Ladies and gentlemen, good day, and welcome to the Nava Limited Q1 FY 2027 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shubham Borade. 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 2027 earnings call of Nava Limited. Today, we have with us from the management, Mr. Ashwin Devineni, Managing Director and CEO, Mr. GRK Prasad, Executive Director, Mr. Nikhil Devineni, Executive Director, Mr. B. Srinivasa Rao, CFO, and Mr. VSN Raju, Company Secretary. We will begin with the opening remarks from the management, which will be followed by a Q&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 2027. We have started the year on a strong note, with consolidated total income reaching an all-time quarterly high of INR 1,269 crore. 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 MW plant operating at a strong 89.3% PLF. Our international foray also continued to provide value through dividend flows and to attain financial strength to pursue investments. At the standalone level, the total income reached a record INR 689 crore. Lower coal and manufacturing costs, along with dividend income from Nava Global, supported this improvement. 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 II of MEL is expected to commence operations next year, later than originally envisaged owing to certain challenges beyond our control, with no material impact on project CapEx. It is however heartening that the 100 MW solar power project set to be commissioned shortly would establish a new niche for Nava, prompting further investment in this space. 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-
Political party. We have been through many political parties changes since we started. We are not affected.
That is fine. Thanks for that, sir.
Ladies and gentlemen, please press star and one to ask a question. Participants who wish to ask a question, please press star and one. The next question is from the line of Vansh, an individual investor. Please go ahead. The next question is from the line of Sri Gopal Kankani. Please go ahead. This is a follow-up question.
Good afternoon, sir. My question is, because there was some problem in connection, I could not hear your last five minutes speech. I just wanted to know what is the expected date of commissioning of this 300 MW thermal because earlier it was planned-
Sri Gopal, you have been unmuted. Please go ahead.
I am speaking, madam. Can you hear me? Hello? Hello?
Sri Gopal, please go ahead.
Are you able to hear me? Hello?
The current participant has been disconnected. We will move on to the next. The next question is from the line of Vijay, who is an individual investor. Please go ahead.
Hello. First of all, may I know if I am audible? I have got disconnected several times.
Yes. Yes, you are 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 Samalkot and another 20 acres in Dharmavaram, I believe, or maybe the other way around. How are these assets taken in the books?
Mr. Vijay, can you hear us?
Now I can hear you. I do not know, this conference call has been jinxed. I have tried three or four times to get into it.
Okay. You can hear us now, right? Did you hear the
Yeah
prior questions-and-answers?
Yeah. Now I can hear you very clearly. Can I ask my question again, or you heard it?
No, we just wanted to make sure we are audible.
So in regard to your question, all this land is recorded in the books at a historical cost.
You have got these real estate assets, the land assets, the land bank, recorded at historical price. 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 accounting standard.
The book value per share is very much depressed.
Yeah. The accounting standard allows us to carry at the historical cost. That is why we are carrying at historical cost.
I see. 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 are kind of showing with valuations really going up. It's good that we did not sell these assets at an earlier stage, otherwise we wouldn't be realizing the greater valuations. 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. That study is currently ongoing.
Yeah. 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 memorandum of association and brought in lot of additional avenues for power generation, such as solar, wind, nuclear, et cetera. With these, you will need capital, and that capital can come only from these assets rather than borrow.
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. 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. 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 had invested that asset value at that time into newer projects, the newer projects would have also generated additional profits.
Once again, Mr. Vijay, I would like to state that it is not a situation where we are not undertaking projects because we do not 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 those projects.
Thank you. My next question is about the holding of Zambia assets. Initially, Zambia project was created 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 dividends or buying back its own shares from Nava Limited with that money, et cetera. Who is the ultimate owner of the Zambia project? Number one. Number two, is Nava Global, is there any plan for spinning it off the way the foreign projects are going and spinning it off or demerging it and going in for an IPO?
First and foremost, with regards to the large assets, and I am sure you are talking about the Maamba asset, it was always under Nava Global. The only difference was Nava Global was called Nava Bharat 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. We always had Nava Global as the international asset holding company that we wanted to grow. Today, Nava Global has multiple assets. It has got the current Maamba power plant, it has got Maamba Solar Energy as a company, and they have got the mine in the Ivory Coast, and there may be other international assets that could fall under it. It does operate independently. The ultimate owner, yes, is Nava, because it owns 100% of Nava Global.
You are telling me that Nava Limited is 100% ultimate owner, beneficial owner of Nava Global?
Yes, that's right.
Okay, I'll go back in the queue. I remain on the line because I got disconnected several times.
Thank you. The next question is from the line of Kaushik Doshi from ICICI Securities. Please go ahead.
Yeah, thank you for the opportunity, sir. My first question is regarding Zambia. How is the situation in Zambia currently? Due to West Asia crisis, do we have any power disruptions 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 Zambia currently. How is the situation there right now? Due to West Asia crisis, are we facing any power disruptions? Do we have any power disruptions?
Disruptions you have. Hold on. Yeah, the situation is fine. Currently, there are no power disruptions there.
My second question is, due to West Asia crisis, are we anticipating any increase in the supply of coal in Zambia?
In supply of coal in Zambia? Sorry, can you repeat the question?
Mr. Kaushik? Mr. Kaushik? Ladies and gentlemen, we will move on the next participant. Vansh, an individual investor. Please go ahead.
Yeah. One more question I had was the deferred tax expense that you have shown in the books.
Right.
Is there any scope of stabilizing it, or will the INR 160 crore, INR 200 crore per year mark will be always there as deferred tax expense?
You are talking about at console level?
Yeah, on the console level, I am talking about. Last year it was INR 261 crores, and this quarter you have again shown INR 40 crores. The last quarter it was INR 163 crores because of the Zambian and USD currency problem.
Yeah
what is the situation over there?
The Zambian kwacha-USD exchange rate is around INR 18 as on 30th June. It is stabilizing as on today. You never know what happens in the future. It depends upon the prevailing exchange rate as on the date of report.
If the currency stabilizes, then this INR 40 crores will become again, the next quarter will not be there, right?
Yes. It may get even reversed also.
Okay. It can get reversed. Okay, that's fine. 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 Macherla land is around INR 40 lakhs in our books.
What will be the current value approximate?
I think that is 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, it is moving fortunately upwards, too. So it is appreciated a lot from, I think, the past few years.
Yeah, but if we can get an idea, that will be great for shareholders. Around-
Yes, but I do not think we would want to speculate on giving a number, because it is a moving This is real estate at the end of the day.
Yeah. No issues.
Yeah.
Moreover, the mining that you were taking on the exploration part, what is the status on that?
There are two parts to it. I think you may be referring to the manganese mining or exploration.
Yeah, the manganese and the lithium mining that you were exploring.
Yeah. In terms of the lithium, it is a very large area, so the exploration is currently underway. There has been a slight slowdown because of the elections and so on, but the exploration is still underway. On the manganese too, it is a fairly large area. You are talking about 360 sq km, which is part of the concession. Out of this, we have done detailed exploration at only 2 sq km. Based on those results, I think the three-month PC indications are that it does look promising. We are currently working on converting the exploration license into an exploitation one.
By when can we expect that if it is-
Mr. Vansh, I request you to join back in the queue, please.
Fine.
Thank you. Reminder for all participants, please restrict your questions to two per participant. The next question is from the line of Sri Gopal Kankani from S.G. Kankani & 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. I just wanted to know what is the expected date of commissioning of this 300 MW thermal power plant. Because earlier it was, I think, planned for January 2027. So what is now the expected date of commissioning of this plant?
So-
Hello.
Yeah. So right now we're looking at the total commissioning of both the units by Q2 of FY 2027, 2028, around the July timeframe of next year.
Okay, sir. My one question was that whether any plant shutdown in the current quarter for Maamba plant, sir?
In this current quarter. We have a biannual shutdown that is scheduled in the current quarter.
in the current quarter.
Which is a biannual maintenance, basically. It is the regular biannual maintenance that we conduct.
Yes. That is fine. Thank you, sir.
Thank you. The next question is from the line of Aditya Sharma from PCS Securities. Please go ahead.
Yeah. My question is regarding the return on equity on the additional 300 MW that you have set up. What would be the taxation as far as the 300 MW is going to be?
Give us a second.
Am I audible?
Yes, you are audible.
Yeah, my question was, because the cost entailed in this next 300 MW is much lesser than the earlier plan, and even the PPA is also signed, what is the expected return on equity on the investment, and what is the taxation that will be applicable on this?
Give us a second, please. Yeah. The return on equity that we envisaged is about 15%. 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 Shreyas from Scientific Investing. Please go ahead.
Hi, sir. Am I audible?
Yes.
Thank you for the opportunity, sir. 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?
The reason for decrease in EBITDA is on account of less reversal of ECL credit.
Okay. What is the sustainable margin going forward, sir, for the Zambian energy segment?
Around 45%-50% is the EBITDA.
45%-50%?
Yes.
Okay. My second question is, sir, how do the inter-segment eliminations work? Is there any ratio which we can use to estimate the consolidated EBITDA from segment EBITDA? There is a lot of inter-segment eliminations.
We adopt some transfer pricing between power and metal sector in Indian operations. Also there, for coal consumed in energy from mines, this gets eliminated. The transfer price adopted for transfer gets eliminated. When it comes to consolidated EBITDA, it will be around between 35%-40%.
The segment EBITDA 35%-40% will be considered for the consolidated EBITDA?
That is consolidated, yes.
Okay. One last question, sir. In the interest cost, how is the interest cost being calculated? Are we capitalizing it during the construction time? What is the industry practice? There is no big increase in the finance cost despite of having a higher loan.
The finance cost incurred on phase II gets capitalized.
Okay.
As per the accounting standard.
Is this an industry practice?
Yeah. It is required by IFRS and in the U.S. as well.
Okay, sir. Thank you. I will get back to the queue.
Thank you. The next question is from the line of Vijay, an individual investor. Please go ahead.
Yeah, sorry. I might have missed some of your initial comments or initial answers because I was disconnected. The recent amendment which is made to the company's memorandum, the new clause about power generation, which are introduced with new avenues of nuclear and solar, et cetera. Could you enlighten the shareholders about what are the company's plans for expanding its power generation operations in India in this particular field?
Yeah. I think with regards are we talking particularly with respect to India? Because I am going to be talking in general with India and internationally. We, as a company, are looking seriously at the renewable space. Not just solar. We are looking at solar, we are looking at wind, we are looking with a combination of both of them with battery storage, so you have around the clock power. There are certain opportunities that we are currently investigating and assessing. 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. Given that we are in the power space, we have been also looking at that sector in terms of development. 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.
All these activities are going to be international and not in India?
No, I do not think we are saying that we are international and not in India. We are looking at it in all geographies, including India.
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 are going to be taking, come from. That could be very well in India or elsewhere.
No, I am sorry if I have misrepresented. But what I meant was, for a long time, we have not expanded any of our Indian operations. That is why I asked, because in India today, there is a lot of scope for these particular activities.
Yes. Like we said, we look at returns, and we look at the risk. In the renewable space, although there has been a lot of expansion in India, sometimes it has 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 are looking at the best returns and risk. And that has really played out well for us. If you look at Zambia today, it is generating good revenue and good profits. That is helping the growth of our company in various verticals.
Yes, I agree with you. The Zambia operation has been a runaway success. Coming to the Ivory Coast operation, when we are looking for manganese there, you have also stated that you are likely to put up a manganese alloy plant there. Is there any progress on that?
I think with respect to the mine, we have disclosed that the exploration results have yielded promising returns, 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 is still under the approval phase, but once that does come through, then we could evaluate setting it up there.
Thank you for the now. 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 is it adjusted as per Nava 65% share?
Yeah, 100%. 100% consolidation.
Sorry, sir?
It is 100% consolidation.
Okay. One last question is, sir, the metals business is struggling in terms of margin. What is the outlook for our margins and sales growth going forward?
Yeah, I think the metals business, as you know, it is 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%-10%. Going forward, we are quite well ring-fenced against any volatilities because almost 70% of our production is already committed, either under long-term contracts or quarterly contracts. 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 do not see a downward trend, at least until the end of the financial year.
Okay. What about the sales, sir? It is stagnant from last few years. That is the reason I am asking.
Your question was not clear. Can you please come again?
Sir, I am talking about the sales growth. What is the expected sales growth?
Sales.
Hello?
Yeah. This particular quarter, as we disclosed, the Odisha unit was under shutdown for long-term maintenance activities. That is the reason the sales numbers have slightly decreased. But anyhow, that is behind us now. We have resumed operations from Odisha as well on 1st of August.
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 require 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.