Navkar Corporation Limited (NAVKARCORP) Q3 FY23 Earnings Concall Transcript

Navkar Corporation Limited (NSE:NAVKARCORP) Q3 FY23 Earnings Concall dated Feb. 13, 2023.

Corporate Participants:

Anish Maheshwari — Chief Financial Officer

Analysts:

Deepika Bhandari —

Unidentified Participant — — Analyst

Ganesh Shetty — Individual Investor — Analyst

Vikram Suryavanshi — PhillipCapital — Analyst

Aditya Sen — RoboCapital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of Navkar Corporation Limited hosted by PhillipCapital India Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions].

I now hand the conference over to Ms. Deepika Bhandari from PhillipCapital India Private Limited. Thank you, and over to you, ma’am.

Deepika Bhandari —

Good morning, and a very warm welcome to everyone. Thank you for being on the call of Navkar Corporation Limited. From the management, we are happy to have with us here today Mr. Anish Maheshwari, CFO; Mr. Nitin Sharma, General Manager Finance; Mr. Ankit Thakkar, Senior Manager; Ms. Deepa Gehani, Company Secretary; and Mr. Antima Surana.

Now I shall hand over the conference call to Mr. Anish Maheshwari, the CFO of Navkar Corporation Limited for opening comments and then we shall continue with question-and-answer session.

Over to you, sir.

Anish Maheshwari — Chief Financial Officer

Good afternoon, and a very warm welcome to everyone present on the call. I would like — insights on the results of current quarter after the changes involved in the financials of the company after slump sale of two ICT business in last quarter. Here, I’m highlighting the details about the continuous operations of the company followed by glimpse of the turnover and the profit of discontinued business for the quarter.

Coming to the total revenue figures of this quarter, the same as INR121.79 crores for this quarter as compared to INR109.92 crores last quarter. This total income includes exceptional income, which is related to sale of trailers to Adani and others, partly remains of INR19.06 crores in this quarter. On these revenue figures, the profit tax — profit after tax of companies this quarter stands at INR42.3 crores in comparison to INR23.1 crores in last one. This is mainly because of reversal of deferred tax liability on account of sale of assets and slump sale along with the separate agreements with the Adani Logistics for sale of 16 — 615 trailers and 90 dwarf containers and for sale of 230 trailers to other party.

Then coming to profit before tax, the same is INR21.06 — same is INR21.6 crores as compared to INR18.5 crores in previous quarter. With that — I just wanted to be — given the elements of revenue of company during the quarter are as below. In case of CFS, PFT, volume of exports container handle stand at 25,639 TEUs from 24,200 TEUs on Q-o-Q basis, which has rise by 5% and from 28,469 TEUs on a Y-o-Y basis, the same is now down by 9.9%. Volume of export containers handles raised by 12.9 from 26,261 TEUS to 29, 869 TEUS on a Q-o-Q basis and from 36,951 TEUs on a Y-o-Y basis, the same is now down by 19.2%.

Coming to the EXIM turnover, is the same is around 14.7 — up by 14.7% from INR57.0 crores to INR65.45 crores. And about the domestic turnover, for this quarter is INR17.54 crores. In case of CFS, PFT, the number of trains handle is 193 in the quarter compared to 190 — 197 in last one. In case of CFS, PFT, that is discounted operations, we have only domestic turnover from this quarter onwards, this business was not transferred to the slump sale. The domestic turnover of ICD, PFT, quarter stands at INR13.1 crores compared to INR39.6 crores. The reason behind is that silver metal business, which was getting down because of railway leading import by last — imposed by 15% and last quarter itself, road has become better options for — in compared to rail.

Now I like — I would like to focus on light upon the fulfillment of the objective of the company slump sale. As presented earlier, the primary object for the slump sale proceeds was to pay off the existing debt of the company. In response to this, the company has weakened all its secured loans from banks or financial institutions and has got debt free status. After payment of all the debt, the extra funds name in the — name in form of fixed deposits in hands of company as of 31st December value of INR172 crores approximately.

Now I want to highlight the profit figure for quarter two, FY ’22, ’23. Operating profits of the continuous business for this quarter stand at INR34.36 crores as compared to INR41.55 crores. But when we compare the same with turnover, the operating margins at current quarter, 35% compared to 37% in last quarter. And the operating profit margin was not deviated significantly. The profit before tax, the exceptional gain comes INR2.55 crores as compared to INR18.53 crores Q-o-Q basis, the impact of profit due to the following factors, the common cost, which was there by company earlier. I just wanted to highlight out there.

The employee cost of the business sold and more by company recently enhanced the employee costs rose by INR4.6 crores to INR8.59 crores also this figure would be INR1.66 crores related to the manpower expense and diligence of Morbi, which has been expensed out of as per [Indecipherable]. The depreciation cost has rose from INR6.36 crores to INR7.38 crores instead of declining because of the depreciation impact of remaining assets of the unit sold in slump sale.

The finance cost appears to have risen the quarter in comparison to last quarter from INR4.61 crores to INR5.86 crores. This appears because of finance cost is not apportioned in the quarter between continuing and non-continuing business and whole impact is on the continuing operations only for the out of INR1.8 crores and the notional[Phonetic] impact of India’s cost, which is reverse on account of repayment of loans. Also, the prepayment and [Indecipherable] charges hit of INR1.7 crores is in this quarter. So over in all, there was a INR3.5 crores impact on this number.

The other expenses have also risen by license fee and charges for ICD Walmart being charged to continuing operations, the total hit of INR2 crores on account of the — apart from this INR1.91 crores of security mentor expense have been incurred for after the October month at ICD locations for smooth transaction now which is going to be discontinued for the future.

EBITDA margin has followed — fallen for INR28.85 crores to INR12.44 crores. The same belongs to higher employee costs attributed to the continued business and the professional fee in form of liability and lease charges, as mentioned above, other than that the advisory and other expense, which is incurred by the company for the slump sale deal. Also the reason of fall of revenue operations from INR109.26 crores to INR99.38 crores contributed at all. And the performance in current part stands at par as per revenue side and when the same comes to the profit side, the decline is because of lag of — this is impacted on the account running both our operations together, the reason of which we have started earlier.

Continue to area of new process development continuing at Morbi, the current completion phase of the FO[Phonetic] site project is almost completed, and the revenue has started from February 1st week of current year. Management is on the opinion that the new facility will help to acquire new customers and increase the profitability of the company in near future. Once the operation start full fledged, the same is to give the synergies impact to the company as a whole and overall probability would rise. After analysis of [indecipherable], I here like to state that the company’s performance in this quarter after slump sale in receding quarter aims to set the fit for growth in revenues as well as profit in the upcoming periods.

Now we will open the floor for Q&A session.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. We have the first question from the line of Ravi Kumar Bucha from Knitright Fabs India Private Limited. Please go ahead.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

Good morning, Mr. Maheshwari, this is Ravi Bucha, I’m a individual shareholder in your company. I would like to ask like you have INR177 crores in your bank, and you said you were in discussion with the management, and you will come out with some plan of repayment rewarding the shareholders. So any plans on dividend or buyback on this because we are already in the month of February now.

Anish Maheshwari — Chief Financial Officer

I can tell you, we are now completing our Morbi facility first because it’s almost on an operational side. So we just wait for the couple of quarters. Once everything will be done, like operations will be in a smoother mode and secondly, railways will be in place, railway orders already been placed. I think so. It may come in next one or two months, then after, we’ll definitely think on it and get back to the market.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

Right. I would like to ask one more thing. What is the kind of revenues what you are expecting from Morbi operations on a quarter-on-quarter basis? Can you just enlighten me on that, like what kind of revenues are expected?

Anish Maheshwari — Chief Financial Officer

So we started our occasion from 1st of February, and we are hoping that it will be in a smoother side until March. Then first quarter operations of 2024, I can be saying in the position where we can give the wide portioning over there in a Morbi market and really getting the trains of that particular thing after a couple of months.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

Okay. So any figures what you can put after — in the Q1 of next year? What’s the [Speech Overlap] for revenues?

Anish Maheshwari — Chief Financial Officer

So there we have projected that we have a facility of almost a full like containers volumes handling capabilities of our entire facility. Against that, there is a market of around — earlier we also discussed, there is a good market over there. First two months will be tough for us to get in that business and understanding towards the market strategies and customer requirement side. Then only will be in a shape to there, we can tell how we’ll be moving further for the customer solutions. And what will be the fair sense for the container handling capabilities over there in next couple of quarters.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

Okay. Thank you. All right. I just had this question. Thanks.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ganesh Shetty, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Good morning, sir and thank you for the opportunity. In continuation with the last — question as it’s to tell that a last meeting — call, the management has promised to go for buyback or dividend as soon as possible as the debt is clear. Now the debt is clear, we have a very handsome amount in the account also company takeout. So it is a very prudent from management point of view to declare some division at least for the shareholders. Now as you see the — most of the interest is going down and down in Navkar Corporation. And in spite of such a huge deal, the management is not giving any dividend or any rewards to the minority shareholders. The market cap of the company is going to go down. So it is a better interest of the company and corporate governance, and with due respect, I request you to consider this proposal very humbly and see that the company’s corporate government is enhanced. Thank you very much and all the best.

Anish Maheshwari — Chief Financial Officer

So I really appreciate your words, and I can tell you that we are in a verge of starting our Morbi operations first. Secondly, just for your information, the company has started — promoter has started acquiring their share in term of creeping acquisitions earlier also and they are planning to start some more operational things towards the — how we will be adding the value for the shareholders. And on that, we will definitely get back to the market once we will be making some static plan for the shareholders.

Now — till now, I can tell you that we have, in our mind, last quarter also, we do the same trend. We are having in our mind, once our Morbi operations will be in shape. And secondly, creeping has already been started in last one or two months, to add the value for shareholders and some further options, we’ll be definitely think on it and get back to the market. And I really appreciate your point too. We are definitely think on the same thing for the — how we’ll have to devaluate and add the value for the shareholders.

Unidentified Participant — — Analyst

My second request is, as we are doing very well like we are in a sunrise industry of logistics.

Anish Maheshwari — Chief Financial Officer

I really consider requests, sir. Don’t worry I’ll talk to management on this.

Unidentified Participant — — Analyst

I just want to have a suggestion that we should have a more communication with institutional investors on a regular basis and showcase our capabilities at our strengths and our balance sheet, all these things to be bought to the notice of the major shareholders or institutional shareholders. So that the interest in the staff or interest in the company will enhance and its overall will be a beneficial to each and every shareholder of the company. Thank you very much.

Anish Maheshwari — Chief Financial Officer

So basically, I just wanted to revert on it. For this quarter, I might say that for next quarter also, the common expenses for the company remains same or remain continue because our Morbi operations will take shape in the next couple of quarters, right? So I don’t want to enhance the other costs for the company. Till now the common expenses, which is made by the company, seeing that, I can tell you, we definitely think on it, we’ll go into the market and give the sense of — about our further operations towards the domestic as well as the Mumbai operations and the Morbi ones will be shaped then definitely going to the market and give our presentations with the numbers.

Ganesh Shetty — Individual Investor — Analyst

Okay. Thank you very much, sir. And all the best.

Anish Maheshwari — Chief Financial Officer

Thank you so much.

Operator

Thank you. [Operator Instructions] We have the next question from the line of from Vikram from PhillipCapital. Please go ahead, Vikram.

Sir, I would like to ask your question?

Vikram Suryavanshi — PhillipCapital — Analyst

[Speech Overlap]

Operator

Vikram, do you want me to ask the question on your behalf?

Vikram Suryavanshi — PhillipCapital — Analyst

[Indecipherable]

Operator

Vikram, your audio is not clear. May I ask the question on your behalf?

Sir, I’ll read out the question for him.

Anish Maheshwari — Chief Financial Officer

Yeah, please.

Operator

The question is, how is outlook on growth in domestic business going-forward? This is the first question.

Anish Maheshwari — Chief Financial Officer

So basically, we are — on the domestic front, we are more — taking more options on the heavy asset side like steel. Steel, we are already doing on a domestic business. Now we are thinking on a cement business also, which I had already been told to the market last time also. So we are taking strategic disciplines on the domestic market for the — earlier we do only agro and steel. Now we are more focusing on the heavy commodities also. So with that strategy, once we’ll come up with entire facility of Morbi with all railway will be on place. And as we have a categorical license, we’ll definitely think on it. Major concentration will be on a heavy commodity right now. So this is our strategy for the next couple of quarters, I can say three, four quarters.

Operator

Thank you, sir. And the next question is EXIM volume growth outlook.

Anish Maheshwari — Chief Financial Officer

So EXIM, — the Bombay will be remain same, remain continue. I think so they may be slightly debt or slightly higher side, might be 5%, but I can say. But domestic is a more focused and Morbi which is new, once the Morbi will come in, then after we will be getting clear sense for the Mumbai operations also with the cross-sales business. So I can say right now, Morbi will be giving new shape to the company, firstly. And secondly, once the Morbi will commence fully or in a manner of good operating side over there in a Morbi, then it will definitely give us a positive for Mumbai also. Or for EXIM as well as a domestic market, too.

Operator

Thank you, sir. [Operator Instructions] We have the next follow-up question from the line of Ravi Bucha from Knitright Fabs India Private Limited. Please go ahead, sir.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

Mr. Maheshwari, I have one more question for you. What is the status on this steel thing, which you are doing on the domestic operations with Mittal, which was hampered because of the export duty imposed by the government?

Anish Maheshwari — Chief Financial Officer

So it will be shape. That’s why we are thinking on other commodities for the heavy commodities as I told. Steel will remain continue because till now also business is remain continue, but it’s in shape, which was earlier INR40 crores — around INR14 crores which might take shape. After all these things will be — steel price will be going up and it might take because cost should be the matter. So that’s why we are thinking on different commodities now on agro as well as other commodities. So it might take shape in the next couple of quarters.

Ravi Kumar Bucha — Knitright Fabs India Private Limited. — Analyst

All right, thanks.

Operator

Thank you. [Operator Instructions]. We have the next question from the line of Naveen, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Good afternoon, everyone. I would like to understand why the employee expenses have been increased. It has been doubled of quarter three FY ’22 to — in FY ’22?

Anish Maheshwari — Chief Financial Officer

So basically, the reason being that is discontinued operations of Vapi, where we have employee cost, it will be segregate that will be again same for the Mumbai, but common cost for the employment, which is not getting down yet. All employees, which is on the role of company, like I can say the senior management team or LE team, which was having a 50% of cost for employment. So they are remaining same with the organization yet. And we are giving them other work for the movie and all. Till now that will be — common expense will remain same. So that’s the reason employee cost stand over there.

Unidentified Participant — — Analyst

Okay. I do have an another question, if I can go ahead.

Anish Maheshwari — Chief Financial Officer

Yeah, please.

Unidentified Participant — — Analyst

Okay. With regards to the Morbi, which is going to get activated from this January, I would like to understand what would be the expenses which would be coming in? You may need to buy trucks and everything, correct? To scale up the business. So what would be the impact for that?

Anish Maheshwari — Chief Financial Officer

So basically, we have already been added asset till now is around INR80 crores, in which we have 100 trailers which we added, right? Then which I told you for the domestic operations, we are going for the heavy commodity. Cement truck containers also be added to the fleet, where we have spent till now around INR17 crores. Then we added six kalmas to the operations for Morbi. So this has already been — so the FD, which I told you right now that after the asset which added to the company after that, that amount has come to the — in totality.

Unidentified Participant — — Analyst

Okay. No, I didn’t understand the rationale when you sold that off — earlier when selling it off to Adani, why — what was the need? You could have leveraged that existing infra whatever was there in terms of vehicles and everything here, right? Why a net new investment would have been required?

Anish Maheshwari — Chief Financial Officer

So basically, what happens, sir, that fleet, which was — we earlier — it will have our last call details with you, so earlier we know that we’ll be going to make the operations for the Adani for Vapi facility, right? Then they told they will handle their operations by their own. That’s why we sold it to them. And we have to take new fleets over there at Morbi. Otherwise, any which ways, if Morbi operations will be in a shape, then we’ll have to take other fleet or another fleet over there, and these fleet which we sold to the Adani, which was — remained continue for Adani itself in a lease model also.

Unidentified Participant — — Analyst

Okay. And subsequently, in the last conference call also, you said that you’re going to share the profits with the investors. Is there any dividend plan for oppose this selloff? What you have done?

Anish Maheshwari — Chief Financial Officer

So we have already been started gripping acquisitions in account of promoters for raising the value for shareholders. And now dividend will definitely plan for.

Unidentified Participant — — Analyst

Okay, thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aditya Sen from Robo Capital. Please go ahead.

Aditya Sen — RoboCapital — Analyst

Hi, sir. This is another Morbi question. So what is the total amount of capex that we have done in Morbi? And do we expect to do more capex in the same?

Anish Maheshwari — Chief Financial Officer

So till now, we have around INR190 crores approximately we did it Morbi, including our fleet and all. So project side, we have spent around INR140 crores and that is for the fleet. So from here, gradually, our operations will be in an improvement side, then we’ll have to think again on it. But for the — if you’ll ask me for next couple of quarters, I think so there is no further expansion or no further asset addition in the fleet.

Aditya Sen — RoboCapital — Analyst

Okay. And do we expect any other sort of capex in the overall business for the next two, three years?

Anish Maheshwari — Chief Financial Officer

Two years — two to three years, it will be challenging to me till now — right now because once our operations will be in a full fledge manner over there at Morbi, then we’ll have to think on it. Because if there is a cross-sell business will be on a higher side, then we’ll have to be think on the further capex towards the both the facility. Otherwise, there is — capability wise, if you ask me, there is no need for the capex for the installation on the project side, there might be need for further fleet addition itself.

Aditya Sen — RoboCapital — Analyst

Okay. And any guidance on the depreciation rent rate for FY ’24?

Anish Maheshwari — Chief Financial Officer

Depreciation rate will remain same because Morbi — after Morbi commencement, there may be a depreciation on fleet only because maximum portion for the capex is for the land and land development. So there is a depreciation if you’ll ask me for the fleet addition only otherwise the depreciation will remain same.

Aditya Sen — RoboCapital — Analyst

Okay. And the last one, any guidance on the revenue and EBITDA for next year, FY ’24?

Anish Maheshwari — Chief Financial Officer

For next year?

Aditya Sen — RoboCapital — Analyst

Yeah, FY ’24.

Anish Maheshwari — Chief Financial Officer

So we are now on a very lower side cycle now. So from here onwards, there may be — we are expecting growth of around 15% to 20% addition of Morbi for next year.

Aditya Sen — RoboCapital — Analyst

For Morbi. Okay. Got it, sir. Thanks a lot.

Operator

Thank you. The next question is from the line of Rahul, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hello.

Anish Maheshwari — Chief Financial Officer

Hi.

Unidentified Participant — — Analyst

Hi, sir. I just wanted to know what would be the revenue guidance for the next three to five years? Where do you see the company in the next three to five years?

Anish Maheshwari — Chief Financial Officer

Three to five years will be a tough question for me right now because we are more focusing on the new facility of Morbi. As I told you, for next year, if you ask me, so from Mumbai operations, we’ll be expecting growth of around 5% to 10% and for Morbi over and all, we are expecting 15% to 20% over and all in a growth side. It might be in a higher side, but now we are taking that growth as first quarter will be the full quarter to operation with our railway and all. And I can give you the fair guidelines for the next couple of years after first or second quarter. Three and five years might be a tough question right now because after slump sale deal–

Unidentified Participant — — Analyst

Do you think that 15 years to 20 years — 15% to 20% growth is sustainable for the next three to five years?

Anish Maheshwari — Chief Financial Officer

That I can say, 15% to 20% growth will be definitely — I can say, based on our past experience for Vapi also, first year, we were having around 15% growth and after second, third year, we were having around 26% to 27% growth. In that expect, I can say that it might be in the range of 15% to 20% year-on-year.

Unidentified Participant — — Analyst

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Anish Maheshwari, CFO, for closing comments. Over to you, sir.

Anish Maheshwari — Chief Financial Officer

So thank you so much to PhillipCapital and chorus call and all participants. I can say that with the blessings of you all and shareholders’ support, we’ll be on a higher side, we’ll be definitely come up with the fair sense of Morbi operations after one or two quarters, and it will be positive for company itself. Thank you so much.

Operator

[Operator Closing Remarks]