Nava (NSE:NAVA) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to the NAVA LIMITED Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Shivam Bhurade. Thank you, and over to you. Thank you, Ananya. Good afternoon to all. On behalf of ICICI Securities, I welcome you all to the Q1 FY 'twenty seven earnings call of NAVA LIMITED.

0:51 Today, we have with us from the management, Mr. Ashwin Devileny, Managing Director and CEO Mister JR Kipassar, Executive Director. Mister Nikhil Devineedi, Executive Director. Mister Bree Srivastava, CFO. And mister BSN Raju, Company Secretary. We will begin with the opening remarks from the management, which will be followed by a Q and A. Thank you and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us. I am pleased to share NAVA's performance for the first quarter of FY twenty twenty seven. We have started the year on a strong note with consolidated total income reaching an all time quarterly high of INR $12.69 crore.

1:43 The quarter reflects the strength of a diversified portfolio and the benefits of disciplined cost management. Our Energy and Mining business delivered healthy operating performance with MEL's 300 megawatt plant operating at a strong 89.3% PLS. Our international foray also continued to provide value through dividend flows and to attain financial strength to pursue investments. At the stand alone level, the total income reached a record INR689 crore. Lower coal and manufacturing costs along with dividend income from NAVA Global supported this improvement.

2:31 We continue to make measured progress on our next phase of growth in the Energy and Commercial Agriculture segments. Our Thermal Energy, Renewable Energy, Avocado and Sugar projects in Zambia are in active implementation and some are set to yield revenue shortly. Phase two of MEL is expected to commence operations next year, later than originally, and we start going through certain challenges beyond our control with no material impact on project CapEx. It is, however, heartening that the 100 megawatt solar power project set to be commissioned shortly would establish a new niche for NAVA prompting further investments in this space.

3:23 We are cognizant of the significant challenges arising from the geopolitical and supply chain disruptions and are taking appropriate remedial actions. Our diversified portfolio, financial strength and operational resilience should, however, position us well to navigate these challenges while remaining focused on long term value creation. With that, I open the call for your questions. Political party. We've been through many political parties changes since we started.

4:38 So yes, we are not affected. Ladies and gentlemen, please press star and one to ask a question. The next question is from the line of, an individual investor.

6:05 The next question is from the line of. Please go ahead. This is the follow-up question. Good afternoon, sir. Sir, my question is because there was some problem in connection, I could not hear your last five minutes speak. I just wanted to know what is the expected date of commissioning of this 300 megawatt thermal because unless you mark you've been unmuted. Please go ahead. Are you... I am speaking, madam. Can you hear me? Hello? Hello? Mister, please go ahead. Are you able to hear me? Hello?

6:56 The current participant has been disconnected. We will move on to the next. The next question is from the line of Vijay, who's an individual investor. Please go ahead. Hello. First of all, may I know if I'm audible? I've got disconnected several times. Yes. Yes. You're audible, sir. Please go ahead. Yeah. I do not hear anything from the other side. Yeah. My first question is regarding the company's assets, how they are taken into the books. We have 65 acres of land in Hyderabad. We have some 200 acres in Samarcot and another 20 acres in Tawaharam, I believe, or maybe the other way around. How are these assets taken in the books?

7:52 Mr. Vijay, can you hear us? Now I can hear you. I don't know if this conference call has been jinxed. I've tried three or four times to get into it. Okay. You can hear us now. Right? Did did you hear the prior questions and answers? Yeah. Now I can hear you very clearly. Can I ask my question again or you heard it? No. No. No. We just wanted to make sure we are audible. So with regard to your question, like the... And all this land is recorded in the book sector, like historical cost. So you have got these real estate assets, the land assets, the land bank recorded at historical price.

8:40 What is the reason why they are not being revalued and taken at current value, current market price or at least the current realistic cost because that will change your book value considerably, the book value per share. The value per share is very much depressed. Yeah. The accounting standard allows us to carry at the historical cost. They... That is why we are carrying the historical cost. I see. And what are the management's plans to make these work, make these assets work to the benefit of the company and the shareholders? I think we've been holding these assets for a while. And I think the fruits of that have are kind of showing with valuations really going up. It's good that we did not sell these assets at an earlier stage.

9:36 Otherwise, we wouldn't have won't be realizing the greater valuations. But what we have done is just to understand what opportunities we have today, we have engaged a third party to study, investigate with the current asset values, what are the possible options that are available for us in the event we want to do anything today. So that study is currently ongoing. Yes. We've been hearing this for quite some time, but we have to make these assets work towards company's plans. For example, company has recently changed its vendor of application and brought in lot of additional avenues for power generation, such as solar, wind, nuclear, etcetera, etcetera. So with these, you will need capital, and that capital can come only from these assets rather than follow.

10:39 Yes. I don't think we have an issue in terms of capital right now. All the projects that we are envisaging and that are currently underway are adequately funded, and we have enough equity and cash in our books to fund that. We don't need to sell the assets in distress or to basically generate cash at this point. So as a company, we feel that and I think it has paid off that we have held on to these assets. Yes, we have been saying that. But for example, if we had sold these assets years ago, when we were being questioned about the assets, I don't think we would have realized the appreciation of the assets in terms of how they've gone up. Very true, Mr. Ashwin, but if you have invested that asset value at that time into newer projects, the newer projects would have also generated additional profits?

11:37 Once again, Mr. Vijay, I'd like to state that we are not it's not a situation where we are not undertaking projects because we don't have cash. Whatever projects we deem fit, where we look at the risk and so on and that we want to undertake, we have adequate cash to fund for us. Thank you. My next question is about the holding of Zambia assets. Initially, Zambia project was created to out of NAVA LIMITED profits, NAVA LIMITED funds. Subsequently, NAVA Global seems to have taken over these assets, and they are now being shown as profits accruing to NAVA Global and NAVA Global giving dividend or buying back its own shares from NAVA limited with that money, etcetera.

12:28 So who is the ultimate owner of the Zambia project? Number one. And number two is NAVA LIMITED. Is there any plan for spinning it off the way these things is... The foreign projects are going and filling it off or the demerging it and going in for an IPO? So first and foremost, with regards to the large assets, mean, and I'm sure you're talking about the Mamba asset, it was always under NAVA Global. The only difference was NAVA Global was called NAVA LIMITED Singapore in the past. It was not like it started with NAVA and then we moved it to NAVA Global or anything of that sort. So we always had NAVA Global as the international asset holding company that we wanted to grow.

13:22 Today, NAVA Global has multiple assets. It's got the current Mamba power plant. It's got Mamba solar energy as a company. And they may be MDM or the mine in the Ivory Coast and there may be other international assets that could fall under it. So it does operate independently. The ultimate owner, yes, is NAVA because it owns 100% of NAVA. You are telling me that NAVA LIMITED is a 100% ultimate owner, basically owner of NAVA's Global? Yes. That's right. Okay. I'll go back in the queue. So I'll remain on the line because I got disconnected several times. Thank you. The next question is from the line of Kaushik Toshi from ICICI Securities. Please go ahead.

14:14 Yeah. Thank you for the opportunity, sir. My first question is regarding the Zambia. How is the situation in Zambia currently? And due to West Asia Crisis, do we have any power reception in Zambia? Sorry, can you repeat the question? I think a little slowly. Am I audible? Hello? Yes. Yes. Just go a little slow. Yes. My first question is regarding the currently. How is the situation is there right now? And due to West Asia crisis, are we facing any power receptions? Do we have any power receptions? Disruptions. Oh, no. Yeah. The the situation is fine. Currently, there's there's no power power disruptions there.

15:07 And my second question is due to West Asia crisis, are we anticipating any increase in the supply of coal in Zambia? Supply of coal in Zambia? Sorry. Can you repeat the question? Mister Kaushik? Mister Kaushik? Ladies and gentlemen, we will move on the next participant., an individual investor. Please go ahead. Yeah. So one more question I had was the deferred tax loss... Deferred tax expense that you have shown in the books.

15:58 Like, is there any scope of stabilizing it, or will the $16,200 crore per year mark will be always there as default tax expense? You are talking about at console level? Yeah. On the console level, I'm talking about. Last year, it was $2.61 crores, and this quarter, you have again shown 40. And the last quarter, it was $1.63 crores because of the Zambian and USD currency problem. So, like, what is the situation over there? Now the Jamba, like, watcher, yes, the exchange rate is around the 18 rupees as on June 30.

16:46 So it is stabilizing as on today. We won't, like, you never know what happens in the future. Like, it depends upon the prevailing exchange data from the data report. So this... If the currency stabilizes, then this 40% will become again, like, the next quarter will not be there. Right? Yes. It may get even reversed also. Okay. Can you revisit? Okay. Makes sense. And moreover, like, the previous question about the assets that you have, if I may know, what was the current value of those assets? What assets are you referring to? The Hyderabad assets, the 200 acres that you have. The historical cost of land is around 40 lakhs.

17:39 And what will be the current value of Brooks? I think that's something that the report that we have commissioned to the third party that I mentioned will possibly bring out. The value is moving. I think every call moving fortunately upwards too. So it's appreciated a lot from, I think, the past few years. Yeah. But if we can get an idea, then we'll great for shareholders. Around Yes. But I don't think, you know, we would want to speculate on giving a number because it isn't moving... This is real estate at the end of the day. Yeah. Yeah. No issues. No issues. And moreover, the mining that you were taking on the exploration part, what is the status on that?

18:31 So there are two parts to it. I think you may be referring to the manganese mining or exploration? The manganese and the lithium mining that you were exploring. Yes. So in terms of the lithium, it's a very large area. So the exploration is currently underway. There's been a slight slowdown because of the elections and so on, but the exploration is still underway. On the Manganese II, it is a fairly large area. You're talking about three sixty square kilometers, which is part of the concession. Out of this, we have done detailed exploration of only two square kilometers. Based on those results, I think the final phase, the indications are that it does look promising.

19:17 So we are currently working on converting the exploration license into an exploitation one. So by when can we expect the benefits? Mister Vansh, I request you to join back in the queue, please. Fine. Fine. Thank you. Reminder for all participants, please restrict your questions to two per participant. The next question is from the line of Shri Gopal from SG and Associates. Please go ahead. Good afternoon, sir. Sir, my question... Because I was initially not participating in the discussion because my line was disconnected for five minutes. So I couldn't hear your speech.

20:04 I just wanted to know what is the expected date of commissioning of this 300 megawatt thermal power plant. Because earlier, it was, I think, planned for January 27. So what is now the expected date of commissioning of this plant? Hello. Yes. So right now, we're looking at the total commissioning of both the units by Q2 of FY twenty twenty seven, twenty twenty eight around the July timeframe of next year. Okay, sir. And my one question was that whether any plant shutdown in the current quarter for Mamba plant, sir? We have a biannual shutdown that is scheduled in the current quarter.

20:53 In the current quarter. Okay. Which is a biannual maintenance, basically. It's the regular biannual maintenance that we conduct. Yes. That's fine also. Okay. Thank you, sir. Thank you. The next question is from the line of Aditya Sharma from PCS Securities. Please go ahead. Yes. My question is regarding the return on equity on the additional 300 megawatt that you have set up. So and what would be the taxation as far as the 300 megawatt is going to be? Give us a second. Am I audible?

21:41 Yes. Are you audible? Yes. So my question was because the cost in this next 300 megawatt is much lesser than the earlier plan, and the... Even the PPA is also signed. What is the expected return on equity on on the investment, and what is the taxation that will be applicable on this? Give us a second, please. Yes. So the return on equity that we envisaged is about 15%.

22:36 And with regards to the second phase, we currently don't have a tax holiday, but that is something that we are actively pursuing with the government. Thanks. Thank you. The next question is from the line of Sai Shriyas from Scientific Investing. Please go ahead. Hi, sir. Am I audible? Yes. Thank you for the opportunity, sir. So my first question is, sir, can you please explain what is the reason behind Zambia Energy EBITDA margin being declined over the years? And what is the sustainable margin going forward for the Zambian Energy?

23:31 The reason for decreasing EBITDA is on account of ECL credit. Okay. What is the sustainable margin going forward, sir, for the Zambian Energy segment? Around, like, 45 to 50% is the EBITDA. 45 to 50%? Yeah. Okay. And my second question is, sir, how do the intersegment eliminations work? And is there any ratio which we can use to estimate the consolidated EBITDA from segment EBITDA? Because there is a lot of intersegment eliminations. So we had some transfer pricing between power and metal metal sector in Indian operations.

24:17 And also there like for coal consumed in energy from mines. So this gets eliminated the transfer rate adopted for transfer is eliminated. And when it comes to consolidated EBITDA, it will be around between 35% to 40%. So the segment EBITDA 35% to 40% will be considered for the consolidated EBITDA? Yes. Consolidated. Yes. Okay. And one last question, sir. The reason in the interest cost, how is the interest cost being calculated? Because are we capitalizing it during the construction time? And what is the industry practice? Because there is no big increase in the finance cost despite of having a higher loan.

25:12 So the finance finance cost incurred on phase two gets capitalized. Okay. Is this an industry practice? Is this an industry practice? Yes. It required by IFRS under India as well. Okay, sir. Thank you. I'll get back to the queue. Thank you. The next question is from the line of Vijay, an individual investor. Please go ahead. Yes. Sorry. I might have missed some of your initial comments or initial answer because I was disconnected. The recent amendment which is made to the company's name, new clauses... Clause about power generation, which I introduced with new avenues of nuclear and solar, etcetera.

26:03 Could you enlighten the shareholders about what are the company's plans for expanding its power generating operations in India in this particular field? Yes. So I think with regards are we talking particularly with respect to India, because I'm going to be talking in general with India and internationally. We, a company, are looking seriously at the renewable space. I mean, and not just solar, we're looking at solar, we're looking at wind, we're looking a combination of both of them with battery storage. So you have around the clock power. So those there are certain opportunities that we are currently investigating and assessing.

26:49 And with regards to nuclear, I think the whole concept of the small modular reactors, which we term as SMRs now, seems to be gaining a lot of attraction. And given that we are in the power space, we have been also looking at that sector in terms of development. But I think the SMR space is very new and it will take a little more time to evolve, but we are actively looking at all the developments that are taking place there. So all these activities are going to be international and not in India? No, I don't think we're saying that we are international and not in India. We're looking at it in all geographies, including India.

27:39 I think, Mr. Vijay, we are quite location agnostic. I think what we do look for is where the best returns for the risk that you're going to be taking come from. That could be very well in India or elsewhere. I'm sorry if I have misrepresented, but what I meant was for a long time, we have not expanded any of our Indian operations. So that's why I asked because in India today, there's a lot of scope for these particular activities. Yes. So we I mean, like we said, we look at returns and we look at the risk. In the renewable space, although there's been a lot of expansion in India, it is sometimes it's been a hit or a miss, given the tariffs and the grid situation. So we look at the geographies without being partial to India or international, we're looking at the best returns and risk. And that's really played out well for us. If you look at Zambia today, it's generating good revenue and good profits, but helping the growth of our company in various verticals.

28:45 I mean, you, the Zambia operation has been a runaway success. Coming to the Ivory Coast operation, when we are looking for manganese there, you are also stated that you are likely to put up a manganese alloy plant there. Is there any progress on that? So I think with respect to the mine, we have disclosed that the exploration results have reached constant return. So we are in the process of converting that into exploitation. But this particular mine that we have worked on is exclusively targeting the Indian operations. In order to set up a factory in Ivory Coast, there is another mine, which is right now controlled by the government for which we are looking to be JV partners. That's still under the approval phase, but once that does come through, then we could evaluate setting it up there.

29:42 Thank you for the note. So I will go back in the queue if there is still time. Thank you. The next question is from the line of Sai Shreyas from Scientific Investing. Please go ahead. Sir, does the reported OCF of NAVA LIMITED include 100% of Zambian cash flows or only... Or is it adjusted as per NAVA 65% share? 100%. 100% consolidation. Sorry, sir? It is 100% consolidation. Okay. And one last question is, sir, the metals business is struggling in terms of margin. And what is the outlook going forward for our margins and sales growth going forward?

30:33 Yes. I think the metals business, as you know, is one of it's volume driven rather than margin driven. Okay. Quarter on quarter basis, we have seen actually a slight improvement in terms of pricing on the spot market to the extent of about 5% to 10%. Going forward, we are quite well against any volatilities because almost 70% of our productions will be committed either under long term contracts or quarterly contracts. So I think to answer your question with respect to margins, we could probably either see a stability in terms of where we are today or if not a slight increase. But I don't see a downward trend, at least until the end of the financial.

31:21 Okay. What about the sales, sir? Like, it is stagnant from last year. That's the reason I'm asking. Your question was not clear. Can you please come again? Sir, I'm talking about the sales growth. What is the expected sales growth? Sales. So I think this particular quarter, as we disclosed, the Orissa unit was under shutdown for long term activities. That's the reason the sales numbers have slightly decreased. But anyhow, that is behind us now. We have resumed operations from Orissa as well on August 1.

32:11 Okay. Okay, sir. Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing remarks. Over to you. Thank you once again for joining us today and for your continued interest in NAVA. We believe the resilience of our core businesses and the progress of our growth platforms position us well for sustainable long term value creation. If you have any further questions or required additional information, please feel free to reach out to our Investor Relations team. Thank you, and have a pleasant evening. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.