NAVANSEQ4 FY20May 24, 2019

NAVA LIMITED

4,790words

120turns

9analyst exchanges

3executives

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Management on call

Abhineet Anand

SBI CAP SECURITIES

Ashwin Devineni

CHIEF EXECUTIVE OFFICER- NA VA BHARAT VENTURES LIMITED

G.R.K. Prasad

Executive Director- Nava Bharat

Key numbers — 40 extracted

590 million

The mark-to-market provision on interest rates slabs. MCL had contracted a long term debt of USD 590 million and USD 443 million remain outstanding as at March 31, 2019 with 25% having been repaid. MCL had

443 million

provision on interest rates slabs. MCL had contracted a long term debt of USD 590 million and USD 443 million remain outstanding as at March 31, 2019 with 25% having been repaid. MCL had also contracted with

25%

ong term debt of USD 590 million and USD 443 million remain outstanding as at March 31, 2019 with 25% having been repaid. MCL had also contracted with certain banks for interest rate slabs whereby 70

70%

5% having been repaid. MCL had also contracted with certain banks for interest rate slabs whereby 70% of the interest on long-term debt was hedged to obtain fixed rate of LIBOR. However, as the LIB O

4.5 million

as of March 31, 2019, a notional loss has arisen impacting the financials of MCL to a tune of USD 4.5 million and USD 5.8 million for Q4 and FY2019 respectively. The other one is deferred tax liability. The

5.8 million

, a notional loss has arisen impacting the financials of MCL to a tune of USD 4.5 million and USD 5.8 million for Q4 and FY2019 respectively. The other one is deferred tax liability. The 300-megawatt power p

joys tax holiday for I 0 years up to FY2029 and the income tax rate during the period ranges from 0% to 26.3%. Following the commercial operations of the power plant, MCL availed investment allowanc

26.3%

ax holiday for I 0 years up to FY2029 and the income tax rate during the period ranges from 0% to 26.3%. Following the commercial operations of the power plant, MCL availed investment allowance resulti

28 million

d A1ay 31, 2019 MCL is however required to make a provision for deferred tax liability of about $28 million arising on account of timing dilTerences during the FY20 19. Such provisions for deferred tax l

Rs. 3

rison of Q4 numbers year-on-year has to be read with the compensation for lower off take of about Rs. 3 7 Crores received in Q4 of FY20 18 being non-recurring and so there seems to be an apparent aberra

7 Crore

of Q4 numbers year-on-year has to be read with the compensation for lower off take of about Rs. 3 7 Crores received in Q4 of FY20 18 being non-recurring and so there seems to be an apparent aberration th

ee corporate actions, which would result in reduction of outstanding equity share capital by over 8% during FY2020. First one is selective reduction of capital through the approval of shareholders a

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Guidance — 19 items

G.R.K. Prasad

“This is of course a notional adjustment because all hedges will be closed at the payment period.”

Devansh Negotia

“Sir, in terms of new PPAs that we have received this quarter, some visibility going forward that you arc seeing if any?”

Devansh Negotia

“Sir, you mentioned in the press release regarding growth capital going forward and new areas that you are looking.”

G.R.K. Prasad

“Basically we want to give that intent out as to what we would do with our possible monetization of assets and what is the purpose for which it will be used for.”

Devansh Negotia

“Sir, we are still evaluating the areas, but what would be the quantum of capital allocation that we are looking, going forward?”

G.R.K. Prasad

“proceeds from monetization, and inJlows from our overseas subsidiaries, going forward in three areas, one is of course the growth capital for expansions and verifications, two, to address the current debt that is lying in our books and three.”

Ashwin Devineni

“We were sitting on an outstanding of about $160 million, which equates to about 30% ofthe total receivables bilL The state utility and the government have remained committed, they have always indicated and they continue to indicate that this outstanding including interest will be cleared.”

Harsha Wardhan

“This MTM loss is only for this financial year or next financial year also there will be some MTM losses?”

G.R.K. Prasad

“Once that is done then we will be in a position to operate the plant.”

Harsha Wardhan

“when can we expect a clean chit on that?”

Q&A — 9 exchanges

Thanks for the opportunity. My question was related to the one off expenses in the Zambia operations, if you can just throw some more light on that, what are these related to?

GRK Prasad

Could you come again, which expenses arc you talking about? One ofT expenses in Zambia operations as you have mentioned. I am talking about not one off, it is a mark to market provision on interest rate slabs which the company is required to do under !FRS regulations based on the LIBOR movement at the end of the period. You would find that as of Q4 and FY20 19, there has been a loss because LIB OR had appreciated over the hedge number of 4.5 million for Q4 and 5.8 million for FY20 19. This is of course a notional adjustment because all hedges will be closed at the payment period. but the repor

Good afternoon Sir. Sir. on this selective reduction of capital, can you please explain it in detail, is there any cash outflow that we need to have for it?

G.R.K. Prasad

No, there is no cash outflow. We are pursuing two selective reductions, one relating to the shares held in Trust by Nav Energy Private Limited which emerged out of our erstwhile merger and the second selective reduction of capital relates to the shares held by employee welfare trust acquired out of an advance given by the Company sometime back. outstanding of which is about Rs.25 Crorcs. So Rs.25 Cr plus Rs.25 Cr lJ·om which we will buy back our equity shares 11·01n the market. Am I right? So Rs.SO Crores is the outgo? It is not exactly outgo, Rs. 25 Crores is immediate outgo, Rs. 25 Crores wi

Good afternoon. This MTM loss is only for this financial year or next financial year also there will be some MTM losses?

G.R.K. Prasad

This MTM loss is a notional provision. It keeps happening because !FRS requires that. MTM loss is recognized at every reporting period, so it could be quarter end or it could be year end. Okay Sir fine. What about the unit in Odisha. like is there any progress there? No, we arc waiting for some of the legal impairments to be cleared still. Once that is done then we will be in a position to operate the plant. At this point. it is still locked in some legal issues where the open access is being denied. Last question, there is an ED attachment for 150 MW plant which is supposed to have been compl

Thanks for the opportunity Sir. First question is on the Zambia, we saw the availability come down in this quarter, so anything specific here and how do you see it going forward?

Ashwin Devineni

This is Ashwin. With respect to the availability, you know 86.9% which is fairly good, we did have some scheduled shutdown for maintenance and so on and that is one of the reasons and we have a PLF of about 74.6%, so there have been no major issues experienced at the power plant and both the units are running. That is for the full year. but if! see for qumier, the availability was 76% and Q-o-Q. there is a dip in PBT and PAT. so this was mainly because of shutdown which was taken, annual shutdown or something in Q4 right? Yes. we did do our annual maintenance for the unit basically. Is it safe

Good afternoon Sir. Just have two clarifications to seek. One is this reduction of capital should happen how soon?

G.R.K. Prasad

The selective reduction goes through process of shareholders' approval and other approvals from stock exchanges and the NCL T. Our expectation is it could take about six to seven months from now, in fact the buyback also runs the same course till November. Secondly, the mining segment profit has declined sharply in Q4, can you explain why that has happened compared to Q3? Mining division operations go around actual extraction of coal as opposed to overburden removal. So in a particular quarter, if the overburden is higher, that impacts the operations of that particular division. Since our Zamb

Thanks for the opportunity. Firstly, I wanted to understand what is the market in India in terms of the merchant scenario, what we have seen in the last three to four years, obviously the market has been subdued with these prices of around Rs. 5 that you mentioned sta11ing from July, have you seen lot of bids not just for you, but other players who have open market capacity, so do you feel that the merchant market is improving which was suppressed for the last few years?

G.R.K. Prasad

Well, there is no clear indication in terms of merchant power scenario, but what we see is that you know if lEX can be taken as a benchmark, there has been some firming of the lEX prices of late, but I think everything is principally driven by an increase in industrial consumption that seems to be languishing for the last two to three years. So unless that changes, we do not see merchant power rates moving up significantly. So our aim is to keep the control on our input cost to the extent feasible so that we stay competitive. Nava Bharat Ventures Limited A4ay 31, 2019 When you say Rs.4. 98. is

Sir, just a follow up on the tax part. Sir, how do we expect this tax expense moving forward in Zambia?

G.R.K Prasad

For example, we had this deferred tax provision of 28 million, the next few years the provision would be substantially less, I think our present assessment is it could hover at around 8 million also max per year and that too for the next two years. Understood, on the receivables part, whatever the bond issuance Zambia government is trying to do, any estimate on the timelines as to when do we expect that to happen or any specific challenges we are facing in this bond issuance? ZESCO and the government are working on it, it is confidential to them, I do not think they are disclosing timelines th

Some clarifications Sir. In the press release, the MCL has surplus of USD 44.3 million, so why do not you use it to repay the debt. is there any reason for keeping it on the books?

G.R.K. Prasad

This is surplus after making the periodically repayments, so we cannot do an accelerated repayment because of the covenants, in fact we are driving to a point where the sponsors and the shareholders will have access to these funds for their distribution as soon as possible. Second question, on the press release you mentioned that we are looking for modifying our contract, or if they look for different customers for the offtake of Zambia, are you working on something on those lines? We only have one customer which is ZESCO, so as I did mention earlier, ZESCO is engaging both IPPs and their end

Thanks everyone for joining the call. I would like to thank the management for giving us this opp011unity to host the call. Thanks everyone.

Management

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Speaking time

G.R.K. Prasad

Devansh Negotia

Mohit Kumar

Siddharth Shah

Moderator

Ashwin Devineni

Abhineet Anand

Harsha Wardhan

Anil B G

AniiBG

Opening remarks

Abhineet Anand

Thanks and welcome everybody to 4Q FY2019 Nava Bharat Ventures Conference Call. We have with us the top management of Nava Bharat represented by Mr. Ashwin Devineni, Chief Executive Officer. Mr. G.R.K. Prasad, Executive Director and other members of the top management. I will hand it over to the management for brief opening remarks. GRK Prasad Thank you Abhineet. Good afternoon and a warm welcome to all the participants. The statement of financial results both on standalone and consolidated basis and respective presentation on operations and financials of NBV Group have already been filed with stock exchanges and posted on our website. The presentation and the follow on disclosure today seck to address the dynamics of various businesses and also the queries received from shareholders on a wider investors' platform. I hope you had a look at them and trust that they provide adequate information on our performance for the Q4 and for FY20 19 ending on March 31, 2019. Further, I would like

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