MSTCLTDNSENovember 09, 2022

Mstc Limited

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Management on call

Subrata Sarkar

DIRECTOR OF FINANCE – MSTC LIMITED

Ajay Kumar Rai

COMPANY SECRETARY – MSTC LIMITED

Ansh Manek

EQUIRUS SECURITIES

Key numbers — 40 extracted

rs,

call to Mr. Subrata Sarkar. Over to you, sir. Subrata Sarkar: Very good afternoon, dear investors, and happy Dasara and Diwali. So, it is all along the results you have already, I think, it has bee

INR 312 crore

sults. So, if you go by the revenue part, so the revenue has, of course, dipped a little bit from INR 312 crore to INR 277.25 crore. And particularly it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-

INR 277.25 crore

go by the revenue part, so the revenue has, of course, dipped a little bit from INR 312 crore to INR 277.25 crore. And particularly it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course h

INR 176.36 crore

dipped a little bit from INR 312 crore to INR 277.25 crore. And particularly it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a ro

INR 92.40 crore

from INR 312 crore to INR 277.25 crore. And particularly it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a robust growth of 35%

INR 124 crore

it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a robust growth of 35% and others has also gone up a little bit. So... Mod

INR 167.70 crore

i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a robust growth of 35% and others has also gone up a little bit. So... Moderator: I'm sorry

35%

rore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a robust growth of 35% and others has also gone up a little bit. So... Moderator: I'm sorry to interrupt you, sir, b

INR92.40 crore

enue has taken a little bit dip, but basically due to the Marketing i.e. from INR 176.36 crore to INR92.40 crore, that is a dip by around 50%, which is in the expected line as we have commented earlier also.

50%

ically due to the Marketing i.e. from INR 176.36 crore to INR92.40 crore, that is a dip by around 50%, which is in the expected line as we have commented earlier also. And the E-commerce, there is 35

INR 167 crore

as we have commented earlier also. And the E-commerce, there is 35% growth from INR 124 crore to INR 167 crore. And others, of course, has a insignificant role in this whole episode. So, EBITDA has grown from

INR 102.44 crore

And others, of course, has a insignificant role in this whole episode. So, EBITDA has grown from INR 102.44 crore to INR 225.83 crore at a robust growth of 120%. Provisions and write-offs and that's almost not t

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Guidance — 20 items

Subrata Sarkar

opening

“So with that, we expect that the third quarter will also could be going on the same philosophy and same path.”

Dixit Doshi

“Now if I net off the INR 78 crore provision, despite that, our other income will be, let's say, if I remove INR 78 crore from INR 103 crore, still our other income is almost INR 25 crore.”

Dixit Doshi

“How do you see the momentum going forward?”

Dixit Doshi

“Because this time on the presentation, we have not given any highlights like we usually give that which are the major project behind that?”

Subrata Sarkar

“So, we expect that e-commerce oriented growth may sustain, it may sustain which, of course, that is very difficult to say for the last quarter and all.”

Harshit Jain

“And will this be the same run rate going forward, INR 18 crores to INR 20 crores per quarter?”

Subrata Sarkar

“So, but you see that around what we have told right now, if you see our total overhead, if you compound it on an annualized basis, it will be in the range of INR 100 crores-plus, around INR 100 crores.”

Harshit Jain

“So, can you please provide a guidance that how much will be your Marketing segment on a quarterly basis going forward?”

Harshit Jain

“So, what will be the growth rate going forward?”

Harshit Jain

“If it's possible, can you provide a little bit guidance that what is the kind of percentage growth we are targeting in this current financial year for e-commerce?”

Risks & concerns — 7 flagged

So, we expect that e-commerce oriented growth may sustain, it may sustain which, of course, that is very difficult to say for the last quarter and all.

— Subrata Sarkar

So, my first question would be regarding, in this particular quarter, we can see that there is a decline in the employee cost from Q-o-Q basis and on a Y-o-Y basis.

— Harshit Jain

So with that pressure, we have maintained the same revenue level.

— Subrata Sarkar

Number two, we see that there will be a constant competition and there will be a price pressure.

— Subrata Sarkar

But what about fourth quarter I mean it is very difficult to say because longer predictions right now is a very difficult proposition.

— Subrata Sarkar

So, it is very difficult right now, sitting today itself so to tell, that what will happen this year or next year.

— Subrata Sarkar

Right now, it is very difficult to share because until unless the order is getting, I have been told that order will be uploaded very soon.

— Subrata Sarkar

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Q&A — 9 exchanges

Congratulations on a good performance. My first question is regarding the standalone numbers. So, there is other income of INR 103 crore and there is a provision and write-off of INR 77-78 crore. So, is there any correlation? And what is this regarding both, if you can answer for both the entries?

Subrata Sarkar

Thank you, Mr. Doshi, for your kind words and the praise for our results. So, you're absolutely right. I say a very, very experienced reader of the financial statement, it is absolutely correct. So, we had made around INR 77 crores of write-off this quarter. So, it is appearing on the both side, Provision no longer required written back, as it is part of the other income and the same charging into profit and loss account as a bad debt written off. So, it is setting off. So, nothing to do with our profitability. So, to be very precise and clear. Only a miniscule amount of INR 0.95 crore, that i

First of all, many congratulations for great set of numbers. So, my first question would be regarding, in this particular quarter, we can see that there is a decline in the employee cost from Q-o-Q basis and on a Y-o-Y basis. So, can you please clarify? And will this be the same run rate going forward, INR 18 crores to INR 20 crores per quarter?

Subrata Sarkar

Jain, what is happening over here. So, if we take like it is a very miniscule decrease so it is not around even tune of INR 1 crores. It is not even in percentage is per se. So, it's keeps on little bit of fluctuating. But if we can go by the H1 basis, H1-to-H1, of course, the last quarter, that last H1 was marred by COVID. And we had to spend lot of money on health issues of our employees. That was important at that time. So, that was some kind of expenditure that we made. So, but you see that around what we have told right now, if you see our total overhead, if you compound it on an annualiz

This is regarding the other income. Earlier, we had also gone through this cycle of abnormal increase in other income. And then that obviously is continuing. When can we hope that there is a normal business income will overcome that abnormality of the other income rising part at least the next few quarters, we can expect a regular trend, non-linear growth we are seeing right now, but the regular income.? Yes. So when can we expect the linear growth for our company from the business growth, actual business growth excluding the other income part?

Subrata Sarkar

So, let me clarify you, sir. So, you see that, if you can deeply analyze our financial statements, standalone or consolidated whatever maybe you are looking at. So there is, of course, other income, but there you see the provisions and write-off. It is basically a compensating entry of around INR 77 crores that we have written off this quarter, which is appearing on the top and this is appearing in the bottom, it is just basically an accounting entry. It has nothing to do with the profitability. We are writing on our operational part only. And if you can see from that operational income, opera

Sir, could you help us know what is the scrap volume trajectory volume growth Q-o-Q, Y-o-Y?

Subrata Sarkar

So far, the scrap volume is concerned, we are basically if you ask me, so H1-to-H1, if you see we are on the higher path. And quarter-to-quarter also, we say on the flatter trajectory because the rate of the scraps are a little bit now cooled, scrap, iron ore that, as you can see from the market. So, with the same amount of disposal, we are having same around. So, it is on a flatter trajectory, nothing significant. So far, these volumes are concerned. Sir, has scrap volume grown in on a Q-o-Q basis or it has not grown on a Q-o-Q basis? Of course, it has not grown. I'm saying, flatter means, it

Congratulations on good set of numbers. So, I just wanted to know about the provisioning, you have provision as well write back. So, is it safe to say that you are done with the more of the provision than the write-backs now and the book is clean?

Subrata Sarkar

Sir, could you repeat your question? I was not able to get you. Sir, in the cash flow, you've done a write-back of INR 88 crores versus bad debt write-off of INR 76 crores. So can you explain that in the first half? And is it safe to assume that most of the write-offs as well as write-backs have we done with? Sir, first let me explain you about the both side entries, which is common, like INR 76 crores and INR 79 crores, both are common. It is compensating entries for this probably taking the benefit of the tax. So writing off, provision no longer written back and writing off. And balance is,

Sir, I have only one question. In your consolidated balance sheet in the segmental results, you have shown INR 26 crores as un-allocable expenses. Whereas in the standalone, it's not there. So, what is that? What expense is that?

Subrata Sarkar

That relates to, if it is in consolidated, that relates to our FSNL business, sir. FSNL, but FSNL has actually shown operating profit of INR 12 crores. Yes. That can be there. Was there a profit or... Expense wise you are talking about un-allocable? Yes, un-allocable. So on FSNL, you have given INR 12 crores operating profit. I'm here with the consolidated results, first, your segment revenue and segment tax. So, where you are coming out with the expenses? In your segmental results, in your segmental results in the consolidated side. Unallocated INR 26.78 crores. Okay? So, what is that? Just a

Sir, one question is, so regarding this marketing business, a couple of years back when we started reducing that business, we were of the opinion that we will discontinue this business. I understand that now whatever we are doing is 100% BG backed business. But are we going to discontinue this as well? Or we will do this 100% BG backed business?

Subrata Sarkar

Right now, sir, right now, we have a mandate like and we are doing with 110% BG. So whatever it goes on. So, it is a very safe and sound and time tested. So, we are not in averse of doing, discontinuing with this business. Of course, it is in a very-very small segment. And our whole focus is on, of course, e-commerce. So, if it comes on its own, we will not deny, but in fact 110% reserve. And is it fair to assume that, that business will not lose any money? Right now, the trend is like that and we have it is backed by BG, you can see in the BG. It is one of the most secured instrument that at

My final question would be regarding the DRAT case, which is scheduled to auction our properties on 14th of November. So, any update you want to share with all your stakeholders and investors?

Subrata Sarkar

Sir, we hope by today is the order date. So, we hope that we will get the order by this evening. So, we will be uploading that in the website, sir. We are waiting for that order. So, any update you can share right now? Right now, it is very difficult to share because until unless the order is getting, I have been told that order will be uploaded very soon. Just people are waiting there. So, it is there, we will certainly keep you apprised, sir. It's very important thing and we will certainly update immediately to the stock exchanges.

Thank you all. It was a very interesting and learning session for us. So, we tender our sincere apology that our CEO could not attend this important investor call because his other meetings with the Ministry. So, we hope that you will keep on reposing faith on the company. Thank you very much.

Management

Speaking time

Subrata Sarkar

Pritesh Chheda

Moderator

Dixit Doshi

Parimal Mithani

Mayur Patwa

Harshit Jain

Srinivas Reddy

Ansh Manek

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Opening remarks

Ansh Manek

Thank you, Rutuja. Hello, everyone. On behalf of Equirus Securities, I welcome you all to Q2 FY '23 earnings conference Call of MSTC Limited. From the management, we have with us today, Mr. Subrata Sarkar, Director of Finance; and Mr. Ajay Kumar Rai, Company Secretary. We will begin the call with the opening remarks on the management and then we can open the line for questions and answers. I now hand over call to Mr. Subrata Sarkar. Over to you, sir.

Subrata Sarkar

Very good afternoon, dear investors, and happy Dasara and Diwali. So, it is all along the results you have already, I think, it has been published and you are all aware of the results. So the result, what I want to say it is two basic highlights. One, as promised earlier, it is based on the like E- commerce-driven growth, number one, and number two, of course, as E-commerce earnings are on a steady path right now, as we compare with the quarter one. And if we compare H1 of earlier year, of course, it is a very, very good robust growth that can be seen by the numbers itself. Now I'm going to the detailes of the results. So, if you go by the revenue part, so the revenue has, of course, dipped a little bit from INR 312 crore to INR 277.25 crore. And particularly it's Marketing i.e. INR 176.36 crore to INR 92.40 crore. E-commerce of course has gone up from INR 124 crore to INR 167.70 crore, a robust growth of 35% and others has also gone up a little bit. So...

Subrata Sarkar

So, right now, is it audible? Okay. So, again, I repeat that the total revenue has taken a little bit dip, but basically due to the Marketing i.e. from INR 176.36 crore to INR92.40 crore, that is a dip by around 50%, which is in the expected line as we have commented earlier also. And the E-commerce, there is 35% growth from INR 124 crore to INR 167 crore. And others, of course, has a insignificant role in this whole episode. So, EBITDA has grown from INR 102.44 crore to INR 225.83 crore at a robust growth of 120%. Provisions and write-offs and that's almost not there and profit before tax has gone from INR 83.23 crore to INR 145 crore and PAT from INR 52.59 crore to INR 115.32 crore, a growth of 119%. And cash profit has also gone from INR 69.39 crore to INR 196 crore, a growth of 182%. If we go by the segmental part, so total value of goods traded at MSTC's ecosystem is INR 919.62 billion as compared to previous H1 of INR 710.36 billion, a robust growth of 30% of revenue traffic. Goo

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