INR 5,663.12 million last year. Employee benefit at INR 677.58 million as compared to INR 711.54 million. Finance cost is INR 68.90 million as compared to INR 274.56 million.Depreciation and amortization expenses is almost on the same level from -- INR 24.81 million from INR 20.35 million. Provisions and write-offs, INR 2,498.65 million, that's compared to INR 713.90 million. Other expenses are INR 228.51 million as compared to INR 243.70 million. And PBT is INR 1,146.81 million as compared to INR 1,294.91 million, and after the tax is INR 1,010.70 million as compared to INR 752.03 million.And on the consolidated basis, the revenue is INR 7,804.66 million as compared to INR 12,313.99 million. Other incomes are INR 2,136.13 million as compared to INR 645.99 million. Purchases [indiscernible] expenses are INR 2,177.46 million as compared to INR 6,151.98 million. The employee benefit expenses are INR 1,733.93 million as compared to INR 1,828.05 million. Finance costs, down from INR 287.22 million to 71.46 million.Depreciate and amortization expenses are down -- are up from INR 166.15 million to INR 186.78 million. Provisions and write-offs, INR 2,520.59 million and -- as compared to INR 761.35 million last year. Other expenses are INR 1,883.13 million as compared to INR 2,070.86 million last year. And PBT on the consolidated basis is INR 1,358.84 million as compared to INR 1,667.43 million. NPAT is INR 1,129.59 million as compared to INR 970.14 million last year.And if we go to the consolidated asset basis, total assets are INR 22,477.61 million as compared to INR 22,011.50 million, and total liabilities on the same side. And total equity on the consolidated basis has come up from INR 4,755 -- come up to INR 5,579.53 million as compared to INR 4,739.22 million in the last year.This is all from our side. Thank you very much.
[Operator Instructions] The first question is from the line of Mr. Vakharia from Lucky Investment Managers.
I had 2 specific questions. My first question was that in the e-commerce business, we have generally seen a range of between INR 55 crores and INR 65 crores in revenue. And we have done about INR 85 crores in this quarter. So is there any one-off...
Okay. Louder, sir.
Can you hear me now, sir?
Yes.
I'm saying in the e-commerce business, generally, our range has been between INR 55 crores and INR 65 crores top line. In this quarter, we have done INR 85 crores. Have we executed any one-off orders in this quarter which is why it's higher? Or this is the new normal steady-state run rate that we can assume per quarter for the e-commerce business? This is my first question.
Do I answer this? Or you have other questions?
No, ma'am, you can answer this, then I'll come to the next question.
Okay. Basically, what happens is in every year, the last quarter is probably the best performing quarter. This year the same trend has happened. But this year, what has happened is in the first quarter, the business wasn't really robust. In fact, we couldn't carry off much business.As you all know, our major owner is the scrap business. So most of the scrap space -- there were 2 factors actually that led to this growth in Q4. First is the scrap business. Most of the materials that was shifted from first and second quarter that got sold in the last quarter. And most prices as such of our scrap has gone up by almost 15% to 20%. So our revenue model is more on a percentage basis. So when the scrap prices are high, then the revenue is also better.
Got it. Okay. Great. Second question was that in this quarter, we have seen a INR 200 crore provision, and we have seen a INR 200 crore write-back. So can you please enlighten us more on that?
Mr. Subrata will address that.
So the basic point is like that in this -- we had written off INR 180 crores of provisions that were made earlier. So for the -- both with book entry, there's 2 advantages. One is the bad debt written off, and another is the provision to [ longer ] written back. So it has got no effect on the overall profitability of the company. It's INR 180 crores is around the bad debt we have written off. Both -- in the income side and in the expenses side, both were this is appearing. This has got no -- again, I repeat, it has got no bearing so far in the trajectory -- on the profit of the company.
Okay. Now is it safe to assume, sir, that this is the last year of seeing these provisions and write-backs and all those things? And from next year, it will be a pure e-commerce-driven company?
Basically, what we used to tell from the [ right to one ], around -- if you can recall, we used to tell that is around INr 120 crores plus, INR 130 crores plus of our sticky data [indiscernible] in the Cash & Carry segment. You can recall the earlier [indiscernible]. Gradually, we have got a provisioning policy in our place. We are realizing a little bit of money out of that, of that segment also. But for the conservative effort, we are making certain provisions also.So -- but we can say that the around of -- that around INR 47 crores to INR 48 crores of another debt balance of that -- this segment is aligned still in our trade receivable part. So that is the only tolerable segment that we can foresee at this juncture. And actually, the policy [ in account ], it will be -- if not realized, it will be taken care of in the financials.
The next question is from the line of Dixit Doshi from Whitestone Financial Services.
To just continue with the first question of the previous participant. You mentioned that INR 180 crores of same accounting entry is there in other income and other expenses as it is. Because I assume that when you are booking in other income, the provision written back, it means you must have provided that in the earlier years.
Absolutely right, sir. Absolutely right. It was on the provisions earlier years since. It has got no effect on the profitability so far in the current year.
Yes. So that INR 180 crores in the other income is the provision write-back, which we must have provided in the earlier year. And then this INR 215 crores of provisions in other expenses, then that must be the new provisions, right?
So this year, 2 things. Bad debt written up, INR 180 crores, INR 180 crores both sides, okay? What's the point? Both sides, provision on [ longer written ] debt and bad debt written up. So we have to [ mine ] these balances as fresh provision for current year.
No. That INR 180 crores in other income must be of some earlier, let's say, [indiscernible] account, which you were...
Yes, yes, yes, on earlier years [indiscernible].
And then INR 215 crores, there must be not -- that account will not be there in the other expenses because you can't write off right now and write back right now. That's what I...
Yes. This is just a book entry. We are writing back the provision and making bad debt. We are declaring that [indiscernible] over the bad debt. So just not to assess our books of account on the profitability, we are [indiscernible] and bad debts are done in the books that way. This has got no bearing on the profitability of the company.
Okay. Now over and above, so if I exclude INR 180 crores above another INR 35 crore of provision, that must be purely from this account of which you are mentioning in the earlier calls that there is one sticky account of INR 120 crores. So from that, you...
Yes, yes, yes. You're absolutely right. We are -- we have -- from the last quarter of December '19, we have formulated a provisioning policy, and gradually, as a conservative approach, we are making provisions in a staggered manner. So that -- it is another -- what I really just now explained, around INR 47 crores to INR 48 crores, around INR 50 crores is still left behind. So this is in the sticky segment of the Cash & Carry and which has been discontinued from the financial year '19/'20. No for that business is being done on this segment.
Okay. So now if I see the stand-alone balance sheet, the receivables, total receivables are around INR 723 crores, right? So I assume that out of this, some will be of e-commerce. And whatever would be the marketing receivables, only INR 50 crores is risky and rest are either 110% of bank guarantee kind of [ refusal ], right?
Yes, absolutely, either 110% bank guarantees or in the associate model, which have got -- which is also as secured as it is, as the bank guarantee and the e-commerce. So you can do a conservative approach, INR 47 crores to INR 50 crores is the sticky that is Cash & Carry figure.
Okay. And now in terms of marketing business, earlier calls, you have mentioned that we are going to taper it down. And there are some earlier agreements, which we are actually executing and no new business we are taking. So by when the marketing business will be completely out of the balance -- business?
As we were keeping on telling to the investors, our investors, like the tapering down of the marketing business, so that agreements are still -- certain supplies in the associate model. First of all, in the first step, we have stopped the Cash & Carry business from '19/'20. So one segment gone. Second segment is the associate model. So that supplies are continuing, and it is expected by that FY '21, '22, there will be less oversupply. So with that supplies, we hope that the associate model will be temporarily out of the picture, we hope. So we are making -- because of the covenant, all the supplies got delayed and everything. So now that things are in the full swing to FY '21/'22.Now coming back to the segment of 110% BG. So of course, doing that also, it is a very low volume that is going on. But as we have got a full security of that bank guarantee in our hands, so some trade businesses in the calibrated manner is what we are foreseeing, of course, on receipt of the value BG from the customers solely, without which we will not do any kind of procurement or business in this segment. But [indiscernible] associate model.
So you are saying that we will not completely 100% exiting the trading business. We will do...
Ye, yes. It's almost on the year of exiting the trading business, almost exiting the trading business because the Cash & Carry gone, the major volume comes from that, that we can see the revenues that is from the associate model. That will also be our by '21, '22. So the very meaningful amount of this leftover of this 110% will be there as it is backed by bank-secured bank guarantees. So this is some kind of things we are envisaging, but of course, depending upon that availability of the valid BG and all. Without it, there will not be a single business in that trading business.
Okay. Now in terms of e-commerce, Bhanu said that this quarter had some benefit of scrap business because the volumes were good and even the prices were up. So can you just break up the e-commerce revenue for this quarter in terms of, let's say, spread, [indiscernible] and other kind of options?
It is there in our -- typically, we're seeing -- we are keeping on telling, like around 50% comes from the scrap [ and allied ] scrap business. So almost the gain is continuing. Trend has nothing -- further trend, then the mix -- that mix almost remaining the same as in the earlier years. That is continuing. Anyway...
Do you guys already in the [indiscernible]...
We're getting from a particular customer, it might be a scrap and it might be some kind of e-sale also from that particular customer. So it's a composite type of revenue. But on a conservative estimate on [indiscernible], we can say that around 50% of our e-commerce business is from that segment.
No, but Q4, we have a very good jump in the e-commerce. So even in the Q4, it is around 50%, 55%?
No.
Which one? Which one?
No. No, for e-commerce, e-commerce much more.
Much more.
No, no. No, I'm saying even -- that Q4 e-commerce business has substantially jumped. So even in Q4, the scrap sale is only 50%, 55%?
You're right. As I explained to you, it is on the [indiscernible], it is generally the same trend. So it is -- of course, the composition is against almost same hand. Of course, that has a major role to play because as our Director, Commercial explained, because scrap prices have gone up, so it is contributing a big jump, but almost that mix remaining the same.
Okay. And one last question from my side. So in last one call, you have mentioned that we are planning to start iron ore auctions for JSW Steel. So have we started that? And if you can just elaborate the opportunity on the private sector. And what is the current mix of e-commerce from -- let's say, revenue from government and private?
Yes. We did conduct a couple of events for JSW for sale of iron ore. But there were some facing problems. And the -- right now, the auctions are not happening. We hope that it will happen in -- anytime soon now from the private sector, not just with JSW. We have pursued with other clients also. So this will be there. And the private sector contribution is more or less same as last year. About 90% of our income is coming from the government sector, the rest, 10%, is coming from the private sector.Private sector, actually, we have to think of -- we are already introducing new revenue models because the way they work is quite different from the way government sector works. So they don't want many of the activities that we do for the government sector. So we are tapering down the services, but we are giving more value-added services in terms of the price trend analysis and all those things. So the private sector volumes, we are -- it will definitely go up, but the revenue may not be commensurate to the volume.So finally, what happens is when you come to the analysis of the revenue from e-commerce sector, it may remain at 90-10 for quite some time. Our focus is that on private sector, let's see where it takes us.
The next question is from the line of Varun Goenka from Nippon India Asset Management Company.
So I had 2 questions. So one, some of the coal block auctions or telecom auctions or some of the businesses is probably nonrecurring in nature. Could you help us understand the recurring part of the e-commerce business? What is probably the next 3, 4 years? What kind of outlook? What are the possibilities? What are the growth opportunities do we have? And how do we understand that? So if you could help us just understand the recurring part and the nonrecurring part.
You are absolutely right about this being nonrepetitive, but the revenue from this [indiscernible] is also not really considerable. In fact, for spectrum auctions, we did it just because it will give us a lot of mileage and confidence in taking over new challenging opportunities. The revenue was very miniscule. So again, as I said, this is actually a very long-term process. Coal blocks don't get sold off in 1 particular year. In the past, we have sold some. This year, there will be something probably 1 or 2 more years that will continue. Similar is the nature of mineral block.But this has given us the opportunity to actually explore the volumes and the mineral sales. Now what happens is when coal blocks get sold, after about 2, 3 years of operations, the mining activity starts and then they have the mine coals. Now those companies, again, as we approach them, and we are the chosen service provider for sale of that coal that is mined. So that is not actually -- that is a very recurring activity. So we are in talks with a couple of companies who have started the mining activities from the coal blocks that were allotted the previous tranches.Similar is the case with minerals also. So some of the iron ore that I was talking about, not just JSW, other companies also, the blocks that they have got in the previous year, once they start the mining activities, then we are the chosen service provider for sale of such minerals, coal, all kinds of produce that's coming out. So that gives us an opportunity. So we should not be thinking that this is not repetitive. So maybe after a couple of years, the revenues may not be coming from this sector, but it is giving us new opportunities in that sector.
Right. And about the recurring part, [ how do we do that ]?
Yes, so e-sale part. Actually, if you see the minerals, coal, iron ore that we are selling, these are recurring and these have been with us for more than a decade now. And the volumes have just been ever increasing in that segment. So that is recurring.So for the scrap business, it's recurring. The e-sale business is recurring. E-sale, out of which certain portion where we are selling the block, that may not be recurring, but the revenue stream from that is not very considerable. So we should not really worry about when the blocks are away, then maybe we will not be getting something.As I said in my opening statement, we talked of liquor licenses. So that's a new opportunity that we got. And this is -- this happens every year. One tranche agreement happens every year in one state itself. If we could get this kind of appreciation, then -- we have so many states, so we are going to expand in that sector also.So if you actually see, one is growth as such in the recurring sector. Second is there will always be one-off. But as I said, once we perform well, then everybody keeps coming for either the same business or for some other business. The client is [indiscernible]. So you can't actually say that it's not recurring. The client is recurring, right?
Right. Sure. Okay. And just to cover this up better, on the balance sheet side, post this trading business going off in the next 1 year old, what is the kind of capital do we need to grow our business? What is the kind of investments we've done on our team side or on our marketing or sales side, if we can have some kind of a view on both the side? One is the balance sheet, what will be our balance sheet looking like; and second, on our team?
The basic, you have put a very good question, fundamental question. So going by that trend that we are now moving towards, so balance sheet will be a little bit [indiscernible] because we will have the same amount of very, very [indiscernible] trade receivables. And so far, there will be -- of course, payables will be also going down. And of course, we are now almost at the company.So basically, it will be a very cozy-type balance sheet with more trade receivables. We will be having cash and bank balances, and of course, in the -- yes, so far investment that we can just source. So our -- the management is thinking in that particular region. And as already we have told earlier also, so far overheads are concerned, the company is very -- having a very, very lean manpower. So we are having a very low overhead cost.And of course, going forward, it will be an investment in the e-commerce segment only and in the technology and the knowledge enhancement. These are the [indiscernible]. Of course, it will be the investment and the growth oriented by the e-commerce. So far, that is the vision of our company right now.
Okay. So on the balance sheet side, just to clarify, how much will we be retaining? And what is the kind of payout ratio that we are seeing [indiscernible]?
Very difficult to say. In fact, right now, we are in a transition phase. So hopefully, in the next year, hopefully, I will be able to, I mean, throw more light. So we are trying to just -- [indiscernible] FY '21/'22 [ major ] our trading orders and all these things, which are on the [ one ] book that has been completed and revenues are realized. Then we will be in a position to just to recap and do the recalculation.So hopefully, by '22, we will be in a position to show some kind of [ thing ] that's why how the balance sheet will -- future balance sheet will be [ in life ]. But of course, it will be the philosophy that's like that it will be e-commerce-oriented [ score ] and e-commerce oriented balance sheet.
The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, I have 2 questions. One, what is the nature of the other financial liabilities which is there in the consol balance sheet of INR 800 crores plus? And what will be your gross debt and net debt? How should we look at it in your balance sheet?
As earlier I have just said, that's now -- I think a question of other investors has been like that. We are, right now, almost a debt company. So coming forward, this idea is like to not have any [indiscernible] right now requirements of the company because we have got enough cash sitting in our [indiscernible]. So there may be some kind of [ nonfunded ] required. But -- so almost debt-free type projection right now.Second, on this...
Sir, so almost debt-free, then should we consider this INR 900 crore other financial liability plus one, so it's a borrowing that is there on your balance sheet? That's my question. So it looks like...
No, no, no. I'm telling you one by one. The part now -- I'm coming to the other financial liabilities. Let me answer that. So other financial liabilities are basically some kind of this cash that is we are coming to take through our portal for [indiscernible], et cetera. So that is a line in the transition, which is a little bit amount.So it will almost -- looking like it will keep on fluctuating on a year-to-year basis and the model that we are following. So other financial liabilities are in nature of that already. It is basically that money that is routed to our [indiscernible] value of our principal and et cetera, et cetera. It keeps on daily basis, comes and goes, comes and goes, like it.
Sir, I'm unable to understand. Is it debt or is it not debt?
It is not a debt. It is not a debt at all.
It is not a debt?
It is not a debt. Whatever...
Is it a kind of payable for us? Sorry?
For our debt, we have to classify if it is a debt. We have to classify if it's a borrowing. It is not a debt at all. It is a financial liability, that means some kind of money, some [indiscernible] value that you pass through our portal, that is lying on the -- many closing debt that is lying there.Again, I reiterate, it is not a borrowing. It is not a borrowing.
Okay. And so your gross debt in your balance sheet is about INR 150 crores is what I see at the end of March '21, right? And your cash is INR 750 crores?
Yes.
Okay. My second question is we would have started gaining from the scrap -- from the prices in our top line numbers. So is it fair to assume that until the scrap recovery price is sustained at a higher level, what we delivered as income revenues in quarter 4 are basically sustainable number because if half of your revenue is scrap and if scrap is up 20%, automatically -- or 25%, whatever will be the number, automatically, you start into a revenue growth mode. Is that assumption correct?
Basically, let me explain to you in a very clear manner, lucid manner this mathematics. Basically, scrap market, scrap market still -- in India still, it is not that organized, still is in bad [indiscernible]. It does not impact in that mathematical model in the [ right ] way. The price is going up. There has to be some disposable scrap here, scrap here also.So quarter 4, growth was basically driven by 2 factors. One was the price. Again, there was some disposable stock of scrap lying at their [ ticket ]. So for the record, there was no movement of the scrap in the first quarter, both first and the second quarter. So that shifted to that fourth quarter.So it does not go in that particular mathematical fashion like that the 20% scrap goes up and the revenue also goes up. No, there has to be a [indiscernible] in the stockyard also, like the generation of the scrap, and that the parties to realize that scrap also -- value of the scrap. There's a lot of factors around what all this particular model. So that is the...
[indiscernible]
But not [indiscernible], but you can see that trend, but we can sustain this thing, hopefully.
I didn't understand the last statement.
Pardon?
I said I couldn't understand the last statement. You couldn't sustain what, sir?
Just a minute. Our Director, Commercial would explain that.
There was a few -- the scrap is a business that we have been doing for more than 30 years now. So based on the volumes in the recent years, we are hopeful that this is sustained for a few years ahead. And if the prices go up, then yes, that will be double bonanza and still have increased volumes as soon as the prices will come up.
Same volumes will sustain, but there is every reason there also to believe since the market is unorganized that we are penetrating in the private names by virtue of the deals that you had announced of [indiscernible] and all. That is reason to believe that even volumes will go higher, right?
I'm able to say that the growth trajectory will be maintained. It doesn't actually grow in a very exponential manner. We have seen as the growth in the volume of scrap has been in a very, very -- it's a very slow kind of moving item. Some year, that is -- some major plants that will be coming up for disposal. There is always new plants coming up in place of the old ones and maintenance work keeps happening.And now with new and modern technology, these plants and these things are more efficient. So the kind of sales that may be there after a few years, we can't expect right now. But at least in the coming years, in the near future, this kind of growth can be expected.
The next question is from the line of [ Dipen Shah ], an individual investor.
I had a couple of questions. On the e-commerce front, yes, we have got a good amount of visibility as far as the revenues are concerned. If you look at in the current quarter, the revenue, the margins which we have made from the e-commerce business are almost similar to the revenues. So maybe there is an accounting issue there.But on an annual basis, we actually understand there is a INR 75 crore employee cost for the company on the e-commerce business, and there is another about INR 25 crores. So about INR 100 crores will be the expenditure for the e-commerce business on an annual basis. Would that be a correct statement to make?
Yes, but you are still keeping on feeling that the [indiscernible] overhead -- [indiscernible] and overhead are about around INR 100 crores. This year also, it was around near INR 69 crores to INR 70 crores, which is a very rough estimate at [indiscernible]. Between INR 90 crores to INR 100 crores [indiscernible]. It will still operate at [indiscernible]. So INR 100 crores is the maximum -- to maximum INR 100 crores of [indiscernible] and overhead will be sufficient to sustain this type of volume level.
And sir, should we assume that any increase in the revenue, say, this year, we made about INR 220 crores of e-com revenues. If it goes to INR 250 crores, just for argument's sake, in the next year, should a lot of that additional INR 30 crores flow to the bottom line, sir?
So almost -- most of that because at this plus/minus 10% trajectory, we will be having the same kinds of overhead that we can -- the trend that we can observe from the past.
Second question is, sir, about the IPO of the subsidiary company. Any further updates which we can get or maybe some more color on that?
IPO, there was no IPO so far [indiscernible]. There was no IPO planned for this -- our 100% subsidiary company, Ferro Scrap Nigam Ltd. Of course, there was a plan for -- yes. So as and when that the development will be there, it will be in the public domain. And it is, of course, the basic thing is like that, it is for the policy of Government of India. So whenever they will decide and it is being dealt by DIPAM, Department of Investment and Public Asset Management, whenever they will decide and whatever [ desire ], it will be available in the public domain. And the new changes possibly informed from that public domain only what is going to happen. So it is fully and only the policy of Government of India what will happen to that company.
The next question is from the line of [ Riken Gopani ] from [ Capricorn Research ].
I just had one question, which was a clarification to the comment about the e-commerce business. Ma'am, just in the previous answer, mentioned that there is a good visibility that the e-commerce business growth should sustain. So just more clarity here. So are we saying that the -- despite the fact that Q4 had a higher scrap volume, the run rate should be closer to the Q4? Or are we saying that the growth will be similar to the 10% that we saw in e-commerce in FY '21? What is the comment -- how should I sort of read into the comment?
See, Q4 should not be seen in isolation. What has happened is in Q1 and Q2, there was a lot of volume that actually could not be transacted. So that -- all that got pushed to Q4. So that is more like an operation. We can't say that, that is going to be the future in every quarter from here onwards.On an average, as we have been saying in the past, 10% to 15% is the bottom line e-commerce revenue is what we can expect to happen, unless there is an exponential growth in the volume and sales and we are able to penetrate more markets in a very drastic way. Of course, the results are there, but we have to see the resources at our disposal and all those things before we take a plunge into a bigger growth trajectory. So Q4 is more like a push from Q1 and Q2, and that's why there's very good growth. Going forward, we can expect about 10% to 15% growth as has been happening in the past few years.
Right. Just one follow-up to that is given the fact that in FY '21, the base got impacted because the first half was relatively weak, will the growth rate therefore be relatively better in FY '22 given the low base?
FY '21/'22, we are not going to make any more predictions with this pandemic. Whatever has happened in the last year with the second wave and all those things, we are just keeping our fingers crossed that we don't get affected. But we can't be making any predictions for this year or onwards. We are a little pessimistic in this area.
Got it. Got it. So if you could just give one clarification, which is in Q4 FY revenues for e-commerce, if you were to normalize it for the higher volumes because of the past, would you be sort of able to give some clarity on that? What would be the normalized number looking like?
As I said, see, the scrap prices increased by about 15% or so. And 15% of our income and e-commerce revenue is coming from scrap. So you can [indiscernible].
The next question is from the line of [ Jayhan Das ] from Nirmal Bang.
If we compare MSTC e-commerce offerings with the government's e-marketplace portal, so what are the overlapping areas between both the portal? And what kind of revenue comes from -- MSTC revenue comes from the overlapping segments?
Yes. So I think we had answered this question in the past. And as you can see in the results also, e-procurement is the area in which the government e-marketplace operates. They are here to provide the e-procurement platform and e-procurement services for government goods and services. So if we actually analyze the e-commerce revenue, there has been a degrowth in the e-procurement from about INR 17 crores to just about INR 7.5 crores.This is mainly on account of 2 factors. One is the GeM. And the other one is -- actually, we used to conduct many events as a transaction adviser for imported coal for certain power utilities in the country. So that did not happen because there is so much emphasis on using the domestic coal only. So the import of coal was considerably reduced last year, and such even did happen.So in the procurement segment, this is basically the -- degrowth in e-procurement is mainly because of GeM as well as the slide in business of imported coal. Government marketplace is definitely [ offset ] as far as the common goods and services are concerned. But as I've been saying in the past, MSTC operates in a very niche area. And portal may not be able to get it, so the requirements of all -- the buying requirements of all the government organizations and, of course, even the private sector.So that is where we come into picture, we offer customized solutions. So there is the trend from GeM, especially in the e-procurement segment. But we are taking up this challenge through our different offerings to our clients.
You said that the e-procurement revenues have come down to less than INR 10 crores. So going forward, that shouldn't be a big [ offset ], right?
Yes. But GeM is offset because the government has been pushing for usage of that portal. And obviously, many of our clients for the government goods and services have already migrated or in the process of migration. So there can be a little reduction further in the e-procurement segment because of the migration to GeM. But we expect to compensate that by giving a customized solutions and other offerings to our clients. So with your question [indiscernible] which sector GeM is a threat. So...
Yes. Which are the [indiscernible].
Basically operating in the e-procurement sector.
Okay. And then these other segments where we are dominant of scrap metal and coal, iron ore, those do not have any impact?
So as far as scrap is concerned, see, we have about 30, 40 years of experience. The type of services that we offer is unmatched. And that is why a lot of our private sector clients, they also have given the trust and they have given us the work for scrap disposal. So that gives us some confidence in scrap segment. But for others, as I said, our e-commerce trajectory, our e-commerce performance has been quite good. And we hope that it will continue at least in the short term.
The next question is from the line of Ashish Kacholia from Lucky Investments.
Ma'am, would you like to share with us your progress in the automotive scrapping joint venture?
Which joint venture?
Scrapping.
The scrapping, the ones with the Mahindras.
Yes. That is -- you can see from our financials also that we have now reduced the losses of that joint venture. It is working. It has got already 3 staffing centers, one at Greater Noida, second at Chennai, third at Pune. And it is coming up to its more [ capital ]. We are just waiting for that -- just broader rules and guidelines from government of India.Already, there is a push for establishment of the scrapping center. So we are ready for that. We are absolutely ready for that challenge. And as soon as that -- the broader guidelines are there, we'll be seen -- we'll be visible -- quite visible and we'll be the front-runner in this particular segment. And of course, we'll have the first mover advantage in this segment.
The next question is from the line of [ Jeevan Patra ] from Candy Floss Investments.
Yes, sir. So I just want to understand your -- again, the same question as Ashish. So what is the -- any plan on how much you are going to invest in that joint venture, the scraping CERO joint venture? How many -- the MD of CERO, Sumit Issar, said in some interview that they are going to plan some 25 centers across the country.
Just to carry, please repeat, just...
So I'm saying, is the -- have you planned any investment in the scrapping joint venture with Mahindras? The MD of CERO, the joint venture, has said in the interview that they are going to plan some 25 centers across the country. So is there any plan on how much MSTC is going to invest in that joint venture?
Just now -- I was just now answering the previous question. First of all, it is a 50-50 JV. So it will be an equal contribution from both the JV partners. So that part is very much clear.And the second part is like we are just waiting for the broader guidelines. So as soon as the broader guidelines are there, so we will now estimate and actually, we will plan our CapEx in that particular region. So until only there is a broader guideline, so we are waiting for that. But it is for certain. Again, we are repeating, it is for certain, it will be, of course, a very priority area so far MSTC is concerned because this is another segment that we are eyeing for that. And of course, we will be going with that particular venture in a bigger way.
[Operator Instructions] The next question is from the line of V.P. Rajesh from Banyan Capital.
My question was regarding what you answered on the other financial liabilities. Are you booking it on your balance sheet because you have the material, whether it is scrap or something else, in your custody and that's why you have to write it in your books? If you can just give some more understanding on that entry, that will be helpful.
As soon as -- you know that it's a very, very typical accounting entry as soon as -- suppose you receive INR 5. If on your account or other account, you have to book it as a liability because you have to again pass it onto your principal. So it is a very, very simple accounting entry that we have to do it because we have to account for any amount that is coming into our balance sheet. We cannot keep our balance sheet items. So it is like very simple.Supposedly on our -- behalf of our principal, we receive INR 5 from the customer. So [indiscernible] INR 5 is a transitional amount. So [indiscernible] is transferring to the main principal which is on a regular basis. So it will be shown as a liability only to our [indiscernible] principals. So it is a very simple accounting entry. Nothing to do with the [ store ] or some kind of thing.
The last question is from the line of Varun Goenka from Nippon India Asset Management Company.
Yes. I wanted to understand the payments opportunity for you, sir. If we're finding such large volume of good services, who handle the payments and the payment gateway related?
I could not get your question. I could not get your question. Can you repeat, sir?
So we get our services from the auctions, et cetera, or provide. So the customer to -- who handles the payments chain in that? If a customer is making the payment for purchase also, who handles the payment gateway and the payments for that?
So our bankers, we have got a [indiscernible] of bankers. They handle -- we have got National Bank, we have got State Bank of India, we have got [ Industrial Bank ]. So they handle this total payment chain. So we totally -- we are totally dependent upon our associate bank who handle all these things.
Right, I get it. So why don't we have our own payment gateway or payment services?
So it's a very, very regulatory thing. It's a very regulatory thing. It involves a lot of guidelines and RBIs and all stipulation. So it is a matter of policy decision. So it has to be decided by the government of India, the government of India totally. So it is decided by the government only. So as of now, the situation is like that. We depend upon the RBI [indiscernible] banks and that the bankers are handling it in a very efficient manner.
Right, right. And just about on the services side, since we keep saying e-commerce company, are we going behind any kind of government services? Like e-procurement, like you're saying, is growing and the government is focused on growing that. But beyond the scrappage, mining, are they going behind any kind of a services opportunity [indiscernible]?
Repeat your question, your voice is breaking. Are you talking about the handling of volumes in various sectors?
I'm so sorry, there's a lot of breeze around. What I meant to ask was since we're handling a lot of metals, mining, scrappage related, are we going behind any kind of services opportunity?
[indiscernible] is actually services only. Are you actually asking about the other allied services in these sectors?
Yes. But I mean I'm saying beyond the industrial or mining sectors and beyond the onetime opportunities like telecom auctions, are we really addressing any kind of services opportunity which could be related to marketplace or payments or any kind of consumer services?
So you're basically talking of value-added services apart from the e-commerce services, platform services that we are providing. So in this direction, actually, we had been telling in the past also that we have our eye on agro sector and expansion of our presence there. So towards this end, we have associated with certain logistics partners. But then as you know, the penetration has to be very, very high. We need a lot of associates and other peripheral activities to be carried out.So it is a very promising area. But then it is not so easy. You can't expect into this area overnight. So it's a very slow process, and we are in the process of associating with various logistics service providers, last-mile connectivity and handling of packaging and all those things are there for B2C customers. We had said in the past that we are also addressing the B2C customers because our presence more or less has been in B2B so far -- B2B and B2C.
I would now like to hand the conference over to the management for closing comments.
So I thank all the investors who were on call today and with whom we have interacted in the past. The kind of confidence, the kind of questions that they had been asking actually gives us insights into what can be done, what is our role and what is expected of us. So I'm really happy that people have been following us so closely. And we are just hoping that this pandemic thing is over, and we are back to business full-fledged, and we are able to repeat the performances that we have shown in 2021 and in probably a much better way. And with that, I really thank the queriers as well as all the investors for joining this call. Have a nice day.
Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.