Nava Limited (513023) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Nava Limited Q4 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you, [ Giko ] On behalf of ICICI Securities, we welcome you to the Q4 FY '23 Earnings Call of Nava Limited. From management, today, we have with us Mr. Ashwin Devineni, Chief Executive Officer; Mr. GRK Prasad, Executive Director; Mr. Sultan Baig, Chief Financial Officer; Mr. Nikhil Devineni, Senior Vice President; and Mr. VSN Raju, Company Secretary and Vice President. Before we go on to the main call, I would like to read the standard disclaimer. There may be forward-looking statements about the company and the subsidiaries, which are based on the beliefs, opinions and expectations of the company management as on the date of this call. The company do not assume any obligation to update their forward-looking statements if those beliefs, opinions, expectations or other circumstances should change. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Consequently, listeners should not place any undue reliance on such forward-looking statements. With this, I'll hand over the call to the management who will take it forward. Over to you, sir.

Ladies and gentlemen, a very good morning to you all. This is Ashwin. I'm pleased to welcome you all to the investor call for Nava Limited and address you on behalf of the Board of Directors. I'm sure you all have gone through our press release on the website and on the stock exchange platforms presenting the financial results for the fourth quarter and year ended March 31, 2023. Allow me to highlight some key achievements from our performance. Firstly, Nava Limited has delivered exceptional financial results for FY 2023. We have achieved the highest ever income of INR 3,928 crores on a consolidated basis, which is a remarkable achievement in our industry. Moreover, our profit after tax for the year stands at INR 1,222 crores, showcasing the effectiveness of our strategies and the dedication of our team. This robust financial performance is a testament to the resilience and commitment of Nava Limited. One of the significant contributors to our success has been the turnaround of our Zambia operations. Mamba Collieries Limited has demonstrated its potential by achieving its higher -- sorry, its highest power plant availability of 92% in the financial year of 2023 since the commencement of our generation in 2016. Furthermore, Mamba Collieries Limited has made substantial progress in the debt repayment, having repaid overdue loan installments of USD 98.5 million by March 31, 2023, and an additional $49 million thereafter. To date, MCL has significantly reduced its long-term debt by $147.5 million, and we anticipate the balance overdue long-term debt of $59 million to be addressed in the near future. The success of our Orissa based 150-megawatt power station and the robust performance of our Manganese Alloys business, particularly in H1 has also contributed significantly to our consolidated performance. We have witnessed a positive momentum in our manganese alloy production with facilities in both Telangana and Orissa, both. Our firm contracts for raw materials and sales give us confidence in our ability to increase volumes and drive future growth. Looking ahead, Nava Limited remains confident in its ability to capitalize on emerging opportunities and overcome challenges in the industry. We are dedicated to delivering long-term value to our shareholders while providing innovative solutions and exceptional service to our customers. Once again, we would like to express our gratitude to all our investors and shareholders for their unwavering support and trust in the company. We look forward to your continued partnership as we navigate the exciting path ahead. Thank you all, and I wish to open the floor for any questions you may have. Thank you.

[Operator Instructions] Our first question is from the line of Jatin Damania from Kotak Securities.

Sir, first question is on the payment that we are supposed to receive from the ZESCO. We are supposed to receive this payment in the month of August. Now same has been delayed in the -- for the month of December '23 and '24 in 2 parts. So can you highlight the reason why the payment caused delayed? What is the surety that you are getting from the ZESCO that we'll get this payment?

Mr. Damania, I think you're talking about the arbitration award payment, right? Yes. So like what was mentioned in the previous investor call, we had a meeting with ZESCO, where they did express difficulty in terms of paying the entire amount as a lump sum. And we have agreed to a specific payment plan with ZESCO. And so far, they have been adhering to that payment plan. I think the payment plan stipulates that out of the total outstanding of $397 million, they would be paying about $250 million by the end of 2023 and the balance is [ $180 million ] at the end of 2024. And they've been adhering to that and they've been making all the payments on time.

Okay. So just because of the inability to pay in full and lump sum, we have changed the repayment schedule?

Yes, which they will pay on a monthly basis certain amounts, and they've been doing that.

And so in monthly basis, are we receiving the amount in the escrow account or -- I mean, we are seeing a delay in that as well?

No. Like I said, we have been receiving those monthly payments on time.

And sir, what is the quantum of that, if you want to share?

The quantum of the monthly, it is -- I mean, in terms of -- it's not a static amount. It differs month-on-month. I think they have put in some thought in terms of how they will gather funds and how the year would look like. So every month is a different quantum. For example, last month, we got $16 million from ZESCO.

That's good. And sir, second question on the MCL segment, almost about more than 90% PLF. And we have near about $59 million of overdue, which we'll be paying in the near term. So post that, I just wanted to understand what is the capital allocation because the ability of overdues will be paid in -- probably in this financial year looking at the cash flows. So if you can share what is the capital allocation strategy?

Yes. So I think you said it right. Right now, out of 6 installments that were overdue, we paid $118 million, and now the only overdue amount is $59 million, which equates to about 2 installments. We hope to kind of clear that very soon. Once that is done, there are certain conditions as per our contracts with the lenders that we need to adhere to, which is [indiscernible] and so on. But once that is done, then distribution will be allowed, and we hope to see that soon.

Our next question is from the line of Nikhil Abhyankar from ICICI Securities.

Congrats on a good year. Sir, in the previous call, you have mentioned your intention to expand power capacity in Zambia and also expand your ferro chrome business. So have we come out with any concrete plans for the same?

Yes. So with regards to Zambia, this interest to expand or requirement to expand has actually come from the government side given the energy crisis in the Southern African region. So we are in discussions with the government with regards to the expansion. And I will pass it on to Mr. Nikhil to talk about the ferro alloys expansion.

Ms. Nikhil, thank you for the question. Were you referring to ferro chrome expansion in Zambia?

Sir, both, sir.

Sorry, I didn't get it. Can you repeat your question?

Yes. sir, Zambia.

Zambia, we have no plans to set up an alloys industry.

And in domestic market?

Domestic market, we are -- we were producing ferro chrome for most of H1 and some part of H2. From 15th of December onwards, we have switched over from the conversion of ferrochrome for [ DFL ] to manufacturing silico manganeses. So currently, both are units in Telangana and in Orissa are producing silico manganese. .

Okay. And so we have stepped down on ferro chrome? You're not producing that much?

No, we're not producing anymore.

Okay. Sir, coming back to the Zambia expansion. So what kind of size are we expecting to add over there? And again, will it be going through a multi-lat -- a global multilateral agency for the funding and all the financial tie-ups?

No. So in terms of the size, we would preferrably like to replicate what we currently have, which is 2x 150, which is 300 megawatts. And with regards to funding, we're exploring various options, one is talking to international banks, but also talking to the government if they can kind of extend a loan from their side. So all discussions are underway.

Understood. Understood. And sir, any plans on Agri? And basically, I want you to paint a broad picture as to how -- where do you see this agri business in Zambia in, say, next 5 years?

So on the agri side, we have been gaining large momentum. We have a large 10,000 hectares piece of land, out of which we are apportioning the certain area for avocadoes and then we plan on using the rest of the areas for other crops. But on the avocado front, we progressed well. I think we are first targeting the initial phase of 275 hectares, which we plan on completing plantation by the end of 2023. We are essentially looking at fairly high-value crops such as avocado. We see a lot of traction being gained with avocado in the international market because demand is increasing and supply is decreasing. So that's -- I mean, but with the agriculture, it takes time. We would expect the fruits from the first batch to only be seen in 2026.

Our next question is from the line of S.G. Kankani from S.G. Kankani & Associates CS.

I am S.G. Kankani from Raipur. Sir, my question is that in financial year '21 to '22, the profit before tax was around INR 890 crores, for which you made a tax provision of INR 276 crores. And in the current financial, that is last financial year '22-'23, the PBT is INR 1,264 crores and the tax provision, sir, half of the provision made in the last financial year, INR 130 crores. So what is the reason for less provision for tax in spite of higher PBT?

There are 2 factors. The overall consolidated tax provision consists of standalone Nava and its subsidiaries. So in Nava Limited from this year onwards, we have shifted to a new tax regime of lower taxation of 25%. That's why the tax on the Nava standalone front is lower. On the other subsidiaries, Mamba Collieries, power sector enjoys a tax holiday. And there has been some reversal of deferred tax assets and liability. That's why the overall tax provision is looking lower. .

No. Sir, I am not talking about reversal of deferred tax. I am talking about PBT, where if you share the [indiscernible] made 25%, given this tax provision for year '22-'23 is just INR 130 crores, that is roughly around 10%.

Yes, sir. It is because of 2 factors: standalone as well as consolidated. Standalone, it is standard at 25%. At the consolidated level at Mamba Collieries, there has been lower taxation because of the tax holiday on the power sector. .

Okay, sir. Sir, my second question is that in the consolidated financial statements, the receivables other than these noncurrent assets, I think presumably, this noncurrent assets consists of dues from ZESCO. So the current assets, we have shown that trade receivables have increased from INR 1,075 crores to INR 2,337 crores. There is an increase of around INR 1,300 crores in the receivables. So in spite of ZESCO payments, we are receiving debts, debts have been shown under noncurrent assets. So what is the reason for increase in trade receivables, which you have shown under current assets?

Sir, earlier, the classification of the receivables from ZESCO was under noncurrent. So it's only the change in classification from noncurrent to current. The overall receivable number from ZESCO has significantly come down. Two factors because of the payment against the arrears. Second, because of the regular payments, which is happening from May '22 onwards, there has been no increase on the monthly receivables. .

That is right, sir. I am talking about trade receivables, which have been shown under current assets. So that does not include dues from ZESCO. So the current assets receivables have gone up from INR 1,075 crores to INR 2,337 crores, that is increase of around INR 1,300 crores. So I presume that ZESCO receivables are not included in current these trade receivables. So what is the reason for increase in trade receivables shown under current assets?

Sir, that has been a transfer from noncurrent to current. The overall receivable number has come down, but it's only classification difference from noncurrent to current. Because now we are considering the entire receivables from arbitration proceeds as current receivables.

Okay. Sir, you have shown that INR 3,400 crores are still due from ZESCO. So these payments will be -- again in monthly installments as mentioned in the arbitration award?

Yes, sir, absolutely right. .

Our next question is from the line of Falguni Dutta from Jet Age Securities Private Limited. .

Sir, I have 3 questions. One is what are the outstanding dues from ZESCO as on date? I mean as we speak?

The current outstanding amount from -- yes, $397 million right now. .

How much, sir?

$397 million.

Okay. And sir, what is the loan outstanding at Zambia?

$265 million.

And sir, one more question is on the power plant. Sir, why are we considering at all of increasing the size of the power plant there even though there is a -- I mean notwithstanding that there is a power crisis there since our experience in terms of payment has been poor. So what gives us confidence in going ahead with it, the new power -- the new expansion that you spoke of to into 150 megawatts?

Yes. I mean, see, one is there is a lot of demand. The second thing now is we're also a member of the Southern African Power Pool. So it's not like ZESCO, our experience with ZESCO has been poor in the past. But once now that we are a member of the Southern African Power Pool, we have another window where if we do experience a vast amount of defaults from ZESCO, we're not happy with the ZESCO's offtake. We can always resort to selling in the Southern African Power Pool grid, which is kind of like an exchange. .

Okay. And sir...

The other thing you have to keep in mind is the second phase is essentially like a no-brainer because all the auxiliaries for 600 megawatts already exist. So, yes.

And sir, 1 last question. This is just a clarification. In your notes to accounts, I saw some discount which was, I think, if I am not wrong included in that figure of $180 million odd. So what was this discount? And has it been provided for [ APS ] in which year?

Ma'am, are you talking about the discount on the receivables from ZESCO? .

Yes. Yes, sir.

Yes, ma'am. If you could recall, our overall outstanding due from ZESCO, when we have got into arbitration was $578 million. And in the mutual discussions between us and ZESCO during arbitration, we have given them a discount of $60 million. So the $60 million doesn't hit the P&L because it has been adjusted against the existing provision.

Our next question is from the line of Vignesh Iyer from Sequent Investments.

Sir, 2 questions from my side. First is, sir I just make the clarification again. So if I'm not wrong, the payment plan, I mean, the money direct come from ZESCO is around $397 million. How much did you say would we get in FY '23 and how much in FY '24 or CY '23, CY '24?

Yes. So the total amount is $397 million. As per the plan, we should be getting $250 million by the end of FY '23. .

Okay.

Sorry, by the end of calendar year '23, not FY '23, and $180 million by the end of calendar year 2024. So by end of December, we should be getting $250 million. And by end of December 2024, we should be getting the balance, which is $180 million.

Fair enough. And this payment would be on a continuous basis, right? Every -- I mean every month basis, right? And not...

It's not a constant number. It is on a monthly basis. And we have been getting it. Like I disclosed last month, they were supposed to pay us $16 million as per the payment plan, and they paid us $16 million. .

6-0, right?

1-6.

1-6, okay. So when April to December, we should get $250 million, basically, if I'm reading it right?

So the total payment that we were supposed to receive in the calendar year was $250 million. We have already received about $40 million. So balance $210 million, we'll receive from May to December.

Okay. Fair enough. Yes. Got it. Sir, my other question from my side is the power plant availability is 91%, which is quite high. I mean -- so how -- what is the situation right now? I mean after almost 2 months done in this quarter? And how confident are we that we can maintain at this rate going ahead because that is your major chunk of business to your entire Nava consolidated?

No. I think owing to the team we have at Mamba, were operating the power plant, they've been doing an excellent job and hence, the high availability. So apart from your usual planned shutdown and maybe 1 or 2 unplanned shutdowns, we're not facing any major issues there. And we are confident that we will be operating it at high availability.

Okay. Sir, how much was the planned shutdown days or unplanned one in the current quarter, I mean, quarter 4?

No. Annual, we basically operate at about 85%. That's the target. .

Okay. But we did have some shutdown in the current quarter, right?

That is after taking into account the shutdown days.

Sorry?