Nava Limited Q1 FY25 Earnings Conference Call Insights

Key highlights from Nava Limited (NAVA) Q1 FY25 Earnings Concall

• Financial Overview
  • NAVA Limited achieved its highest ever quarterly income of ₹1,288.4 crores, a 16.7% increase year-on-year.
  • Profit before tax reached a record ₹513.8 crores, reflecting a 27.6% growth compared to the same period last year.
  • Strong financial results are attributed to the company’s strategic focus on operational efficiency and cost optimization.
• Segment Performance
  • The Mamba Energy Limited power plant operated at near-perfect 100% plant availability.
  • The company has commenced the construction of an additional 300 megawatt power plant in Zambia.
  • The metals division reported a profit before tax of ₹23.2 crores, compared to a loss of ₹1.6 crores last year.
  • This improvement was driven by higher realizations and successful product diversification into periscope.
  • Agri business made significant strides, with the successful completion of the plantation in Division 8 with over 90,000 trees.
• Power Plant Expansion
  • Company has a 20-year PPA in place for the 300 MW power plant it is constructing in Zambia.
  • As per the PPA terms, the plant will start operations two years from now, after the commercial operation date.
  • The current PPA tariff is 10.3 cents, which will be reduced to 9.5 cents in the new PPA.
  • The tariff will be linked to the US PPA inflation index each year.
• Debt Reduction
  • The company has completely repaid its debt at NAVA, Maamba Collieries, Maamba Energy, and Nava Energy, resulting in no interest costs for the current quarter.
  • The plan is to remain debt-free at Nava Energy for the next one or two years.
  • However, some debt will be taken on for the phase two, $300 million expansion of Maamba Energy.
  • On a consolidated level, NAVA will not be completely debt-free as it takes on significant capital expenditures.
• Avocado Production
  • Expects revenue from its avocado product to be small, around $3-4 million, in the next financial year.
  • However, the peak revenue from the avocado business is expected to be realized from the 2027-28 financial year onwards.
• Free Cash Flow
  • Generated a free cash flow of around 500 crores at the group level in Q1 FY25.
  • Evaluating opportunities to sell some of its non-core assets, such as the land parcels in Samalkot and Dharmavaram.
  • Not in a hurry to sell these assets, as the land valuations in Andhra Pradesh have been increasing due to investor interest in the region.
• Cash Allocation Plans
  • Company plans to utilize a significant portion of the cash flow for growth capital, such as the expansion of Maamba Energy, the Avocado Project, and the Ivory Coast Project.
  • Exploring other opportunities to diversify its business, as some of its current sectors may face challenges in the next 20-30 years.
  • Evaluating various corporate actions, such as buybacks or increased dividends, to further enhance shareholder value.
• Arbitration Award Payments
  • In the current quarter, the company received $224 million from the arbitration awards.
  • The monthly payment from the state utility is dynamic and dependent on their financial situation.
  • Therefore, the company cannot commit to a fixed amount going forward.
  • The equity contribution for the Maamba Energy expansion will be funded from the arbitration award proceeds.
  • Zesco is currently paying $5 million per month towards the arbitration, but it’s expected to increase to $25 million.