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MSTC Ltd
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Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of MSTC Limited, hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Deep Modi from Equirus Securities. Thank you, and over to you.
Thank you. Good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to Q4 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 then we can opt line for question and answers. I now hand over the call to Mr. Manobendra Ghoshal. Over to you, sir.
Good morning, everybody. It's a pleasure being connected with you here today. FY '24 has been a steady year for MSTC. Business volumes have remained largely similar to the previous year in the major sectors like coal. There has been an increase in iron ore, a marginal decrease in scrap. E-sales have had a cyclical dip due to the absence of spectrum auctions during FY '24, which has pushed up the volumes in FY '23. Revenue was also flatlined with revenue from scrap being adversely affected due to fall in both volumes coming up for disposal as well as average market prices having gone down over the year. And therefore, auction revenues were also down in this segment by about 10%. Coal block auctions were about half the numbers as of FY '23. And also, as I mentioned, the fact that there was no spectrum auction in the year costed dip. On the positive side, iron ore auctions, ELV auction volumes, property auctions, all of these showed significant gains. Revenues maintained generally around the FY '23 levels. There have been increases also in employee benefit costs, which were higher on account of industry-wide wage revisions. So looking at the consolidated financials, It's been a reasonably good year for the group with FSNL's performance being standing out. The group revenue levels as well as PBT showing an increase of about 4% year-on-year or -- on a consol basis. A similar trend has been there in the year-on-year Q4 results for the entire group, though the revenue was largely flat.
We intend to use FY '25 as the year for consolidation of our traditionally strong areas and to reach out into sectors where we haven't yet ventured into, mainly with respect to more comprehensive bundled offerings. We've also embarked on a very ambitious plan for building and enhancing capacity in terms of domain expertise, both in terms of manpower and in technology.
We're quite confident that this approach shall show tangible results -- tangible benefits in Q3, Q4 of FY '25. I'd like to hand over to Mrs. Bhanu Kumar, our Director Commercial, for her remarks.
Yes. Good afternoon, everybody. The key highlights of the performance for the year '23-'24, more or less our CMD has already touched upon. The operational performance, volume-wise, if we see, we have done about INR 1,41,586 crores of business. That is the value of goods that has been transacted through our portal. And financials, if you see, then we have done about INR 961.37 crores of revenue vis-à-vis revenue of INR 879.17 crores in '22-'23. This is on consolidated basis.
And the PBT has been INR 340.18 crores in '23-'24 vis-à-vis INR 329.18 crores in '22-'23, that's about 3.34% hike? The coal mines, we have done about 20 coal mine blocks, which have been successfully allotted through the auction for commercial mining. Major mineral blocks also. It has been quite a successful year as far as this sector is concerned. And very recently, we have signed the agreement for major mineral block auctions in the state of Bihar and Uttarakhand.
We are expecting that these will culminate to business in this financial year. The Ministry of Mines had ambitiously hosted the auctions for critical mineral blocks. So out of the 18 blocks that were put up in the first tranche, 6 blocks was successfully sold off. We expect that this year, we will be able to sell the remaining blocks. The highlight of the performance has been the NPAs of the various banks that are being sold through our portal, the [indiscernible] portal. The 10,000 properties are being sold, which is quite a record by itself. And properties, we have witnessed another big tranche of events for the Hyderabad Metropolitan Development Authority. Almost INR 7,500 crores worth of the properties have been sold in our auctions. UDAN also, we had -- successfully conducted 3 rounds of auctions for the Regional Connectivity Scheme. Plantation lease is something that we have been embarking about for quite a few years. And a new addition to that is the Odisha State Cashew Development Corporation. So they have sold about 4,000 acres of cashew plantation on lease. Regarding the financials, I'll request my colleague, Director of Finance to talk about financials.
Good afternoon, everyone. So this year, as CMD and Director Commercial explained. It was a flat-like thing. But before I explain the financials, I would like to say that -- this year, we have gone for an impact regime with that -- 25.168% of effective tax rate instead of 34.944%. Due to this, we have to restate the deferred tax asset and accordingly, the effect on this PAT is INR 37.06 crores. So effectively, if we nullify this effect, so our PAT is around INR 208 crores as compared to INR 239.23 crores of last year. .
So far as revenue is concerned, it has -- total revenue has grown from INR 498 cores to INR 519 cores. And this marketing part is INR 115 crores to INR 123.89 crores. E-commerce is INR 348.93 crores to INR 364 crores. Others is a little bit lesser, INR 31.30 crores from INR 33.58 crores. And with that, PBT is down by 9% from INR 313.48 crores to INR 284.44 crores. And PAT is INR 171.91 crores, but I already explained because of that INR 37 crore adjustment, this has happened; otherwise, it would have been INR 208 crores as compared to INR 239.23 crores of last year. EPS is INR 24.42 as compared to INR 33.98. In the consolidated part, our revenue has gone up from INR 879.17 crores to INR 961.37 crores, and this is mostly powered by the growth, of course, from our 100% subsidiary, FSNL, where you can see the Scrap Recovery & Allied Jobs has grown up from INR 414.16 crores to INR 467.73 crores. JV has suffered a little bit of loss because of low intake of and availability of the vehicle for scrappage. And with that, the consolidated profit, of course, has gone up from INR 329 crores to INR 340 crores. And PAT, of course, if you add that INR 37 crores part, it is almost on the flatter, but now the figure is INR 204.37 crores as compared to INR 241.96 crores of last year. EPS is INR 29.03 as compared to INR 34.37 last year. And so far, retail is concerned, so our revenue from operation is up in a stand-alone basis from INR 324 crores to -- down, sorry, down by INR 316 crores. And other incomes are up from INR 173 crores to INR 203 crores. And in the expenses part also, major increases in the employee benefit as our CMD explained, this is because of industry-wide wage revision. And -- but -- afterwards, there will not be that much of fluctuation. It will be a normal increase due to certain increase in the inflationary part and these provisions and write-offs, basically, it is both way effect from -- it is in the provision written back in the other income also and write-off also, it has got no effect bearing on the P&L. And this year, no provisions has been created. Again I repeat, no provision has been created for bad and doubtful debts and advances.
Other expenses have shown a little bit of increase from INR 32.03 crores to INR 36.41 crores. And with that, total expenses comes to -- INR 234 crores to INR 184 crores. And profit before tax is down to INR 313 crores to INR 284.44 crores. And with that, tax expenses gone up by around 50%.
So it is because of that 37% -- INR 37 crores effect on deferred tax. And PAT INR 239 crores to INR 171.91 crores. And in the on consolidated part, so we are on, of course, a flatter trajectory so far revenue from operation is concerned, it is INR 750.82 crores as compared to INR 720.97 crores, increased because of the increase -- mainly increase in the revenue from operations in the -- our 100% subsidiary, FSNL. Other income has shown a little bit increase. And with that expenses, our PBT has gone up from INR 329 crores to INR 340 crores, a little bit of increase because of the FSNL effect. And PAT, of course, has -- is down from INR 241 crores to INR 204 crores, again, due to that INR 37 crores.
And in the way forward, that MSTC feels. MSTC will enhance the user experience by automating the processes, offering value-added services, new business model will also be developed to cater to the market requirements with focus on private sector using latest technology. So I would like -- now I'd like to hand over to mic to the Equirus team for further queries and answers.
[Operator Instructions] We'll take a first question from the line of Rushabh R. Shah from Anubhuti Advisors LLP.
Sir, my first question is with respect to the recent, I think, amendment in the object clause where you even inserted objectives like data center and I think fintech and recycling business. So what exactly are we planning in those segments? Can you throw some light on that?
I'll take that question. Regarding the focus on recycling and data center business, what we intend to say is, we want to utilize the state-of-the-art data center services technology that we have. And we do have some surplus capacity, which can definitely be monetized. And given the experience that we have gained in the past about 2 to 3 decades, we would like to offer Infrastructure as a Service.
So towards this end, we are already -- as in his opening remark, our CMD has said that we will be having state-of-the-art technology, technology upgradation, and probably expand our focus on the infrastructure that we have, hardware and software both. So we would like to monetize the surplus capacities and efficiencies that we have in the system. That is as far as data center is concerned. Then regarding the recycling business, as -- see, we have 2 revenue streams from the recycling of ELVs. One is by way of our partnership in the JV with Mahindra, where the recycling activity actually happens.
But then we have also launched a portal for sale of all ELVs in the country. That hasn't seen much traction, though the trend is quite -- it is good, and we expect that this will grow manyfold in the coming years. So here, once the system is accustomed to recycling the ELVs, we see more traction happening in this area.
Apart from ELVs, we would also like to focus on other materials that can be recycled. We are still in a very nascent stage working on all those proposals. So maybe in the coming meetings, interactions, we'll be able to update you in a more specific manner.
Okay. So just wanted to add on to this thing. So I think, for financial year '24, if I see the cash flow statement, you have done CapEx of roughly INR 132-odd crores. So is this regarding the whole the data center capacity expansion that you gave in the statement?
So CapEx, right now, you see, like if you ask me that question regarding that capital advances and -- yes, that is a big outflow, of course. It is partially yes. Partially, yes, we are trying to have some offices somewhere else other than our main data center. So we can utilize that space for future expansion for -- in this particular business. Of course, it will -- the space will be utilized for the business augmentation and marketing purposes also.
So not directly as such in that true sense in the hardware and software on that particular thing that amount has been spent, rather it is being spent for other infrastructure, and we'll be gradually spending in the coming years to augment that. Meanwhile, we are -- we have spent strengthening our Calcutta data center also with some latest equipments, which were required and software. So it is a mixed bag, sir.
Okay. So just a final question on this part. So from when can we actually expect some sort of revenue inflow from data center business, we can see? Can we see some part of this in FY '25 itself?
May I take that one? You see it would not be very fair to put an exact time or exact prediction as to -- because it is a revenue stream, which is, in any case, already there to a certain extent.
There would be naturally the more capacity gets built up, the more physical infrastructure keeps getting supplemented. So revenue streams then start increasing on those areas. But this is -- as we pointed out, that this is a sector where we have -- we see a lot of promise and possibility, and which is why we have intended to go into this in a bigger way than we are doing at this point.
Obviously, I think being an only PSU, which is [indiscernible], I think you can very easily capitalize on this. And sir, just one last final question from my side. So I think a couple of quarters back, we heard from Railway Ministry that they'll be scrapping out a large number of trains, basically which should be replaced by Vande Bharat series. So are we by any chance working on, I think, the railways of scrapping on those old trains? And if it is, then how much revenue potential can we see from that space going ahead?
It is something that the Railways would be able to better answer because you see the railways have their own disposal systems in place. So that's not really a question that we would -- that you should ask us.
But by any chance, are we working with them on any space?
We would be open to looking at all kinds of possibilities of collaborating. And as of the moment, no, we are not in that space.
[Operator Instructions] The next question is from the line of [ Ananth ] from Mount Intra Finance.
Yes. I have a few questions. To we charge revenue on percentage of value basis for scrap and iron ore, correct? Is there any other good revenue charge -- revenue on percentage of value basis, not event basis?
The management team is on mute, I believe.
[Operator Instructions]
We have the management team back on the call. Mr. Ananth, can you repeat your question, please?
Yes. So we normally charge revenue on percentage of value basis for scrap and iron ore as far as I'm aware. Are there any other commodities or goods where we charge revenue on percentage of value basis and not on event basis?
Can you repeat your question? It's not very clear.
Mr. Ananth, can you use your handset mode, please?
Yes. So we charge revenue on percentage of value basis for scrap and iron ore. Are there any other commodities where we charge revenue on value basis and not event basis? Because, for example, for mineral blocks or coal blocks, you charge revenue on event basis.
So if you see our e-sale revenues, part of it is on a percentage basis and the part of it will be on event basis. Basically, what happens is have other minerals apart from iron ore and coal, we are giving it under the head of e-sales and all the forest produce, timber, teakwood, red sandal, all of it is on a percentage basis. As we had clarified earlier also, the percentage depends on the scope of services and the volume of business. So -- we -- for each client and each kind of product, we do have a different model, different revenue stream.
Okay. My next question is, you said you saw some traction in the ELV business. So could you quantify that, the number of government vehicles coming through your portal, the average price and the percentage charge on each vehicle?
You see scrapping of vehicles is not totally in our hands. The government has made a policy and they are pushing it to the extent possible to -- but it doesn't happen overnight. You know that when you scrap a vehicle, you need to have the budget to acquire a new vehicle. So -- and apart from that, for scrapping also, you need to have good infrastructure, good ATS facilities all across the state. And a lot many factors are involved in scrapping a vehicle.
So as and when this entire ecosystem gets developed, we will be having more traction in the ELV recycling business. Now it is only having a very steady flow. There's no exact number that we can say, there are so many vehicles which will be coming in this year or so and so. There are -- million -- at least 2 million vehicles of old, which are ELVs all across the country. But definitely, all of it is not going -- cannot be scrapped overnight, right? So it's going to take a few years, at least.
No, ma'am. That wasn't my question. My question is the government vehicles, which have been portailed as scrap, how many of those vehicles have come across to your vehicle up-to-date? You would have a number, because over 15 years as the government has made a rule, all vehicles are supposed to be scrapped so your portal. So I'm just trying to understand the number of vehicles till date that has come to your portal. As of last year, I remember it was around 2,000 odd. So I just want to understand that number and the average price and the percentage you are charging.
Just give me a moment, as far as the numbers are concerned, I don't have it readily. As far as the percentage is concerned, it is on a percentage basis. But there, again, there are different ways in which we are scrapping. Something that is coming as an ELV, that is going into our ELV portal, and that is how we are auctioning it. But there are some parts and there are obsolete material of scrap...
Ma'am, any average percentage would do, please. Any average percentage, just a rough number?
It is very difficult for us to spell out the average percentage. As far as the numbers that you were talking about, total number of vehicles sold is about 37,000, government vehicles mostly. Out of this, the Central Government vehicles is about 21,000 and state government vehicles is about 15,000 to our portal. Now apart from this, there are some transport corporations, which are dismantling the vehicle and selling only certain parts of the vehicle, so that is not added to this.
Okay. And could you give me just a figure of how much of these vehicles have come through to the JV with Mahindra, say out of 37,000, just a rough number, which is [indiscernible] JV?
About INR 250 crores, INR 300 crores. So averaging that out, it would not be fair because there will be two-wheelers. A lot many will be two-wheelers, a lot many will be buses or cars or something. So you can't simply be averaging out for numbers, right?
I'm just asking you the number of vehicles has come through to MMRPL because I understand that you have to bid as well because....
MMRPL is also getting vehicles through auction system through our portal. They are not getting any vehicle directly apart from the tie-ups that they have with automakers or the test vehicles or one-to-one tie-up with some institutions. Apart from that, they are procuring mostly...
And also from the retail segment.
Yes, from the retail segment also, the Mahindra vehicles or the channels that they have. So apart from that, major procurement is happening through our ELV portals only. They are competing with other RVSFs, and they are getting the vehicles.
We have a next question from the line of Bhavesh Kanani from ASK.
Ma'am, in the last quarter's earnings call, you had promised us that you will share details regarding the size of opportunity in various segments we are operating in. And you had mentioned that in the next call, that is this one, you will help us understand various business opportunities available to you in better detail. Can you please share that?
Business opportunities, as we have spelled out in our MOA that has been recently we talked about. So first thing is, we would like to offer Infrastructure as a Service, monetize the assets that we already have. Second thing is we would like to augment on the property sector that we have recently entered, just a couple of years back we had entered the sector, and we see good promise in this area.
Then, of course, minerals, we have been the biggest player for quite many years. So all the mine minerals, we would definitely, not just in the government sector, but also in the private sector, we would like to sell through our portal, and we would also like to give value-added services, not just auctioning it out, maybe something like logistic arrangements, insurance, actual door delivery, sampling. All those things are there in our mind and these are areas in which we'll work upon.
Apart from that, our traditional scrap business, we do have a lot of scrap coming through from the public sector and the government sector. But the private sector is still an untapped area. And the concern in that area is mainly -- probably the systems and processes that we have for the government sector probably doesn't suit them.
They want quicker -- the time lines and the milestones will have to be a lot more quicker than that. So maybe we are thinking of having new business models for them. So these are areas that we are working upon right now. And any other opportunity that comes our way, definitely. And apart from that, the government projects that are there, where we are -- we may customize software for them. That's, again, a very focused area for us because that is how we are going to learn and adopt new technologies.
Ma'am, a related question is, if you can share what kind of revenue mix we may be looking at, let's say, 3 years down the line?
May I take that one? We were talking about essentially a kind of revenue mix in terms of the way forward. So at the moment, we have somewhere to the tune of maybe 45% to 50% of business from scrap; maybe about 30% to 35% of e-sale, e-procurement and others; and the balance would be made up by minerals. So this is the kind of product mix that we are working in at this point of time. We would be looking to add certain other products, which would basically -- since there were -- I mean, scrap would -- once the pie increases, that part of the scrap would get supplemented by new areas, what we had talked about, for example, data center, virtual services -- vital data services as well as other software offerings, which we would be looking at as supplementing upstream and downstream activities to the basic auctions.
Sir, last one from my end. Given the revenue mix you have shared, clearly, scrap business is the largest segment for us. And as ma'am was saying, we want to tap the private sector clients as well. Ma'am alluded to a few things related to turnaround times which are demanded by the private clients. But other than that, what are the steps we are taking so that the scrapping related business growth can be accelerated?
Basically, the business model itself, we are having a new product for the private sector. We are planning to have. We don't have anything -- any ready-made solution, where the turnaround time will be much less and a lot more activities can be done by the seller himself rather than being dependent on us.
So for that, we have to enhance our capacities as well as give a lot more facilities and the access to the portal. So that we are building upon. Definitely, with that, we are hopeful that the volumes will also increase and the revenue stream also from the private sector will -- we'll see quite a good growth.
And I'd also to supplement a little bit here. I talked about in my initial, when I mentioned that we are embarking on a major capacity building expense. So that is both in terms of manpower as well as in terms of technology. So this is the kind of technology that would make user interfaces easier.
Wonderful, sir. Any more details you can provide on the, let's say, human resource side, the team we would have built for tapping the private clients?
As far as the marketing part of the interface with clients is concerned, that we have a very strong team, which is what has built up MSTC's reputation till all this time. We are supplementing in the areas of newer technology, which is where we intend to build up a base so that we can offer customized solutions to the client as per their requirements. So it's not going to be something that this is the kind of product that we have off the shelf. And that is the standard offering that we would like to give. We would like to go to our clients with a customized solution, understand the requirements, develop the solution in-house to the extent possible and supplement with partnerships and give it to him as a very user-friendly usable product. That is the approach we have been...
Sir, last bit on the cloud, ma'am mentioned that we have spare capacity there, and we would like to offer that to external entities. How big is this spare capacity? And what kind of revenue we can generate out of that?
Ask us to put numbers to it. But as I said, I mean, capacity of hosting users' requirements and users' data on our website, it is a continuous process. That is a model we have been working on. And naturally, as you go down the line, you enhance your capacities, you strengthen your own systems. So that is a part of it.
Suffice to say that we have adequate capacities for our requirements at this point of time, and we have been adding on to the extent that we anticipate additional requirements coming in from clients.
[Operator Instructions] We'll take our next question from the line of [ Atriya Pal ], an individual investor.
Yes. My question is, I understand that there is quite a lot of penetration of e-commerce in government B2B sales, and we are seeing that in the growth of MSTC numbers. But can you give us a sense of what is the share of e-commerce in total government B2B sales? And is that growing over time?
Well, it's a very difficult question because this is a kind of data which is not really there in the public domain as to what is the extent of our total government business, which is there on -- this is not something which is generally being complied.
No one has done this kind of a study as to what is the total potential of e-commerce business, especially government business. See, anything -- that was transacted on paper can definitely be done through e-commerce. So that kind of resource mapping has never happened. It's very difficult for us to put a number to the -- what is our share.
Understood. As you're deeply entrenched in this segment, can you give -- sorry, I just wanted to know -- I just wanted you to give us a sense of is the share of e-commerce growing over time?
It is definitely the way forward because that is the direction over the last 15 years that not only government, but in general, business has shifted over from the physical format to the e-format in a lot of areas such as particularly procurement, auctions. So as far as these 2 activities, these 2 major activities are concerned. Over the next 10 years, we would have a substantial part of the business being transacted electronically.
Understood. I have one more question. Can you give us a sense of who you are competing with for the auctions that you are participating with? And what competitive advantage does MSTC bring to the table?
I'm glad you really asked that question. As far as competition is concerned, I would say that as far as the [indiscernible] space is concerned, we are probably the only people who offer this major e-commerce as a service. And as far as competition with everybody else in the market is concerned, there is almost nobody who offers the full gamut, the full range of services that is offered by MSTC. Most of our competitors would offer basically just the Auction As a Service, not the upstream and downstream parts that go into making it a complete service for the customer, right from building up their requirements, helping them create the auctions and right up to the final last-mile point.
We do have some advisory role as far as the scrap disposal is concerned or even minerals and other e-sale materials. But I would here like to point out that now the government is trusting for use of GeM, especially for procurement, of course, it has become a mandatory now. For forward sales, GeM has come up with a standard portal. So we'll have to see how much of business actually gets transacted there. But the kind of services that we are offering, that is not available with any government or any private sector portal.
And is the business growing in the private B2B e-commerce segment as well? What has been your journey there?
Absolutely. See, we started off with sale of scrap for some big entities in the private sector. But now we are in a position to sell their iron ore and other minerals. So going forward, we definitely expect that the sales from auctioning, especially from the private sector will go up.
We have a next question from the line of Ketan Athavale from RoboCapital.
I wanted to know what is our scrappage capacity currently? And do we plan to commission new capacities at time?
I think you are referring to our JV company, MMRPL, which is actually into the scrapping business.
Yes, yes, Vehicles -- yes.
So at this point of time, the JV, that is MMRPL has 7 RVSFs. And -- which is adequate capacity for, in fact, the current load that we anticipate as well as for the anticipated load for maybe the next couple of years. And as and when the capacity gets saturated, it is -- setting up further facilities would be a continuous process.
Got it. And can you give revenue and margin guidance for next FY '25 and '26?
I'm sorry, could you repeat that, please?
Can you give revenue and margin guidance for FY '25 and '26?
It is not really fair to talk about numbers, but we are looking at growth naturally. And we -- with the kind of the capacity building that we have been doing over the past some time and the outlook for the market itself, we would expect there to be a healthy growth in all the parameters.
Okay. And just last question. So if you can give how much commission did we earn on the 37,000 vehicles that we sold through our portal?
So can you give that number?
37,000, can you come again?
The vehicle, ELVs.
See, as I said, it's a mixed bag. So it depends on volume, the kind of services that we give. So we can't be giving any kind of numbers as to what we earned from sale of 37,000. All this was in a clubbed format.
Let us say that it was as per the industry norms. In fact, we are very competitive in that space.
[Operator Instructions] Next question is from the line of [ Rakesh ], an individual investor.
You recently made a few changes in the MOA relating to e-commerce and fintech. So what exactly do you plan to do as far as these things are concerned?
Rakesh, we started off life as basically canalizing agency for scrap. So the MOA, which had been there was essentially designed as a physical auction agency and a canalizing agency. Now over a period of time, MSTC has morphed into an e-commerce platform. And that is what we wanted to bring our MOA and AOA in line with the kind of work that we have been doing over the last 10, 15 years and not legacy prior to that.
And also, since we are delving more into e-commerce and associated bundled value-added services, so to enable ourselves to be able to do that. So that was the purpose of change, the modification and amendments that we put in, in our MOA and AOA.
Great. So regarding fintech?
Fintech is, of course, an area that all services do have an upstream and downstream additionality. So these are also areas that we will evaluate when we look at other offerings.
Some kind of fintech is already clubbed in our services for implementing the kind of activities that we are undertaking. So maybe going forward, we can offer that as a service also. So as of now, we are using fintech technology for our own activities, for our own e-auctioning services.
Okay. Regarding the data center, madam -- sorry, please go ahead, sir.
No, no. Please.
Sir, regarding the data center, you mentioned that there is excess capacity in which you want to offer as a service. So Infrastructure as a Service. So the plan of the company was to get into this business only because you had spare capacity?
There was -- during our interactions with our various clients, especially the smaller and medium-sized clients, we saw that they didn't want to invest heavily on the infrastructure, buying servers and keeping their data. So that is one opportunity we thought will definitely be bringing some revenue for us as well as we will be able to utilize our excess capacity.
And apart from this, MSTC has built up a reputation for transparency and data safety, which is not very -- which is an area where there are a lot of our clients, particularly government clients who are very concerned about. So that is why we saw an opportunity because that is where we can leverage the fact that MSTC's systems are considered very strong. They are certified as strong. And therefore, clients are quite comfortable placing with data -- placing their data on our servers. This is an advantage, something that we should leverage.
Okay. Sir, in the data center business, you'll be competing with the likes of AWS, Microsoft Azure, these are global players with billions of dollars of investment.
Our capacities are much, much smaller. And this -- as I said, we would be basically leveraging the fact that MSTC systems are considered very strong and transparent. So those kind of clients who would have data which have optimum sensitivity, there would be certain government clients who would not be comfortable having data in any other third-party servers. So those are the kind of people that we would cater to in the initial stage.
Got it. Sir, regarding scrap income, what percentage is generated through customers in the private sector?
See, it depends on the scope of services. If somebody is offering scrap just to find out the rate from the market. And we do have value-added services. We do handle this business up to delivery. So based on what is the scope of services, it varies from client to client. And of course, the volumes also, somebody is giving me just INR 2 crores worth of scrap and somebody is giving INR 200 crores. Obviously, I will have to have different slabs for different volumes.
Got it. Sir -- madam, my question was that out of the total e-commerce revenues generated, so it is INR 314 crores this year or INR 306 crores of these figures. So what percentage of that was Scrap? So which is normally around 45% to 50%. So let's assume...
50% is Scrap.
Yes. So say, around INR 150 crores were it was generated through the Scrap income. And what percentage of that comes from the private sector?
So we are looking at somewhere around maybe 10% to 15% at this point of time.
About 10% -- 10%, 11%.
Okay. Okay. Sir, one last question was regarding the steep increase in the employment costs. It has gone up by 27% from INR 69 crores to INR 88 crores. So any particular reason, although you did touch upon that there was an increased industry-wide increase, but can you please share more details?
If you look at the financials, so you will see that last year, there was -- we had written back 1 provision, right? So of around INR 5 crores. So the comparison is not that steep. If you add that thing, the increase is around INR 13 crores to INR 14 crores, of course. And industry-wise norms means, there were some wage revision spending that was already available in the annual report that we had given a note under the balance sheet, the wage revisions of the nonexecutive employee and of course, some facilities given to the executives were under revision.
So that has been implemented. So we hope afterwards, there will not be this type of jump, but the jump will increase on 2 things: one is the inflationary pressure on the basis of which the DA rates are divided. Second, the discounting rate through which the retiral benefits are decided. These 2 factors will decide the future increase. But of course, that will be normal and, of course, we have a wage revision due in 2027 because every 10 years, government revises the wages. So that effect will also come subsequently as well.
We have a next question from the line of Satish Kumar from Wealth Aggregator Financial Services.
Yes. I'm [ Srinivas Reddy ]. So as you remember, I'm old shareholder, more than 10 years' old. And I need a few clarifications regarding these provisions and write-offs, sir. We have been informed earlier that, the last 2 years con calls that they are done with, but again, this year, they have crossed INR 100 crores, sir? Okay. I need a clarification on that.
Yes, yes. I'm just clarifying it. You see it is -- basically, we have written off bad debt this year of around INR 100-plus crores. So it is the provision, even you see that the other income part also that has been increased because of that. And for that, it is a 2-way entry, no effect on the P&L, profit and loss account, there is no effect. We again say, again repeat, there is no provision charge on PL this year. It is just merely a book entry because we have written off one bad debt for which provisions were created earlier in the year. And this year, no provisions has been created. Again, I repeat.
So we can expect these things are done with or in the future, again, we are -- this write-offs might be there in the future - near future?
First, Reddy Saab, let me explain you very much. Write-offs have no effect on the profitability of the company right now. Number one. Number two, it represents regarding charge on P&L due to bad debt provisions. So that's what I can say is that the marketing part is already over. That part has been done away with. There will be, of course, very miniscule provisions because in a business environment where you generate a revenue of INR 300 crores, around, so there will be some miniscule, miniscule provisions. We have got a provisioning policy in place. So we make conservative things. But that will be very, very miniscule and will have no major impact on the profitability of the company. So this year, we do not have any such provision. So accordingly, it will -- trends will go. But even if it is there, it will be very, very miniscule; I repeat, very, very miniscule.
Okay. My second question is regarding this FSNL divestment -- disinvestment. So what is the progress? And are you expecting in this financial year at least to be that happening? Can we expect -- subsidiary, FSNL?
First of all, let me answer your second question first. So this is all dependent upon the Government of India, which is being taken care of by DIPAM, so DIPAM is the wholly and solely deciding authority on this matter. Second thing, if we look at the DIPAM website, so [ EOI ] has already been annualized. So that is the progress that is available in the site and that is in the public domain. You can also access. You can also see from that. So we have got that much of knowledge available with us also, sir.
Okay. But my -- regarding the other most important, in the last few years, sir, our -- both revenue and sales are getting stagnated. There is no structural growth, whereas other e-commerce companies are growing at much faster pace of 30%, 40%. But we are not able to scale our business in terms of profitability or the sales revenue also, either one thing go up or the other one will go down and marketing and other things. So is there any long-term structural plan, I mean, that the management has for the secular growth possibilities?
See, you're talking of 30%, 40% growth in e-commerce, mainly in the B2C sector where the consumers are now largely using these facilities rather than going to the shop and buying in person. But as far as government business is concerned, it is mainly the natural resources that are getting auctioned. So there are a lot of policy directions, a lot of procedural aspects that have to be taken care of. So that kind of growth can never happen overnight as far as government business, I mean in B2B scenario, especially.
Now again, as you see in the year 2019-'20, our e-commerce revenue was in the range of about INR 183 crores. 2021, it showed a steady increase to INR 202 crores. But in '21-'22, there was a jump by about almost 30%, mainly because of these major mineral blocks, the coal blocks and a lot of iron ore that got sold.
So when the policies and the market conditions favor, these volumes and the revenue streams go up. It cannot happen that every year, you see a growth of 30% to 40% in B2C kind of business, especially [indiscernible]. Yes. So 8,000 to 10,000 is something that we have been witnessing, which is average and which will -- we expect to continue.
We have a next question from the line of [ Kamlesh Jain ] from Lotus Asset Managers.
Sir, just on the part of your results like if we see the presentation and the clarification which you have provided on the other income and the provision side. But if I go through the presentation, it's just a statement -- no clarification, no other information has been provided, how the earnings have moved? Like if I see the marketing revenue, it has gone up from INR 55-odd crores to INR 107 crores. But if I see the EBIT, it is like, say, it has fallen from INR 5 crores to INR 4-odd crores. And same way, e-commerce, like say, there is no explanation how earnings move, how our business model is panning out, what is our -- like say, in the last quarter, you were guiding that you are focusing on the -- on the real estate business? How we are focusing on different businesses? How are earnings trajectory would be going forward. There is no clarity on that particular part. Even on the presentation on the historical data as well, it's why it's very difficult to convenient that how the earnings are flowing through on the basis of the -- your reporting like the data as well? So how we are going to place our entire business model going forward? Because honestly, over the last 3, 4 years, it's very difficult to take a call how our business is going to flow out in the coming years? That's my...
Sir, the question is well taken because you see it is very difficult. So far, we have -- we work in a -- we are basically e-commerce service provider with different kind of segments that we are working on. So far, if we book -- we book revenue from -- revenue from operation. So only one source of revenue is the service charge that we earn from that our customer. And time and again, time to time, we explain to our esteemed investors about the way that we are going on.
In every investor call, we are saying this is that, this is that. But the basic still that you have rightly pointed out, like in the past year, we are basically e-commerce service provider. And this is great earner is, of course, we are dependent upon the scrap revenue and other e-commerce. And just now our Director of Commercial explained, like there were some growth in between when we get some windfall because of certain e-auctions that is being allotted and some scrap prices get spurred -- there is spur in the scrap prices.
So that is the point. But even it is not possible -- to give explanation in the financial statement to each bit and bit and bit of our because it comes from our e-commerce segment, B2B also, it comes from our n number of customers. So it is very difficult for that way to explain. But so far future outlook is concerned, we are talking about, in this investor call also. So I will now hand over to our CMD to talk about some future outlook that is happening.
One thing I wanted to say is that when you look at e-commerce as a business, it is necessarily sector agnostic. So there would be some sectors which would be performing differently year-on-year. And as far as e-commerce opportunities in those particular sectors are concerned, they can vary widely. What is important is that we are able to look at opportunities in terms of the type of e-commerce products that we offer and categorize those types in 2 segments, which is why, I mean, at some point of time, there might be a major increase in property sales. In some other year because of regulatory differences, there may be a lot of, let us say, mineral blocks coming up for auction. So those kind of changes are always going to be there. But it is the kind of product categorization, which we can do, which is what our reporting is always going to be. It's not necessarily going to be the same sector year-on-year. That is one part of it.
Now as far as now the way forward is concerned, the basic product that all e-auction or e-commerce platforms provide has been basically either e-procurement or e-auction. To be able to enhance the overall business scenario, it's essential that we add on services which are prior to the point of either procurement or auction and also the post the process and in components like the fintech, the deliveries and the downstream activities, which would enable the customer and the buyer and the seller to basically interact only at a single platform at a single point of time.
So those are the kind of value-added services and offerings that we are looking at, talking to other people who are experts in those particular domains and then trying to deliver a product which would be an amalgamation of all of these.
But, sir -- we can do one thing like in the presentation for our clarity, you can at least provide your revenue breakup from different sectors like BFSI, mineral or [indiscernible], that would give much more clarity to us that how different -- how a particular sector is important for us because honestly, this presentation doesn't add any value to us because the data which we provide is available on various websites.
As I said, I mean, this also is not something which is -- which reflects an e-commerce platform's performance. Because an e-commerce platform's performance is a reflection of how the particular sector is performing and those sectors can vary from year to year.
But at least we can provide a sector breakup for each quarter, sir, or yearly because it would give much more clarity to us. Honestly, like how your marketing revenue pans out, e-commerce, it doesn't add much value to our thought process. Because over the last, if I say, 10 years, like, the way our revenue has panned out, like from March 2014 from [indiscernible] revenue, we are at, like, say, around INR 315 crores revenue for the year as of it.
In fact, the kind of products that the company has shifted from.
Vertical, in fact. The business vertical itself has changed. If you see about 10, 12 years back in our financials, we have been reporting a lot of revenue from our trading segment. And probably e-commerce was almost nonexistent expect for some scrap sale that was happening here and there. But because of the inherent risk in the business model and the kind of huge provisions that we made about 5 years back, we had to slowly withdraw ourselves from that business vertical. And today, we are focusing only on the e-commerce business vertical. So if you see our presentations, we have categorically stated that these were our business verticals, and this is what we are going to do. We are going to have more focus on the e-commerce sector and probably some focus on the recycling sector. But trading, definitely, we are not pushing, and we are not going to do any transactions under that vertical. So if you compare 10 years back and now, there's probably no reasonable comparison.
The kind of businesses are totally different. I mean, may I ask the Director of Finance to...
If you look at our -- if you are a part of our IPO presentations, during our presentations in the IPO, we categorically promised our investors that with this business, we have already decided to leave away and right now, while answering the question to one of our esteemed investors, we categorically said this is not -- this is a foregone and all the provisions and how that has been done away with. Now in the -- if you can go through the last few investor meetings, where we have categorically told, the only segment in the marketing is less is that the business backed by guarantee. So whoever provides us a guarantee -- bank guarantee of a scheduled bank, we do the business with that particular customer. So that part -- it is '14 and 2019 when we went for an IPO. That is a paradigm shift in the focus. So that has already been explained n number of times. If you can see the annual reports are also, if you see the Chairman's speech also, sir. And -- but your suggestion is well accepted. And of course, we will -- from the next presentation, we will give that -- we will also clarify that the marketing business has been tapered down for the sake of clarity and the transparency to the investors as well. Well accepted your suggestion, sir.
And lastly, can you provide sector-wise breakup of our e-commerce revenue?
Right now, it is basically we do not -- as in the opening -- my opening remarks, for us, it is basically we capture it as a service charge. So for us, it is a client-wise, not sector-wise. We -- suppose, let us say, take example, I have a client per se. He has got minerals. He has got scrap. He has got something different product. He comes to us. Say, I want to dispose. He wants to dispose off some bulk goods. He wants to dispose off his scrap. We do the -- all the services as per our model, and we record the revenue as a service charge. It is very difficult to that way to predict accurately what mineral faced what amount of service charge. It is very difficult so far accounting-wise it is right now. But going forward, as we have said, if our business grows and it goes beyond a certain limit. Obviously, we will look at capturing those data also in our accounting system.
Ladies and gentlemen, we'll take that as a last question for today. I would now like to hand the conference over to management for closing comments. Over to you, sir.
At the end of this call, I would like to express our gratitude to all the advice, all the questions, which has given us set of guidances for the way forward, advice on how else and how better we can take our company forward -- your company forward for performing even better over the coming quarters. And also a very hopeful prognosis that over the next few quarters, we should be able to see a healthy growth in all the parameters. Thank you very much.
Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.