NAVA — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

MODERATOR · Mr. Bharat Jain-ICICI Securities Limited

Mr. Bharat Jain-ICICI Securities Limited

Moderator · Conference Operator

Good morning, ladies and gentlemen.

I'm Vidya, moderator for the conference call.

Thank you, sir.

The next question comes from Jatin Damania from Kotak.

Please go ahead.

Jatin Damania

Sir, just wanted to check the last proceeds that we received from MCL, was US$60 million.

Have you received any further proceeds on the arbitration amount?

Ashwin Devineni

Mr. Damania, we received, like you rightly said US$60 million, post that they’re essentially paying us based on an agreed monthly plan.

So, every month we receive a different amount based on the plan.

So, after the US$60 million we received $5 million more from ZESCO in relation to the arbitration award.

Jatin Damania

That was probably during the month of June.

So, any money which is due in the month of July and August?

Ashwin Devineni

Yes.

July, the amount is actually $40 million that we are to receive.

And what we hear from the utilities our payment is being processed.

Today is of course it’s a public holiday there, but we expect to get that sometime during this week.

Jatin Damania

Yes, sir, that’s a good amount.

But, now since the major overdue which we hardly paid in the last quarter, post this I just wanted to understand the capital allocation policy and as a Company have we framed any roadmap in terms of expansion in Zambia and the ferrochrome in the domestics business?

Ashwin Devineni

Yes, so firstly, with regards to the amount.

Although we have cleared the overdue amount, there are still certain conditions and requirements that we need to meet prior to us being able to start distribution.

So, the Company is currently working hard to meet those conditions so that the vendors permit distribution.

Once distribution is permitted, then that money comes to the parent Company and could be used for various actions with regard to plans on how to utilize the money.

Firstly, I think we're looking to reduce our debt.

Secondly, we're looking at funding a lot of our growth plans.

In terms of our growth plans, we're looking at expanding in Zambia with another phase, discussions on Phase 2 for another 300 megawatts are currently underway with the government and the relevant authorities.

Moderator · Conference Operator

Thank you, sir.

The next question comes from Vignesh Iyer from Sequent investments.

Please go ahead.

Vignesh Iyer

Thank you for the opportunity.

Just want to understand the receivable side.

What is the outstanding receivable we would be having by the end of Q4FY24?

What is our internal target to get the money from MCL?

Sultan A.Baig

Mr. Iyer, if you recall the total outstanding from ZESCO was US$517 million against that current outstanding as on the case it is only $332 million.

From this

Moderator · Conference Operator

Thank you, sir.

The next question comes from Falguni Dutta from Jet Age Securities Private Limited.

Please go ahead.

Falguni Dutta

Good morning, Sir, just to clarify as regards our current billing, we are getting everything from ZESCO.

So, there are no monthly overdue that are occurring, right?

Ashwin Devineni

Yes, correct.

From May 22 we've been receiving the payments in full without any overdue.

Falguni Dutta

Sir, if you could broadly just directionally give us an idea how is this ferrochrome, manganese division doing for the current quarter versus the previous quarter?

Is it same?

Is there some improvement?

Or has it gone even bad?

Nikhil Devineni

As I mentioned, we have seen a dip in prices to the extent of almost 15% on a quarter-to-quarter basis.

But having said that, we also find that the raw material prices in this case being manganese ore, which accounts for the bulk of your costing has gone to historical low levels.

So, I think we could also be better positioned to tackle the market, given these low prices.

Falguni Dutta

Okay.

Thank you.

My last question would be, in how many years’ time, given we have spelled out various expansion plans andin how many years’ time do we expect to get some dividends from the money repatriated from Africa?

Ashwin Devineni

We are hoping it’s not years and it’s just months.

Like I said there's a lot of light at the end of the tunnel now.

Payments are current, ZESCO is also meeting with its arbitration payments as per schedule So, I think once we meet these conditions laid out by the lenders, we will be in distribution.

So, we're hoping that it's going to be sooner rather than later.

Although we have expansion plans, it's not that we're going to utilize 100% of the money for the expansion, we definitely will be starting distribution.

Moderator · Conference Operator

Thank you, sir.

The next question comes from Dhruv from Shree Info.

Please go ahead.

Dhruv

Hi.

I just wanted to understand on the CapEx that we plan to do in Zambia power plant.

What could be the timeline for it?

And what would be the equity and debt allocation that we look at out there?

Ashwin Devineni

So, in terms of the Phase 2 expansion, the capacity we’re looking at is identical.

It's another two-times 150, which is 300 MW.

We're still finalizing numbers, but the expected project cost is approximately US$450 million.

And with regards to timelines, once we commence, once we receive the financial closure and commence the project, we anticipate about two-and-a-half years.

It's a fairly optimistic timeline, but we are fairly confident we'll achieve it.

Dhruv

Secondly, on the broad base capital allocation.

We are looking at a lot of activity in infrastructure CapEx cycle in India and everything including mining and other metals also.

So, are we not finding any opportunities in India on an IRR basis or is there any strategic decision to go ahead and look at Africa as a place where we would like to expand?

Ashwin Devineni

No. I think as a Company, we're always looking at opportunities everywhere.

In fact, we’ve prioritized our opportunities when they come up if they are within the Indian subcontinent.

But we do balance risk and reward.

At the end of the day, while there are opportunities, there are a lot of risks to as long as, if you do not have security on the raw material, for example, there's a lot of risk you take.

So, we're always open to expand in India, when the right opportunity arises.

Dhruv

The third question is on the Indian power operation.

So, what we understand is that we don't have PPAs and we have the benefit of selling it out there in the open market.

And given that India is facing a deficit, we should be able to get a good rate of return on the power as we are able to sell in open market.

Is it true?

And usually during the summer months, we would be able to get that.

So, have we got that bump up in this particular quarter?

Because from the results it was not too clear.

Ashwin Devineni

No, we definitely have gotten that bump up.

I think one of the benefits of trading in the open market is when prices are high and that is seasonal, we do take advantage of it.

Whereas one of the negatives is when prices are low, when there is heavy rains, you don't do that well.

But if you look at our results on the power sector, we have posted extremely good results both from Telangana side and from the Odisha side.

Moderator · Conference Operator

Thank you, sir.

Ladies and gentlemen, if you have any questions, please press * and 1 on your telephone keypad.

The next question comes from Aditya Shrimal from PCS Securities.

Please go ahead.

Aditya Shrimal

Hi, congratulations on a good set of numbers.

I had a couple of questions.

One was on the power demand.

How is the power demand currently in Zambia and which are the industries driving this growth?

I also wanted to know how much of this demand is linked to copper mining.

Ashwin Devineni

So, in terms of the power demand, the way we look at it is not only in Zambia, we look at it as Zambia and its neighboring countries, which is the southern part of Africa.

And it's extremely high.

I mean probably of what's going on in South Africa

Moderator · Conference Operator

Thank you, sir.

I request the participants to restrict with two questions in the initial round and join back the queue for more questions.

The next question comes from Viraj Mahadevia, an Individual Investor.

Please go ahead.

Viraj Mahadevia

Hi, congratulations on making progress.

Question to you sir, regarding your Zambia expansion Phase 2 plan.

Given that you have already been scarred in Zambia, and I know, that's on a path to recovery.

How do you feel about the certainty of ramp up and payments coming in, and how do you de-risk yourself on that?

Ashwin Devineni

So, I mean we still feel the scars.

We’ve learned what to do different this time.

So, we’ve taken that all into account.

So, the way that we would be structuring Phase 2 would be very different from the prior phase, where risk would be mitigated through certain requirements from our side.

And I think we'll implement all those before we embark on Phase 2.

Viraj Mahadevia

So, requirements in terms of the ZESCO, is the local utility or you have these commitments before going ahead with your CapEx plan or before you commence supply after CapEx is complete?

Ashwin Devineni

No, I'm talking about how we get the funding, what those conditions are.

In terms of, is it external funding or is it funding from the government itself, which would

Moderator · Conference Operator

Thank you, sir.

The next question comes from Vishesh Jain, an Individual Investor.

Please go ahead.

Vishesh Jain

Could you please give an indication of ROI or ROE that you would expect in this incremental US$450 million power plant investment?

Is there some internal benchmark on that investment that you are targeting?

Ashwin Devineni

I think currently it’s a little too premature to discuss that because we’ve not even finalized the total project cost and that's still in, its under discussion.

And all that would also relate to the tariffs that we would be signing up with the utilities.

So, all those are still in the negotiation phases.

So, I think it's a little too early to talk about your return on investment now.

Moderator · Conference Operator

Thank you, sir.

The next question comes from Anant Sarda from Chhattisgarh Investment Limited.

Please go ahead.

Anant Sarda

Sir, congratulations for the result.

First of all, I want to ask an accounting question.

So, you know that we have taken some allowances of expected credit loss, right, and we're reversing it right now.

So, for example, in this quarter we have reversed on INR 92 crore expense that we had taken in the past.

Do you have any kind of schedule or something , where will you reverse the remaining INR 300-odd-crores?

Sultan A. Baig

Yes, Mr. Sarda, you’ve sorted it up correctly.

We have reversed US$11.3 million in the current quarter.

If see this is in proportionate to the amount that we have recovered from ZESCO.

As and when we receive the arbitration proceeds we’ll reverse the proportionate ECL in the books on a progressive basis.

Anant Sarda

Okay, sir.

And also, one other thing that I read that Telangana government was giving you some issues with selling in the open, I think, in the IEX, and you had to go through the High Court route.

So, is that being sorted?

Ashwin Devineni

Yes.

Essentially the SLDC has been rejecting all the applications, it’s not just us, but any power producer here to export power and it's just the usual thing where we can go to court and get approval for open access.

So, that has been sorted and as we speak, we are exporting today.

Anant Sarda

Thank you, sir.

All the best.

Moderator · Conference Operator

Thank you, sir.

Ladies and gentlemen, if you have any questions, please press * and 1 on your telephone keypad.

We have a follow up question from Falguni Dutta from Jet Age Securities Private Limited.

Please go ahead.

Falguni Dutta

Sir, what would be our sales volume for power in India excluding captive consumption, for the quarter?

Moderator · Conference Operator

Thank you, sir.

We have a follow up question again, from Aditya Shrimal from PCS Securities.

Please go ahead.

Aditya Shrimal

My question was regarding the Nacharam land.

Over there the real estate market is a little weak right now.

So, are we open to development there compared to selling it outright?

Ashwin Devineni

No,we are open for various options.

But right now, that's not a priority for us.

The reason being is the market prices have been going up in that area.

And we do see that in the near future there is going to be a significant growth at least looking at the momentum.

So, I don't think we're in a hurry.

I think when the time is right, we will look at other opportunities in terms of either developing the land or possibly an outright sale.

Aditya Shrimal

Alright.

And I had another question.

Are there any funds due from our Singapore subsidiary to Nava India?

Sultan A.Baig

There is no outstanding dues from Singapore subsidiary to Nava India.

Aditya Shrimal

Okay.

Moderator · Conference Operator

Thank you, sir.

Ladies and gentlemen, if you have any questions please press * and 1 on your telephone keypad.

Next question comes from Nikhil Abhyankar from ICICI Securities.

Please go ahead.

Nikhil Abhyankar

Thank you, sir.

Thanks for the opportunity.

So, I just wanted to know what is the status of receivables from Maamba?

Sultan A. Baig

Mr. Abhyankar, if you read our press release, we’ve recovered about US$60 million in the month of June subsequently we realized another US$5 million.

So, as of now, overdue amount still to be recovered is US$332 million.

Nikhil Abhyankar

Okay.

And sir, have you started selling power to the African pool from Maamba?

Moderator · Conference Operator

Thank you.

So, ladies and gentlemen, if you have any questions, please press * and 1 on your telephone keypad.

We have a follow up question from Anant Sarda from Chhattisgarh Investment Limited.

Please go ahead.

Anant Sarda

Sir, do you see any kind of currency risk?

I mean, is your PPA in dollar terms or is in the ramped in quarter?

Ashwin Devineni

It's all in dollar terms.

Our PPA is in dollar terms, even the coal sales that we make are in dollars.

So, there's no currency risk there.

Anant Sarda

Sir, what is your debt repayment strategy?

So, are we paying all the loans upfront or you’ve repaid by the schedule?

What is the outstanding loans in the MCL?

Moderator · Conference Operator

Thank you, sir.

That will be the last question for the day.

Now, I hand over the floor to the management team for the closing comments.

Over to you, sir.

Ashwin Devineni

Thank you very much, everyone, for your participation in the discussion.

I hope we have addressed all the queries adequately.

If there are any questions of applications that remain unanswered, please get back to us, and we’d be happy to provide answers on a wider Investor Platform.

Thank you very much.

Moderator · Conference Operator

Thank you, sir.

Ladies and gentlemen, this concludes your conference for today.

Thank you for your participation, and for using Door Sabha’s conference call service.

You may disconnect your lines now.

Thank you and have a good day everyone.

Note

1.

This document has been edited to improve readability 2.

Blanks if any, in this transcript represent inaudible or incomprehensible words.

Questions and answers

Moderator · Conference Operator

Thank you, sir.

Ladies and gentlemen, we will now begin the question-and-answer session.

If you have a question, please press * and 1 on your telephone keypad and wait for your turn to ask the question.

If you would like to withdraw your request, you may do so by pressing * and 1 again.

The first question comes from Srikrishna Agarwal, an Individual Investor.

Please go ahead.

Srikrishna Agarwal

First of all, I congratulate the management of the company for their excellent financial performance.

I have two questions.

The first one is that the company is having INR 414 crores of cash and cash equivalent.

So, what are the plans for the utilization of this cash balance?

My second question is, you have a vast experience in your business of this ferro alloys.

This division is not doing well.

So, what is your future outlook about this segment?

Mr. Sultan A.Baig

Okay.

Thank you, Mr. Agarwal.

Coming to the first question of the cash available in the Company.

So, the cash will be utilized partly for distribution and partly for future growth prospects.

Nikhil Devineni

Mr. Agarwal, let me answer your second question.

As you rightly pointed out, the ferro alloys industry is going through a challenging time.

We witnessed a drop of prices to the extent of almost 15% on a quarter-to-quarter basis.

Having said that India is turning out to be a bright light in terms of both steel production as well as ferro alloys production.

This particular quarter we have surpassed Japan to be the