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The Bombay Burmah Trading Corporation Limited — Q4 FY23 earnings call

Call held 30 Sep 2023

Management summary

Bombay Burmah's FY23 performance was severely impacted by the insolvency of its associate, Go Airlines, leading to a significant consolidated loss despite 14% revenue growth. The company is pivotally managing its balance sheet through strategic divestments, such as the ₹291 crore coffee business sale, and focusing on growth in its Auto and Healthcare segments. Management expects the GoAir-related financial drag to conclude following a final ₹210 crore provision in Q1 FY24.

Highlights

Consolidated revenue reached ₹16,303 crores, registering a growth of 14% YoY
Reported a consolidated loss of ₹533 crores compared to a profit of ₹808 crores in the previous year
Recognized a massive impairment provision of ₹1,865.65 crores for Go Airlines in consolidated statements
Divested the coffee business for ₹291 crores to reduce overall debt and pay off secured loans
Healthcare (Dental) segment turnover surged 50% to ₹29.17 crores due to post-COVID clinic reopenings
Auto components (Electro Mags) revenue grew to ₹151.7 crores from ₹133 crores
Standalone profit after tax stood at ₹8.79 crores, down from ₹9.89 crores in the previous year
Management identified a final pending liability of approximately ₹210 crores for GoAir in Q1 FY24

Concerns

Go Airlines Insolvency

Key financials

01 Consolidated Revenue ₹16,303 Cr +13.9%YoY
02 Consolidated PAT ₹-533 Cr -165.9%YoY
03 Standalone PAT ₹8.79 Cr -11.1%YoY
04 Auto Component Revenue ₹151.7 Cr +14%YoY
05 Healthcare Turnover ₹29.17 Cr +50.2%YoY

What they filed

Q1 FY27: revenue up 8.0%, net profit up 17.1% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	4,761	4,685	4,519	4,712	4,943 +4%	5,066 +8%	4,818 +7%	5,089 +8%
Expenses	4,037	3,811	3,717	3,988	4,007	4,123	3,991	4,275
EBITDA	724	873	802	724	936 +29%	943 +8%	827 +3%	814 +12%
Margin	15%	19%	18%	15%	19%	19%	17%	16%
Other income	187	81	109	74	85	78	174	83
Interest	37	51	39	34	41	39	24	27
Depreciation	80	86	84	86	89	88	89	83
Profit before tax	794	818	788	678	891 +12%	893 +9%	889 +13%	787 +16%
Tax rate	35%	23%	26%	27%	36%	27%	12%	26%
Net profit	516	627	585	498	566 +10%	655 +4%	781 +34%	583 +17%
EPS	36.22	48.58	44.24	34.50	34.64	45.34	63.63	41.30

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Tea
37.38 lakh kilos Production₹-4 Cr Revenue Change
Coffee
639 metric tons Production₹291 Cr Divestment Value
Auto Components (Electro Mags)
₹151.7 Cr Revenue
Healthcare (Dental)
₹29.17 Cr Turnover

Guidance & targets

Other

GoAir Pending Liability Other · Q1 FY24 · High confidence ₹210 crores

There is, for the first quarter, there will be a liability. I will ask Mr. Datanwala... About 210. So that will be the last amount.

— Nusli Wadia, Chairman

Debt

Non-convertible Debentures Issue Debt · FY24 · High confidence ₹300 crores

Item number nine, approval for issue of redeemable non-convertible debentures of an amount up to INR300 crores.

— Murli Purohit, Company Secretary

Risks & concerns

Go Airlines Insolvency
high

The airline filed for voluntary insolvency due to Pratt & Whitney engine failures, leading to a ₹1,865.65 crore impairment.

Management acknowledged
Debt Levels
medium

Company divested coffee assets specifically to pay off secured loans and reduce overall debt.

Management acknowledged
Agricultural Volatility
medium

Tea production was lower by 4.34 lakh kgs due to excessive rain at Mudis during main cropping months.

Management acknowledged

Q&A highlights

2 direct

GoAir Liability and Future Impact Direct

210. So that will be the last amount... after that amount, there will be no further provisions required.

Confirms the end of the financial bleeding caused by the GoAir insolvency, providing a cleaner outlook for FY24.

Asked by S.V.R.B. Sastry

Share Split and Balance Sheet Errors Partial

Sir, on page 170, the shares of SBI... is splitted from INR10 to INR1. Either your Company Secretary is not giving the proper information to the Auditor or your Auditor is not asking.

Highlights potential clerical or disclosure inconsistencies in the annual report regarding investment holdings.

Asked by Manoj Gupta

Asset Gains and Tanzania Tea Performance Direct

Last year we had an exceptional loss due to GoAir issue. And we have made exceptional gain due to sale of coffee assets, for INR291 crores we sold and we had an asset gain of INR243 crores.

Clarifies the scale of exceptional gains used to offset the operational and GoAir-related losses.

Asked by Vinod Agarwal

2 min read 5 chapters

Detailed narrative

Go Airlines Insolvency and Financial Impact

The insolvency of Go Airlines was the defining factor for BBTC's FY23 results, necessitating a massive consolidated impairment provision of ₹1,865.65 crores. Management attributed the airline's failure to the non-supply and failure of engines by Pratt & Whitney, which grounded 50% of the fleet. A final liability of approximately ₹210 crores is expected to be accounted for in Q1 FY24, after which management expects no further outstanding impact from this matter.

Strategic Divestment and Debt Reduction

To strengthen the balance sheet, the corporation divested its coffee business for ₹291 crores during the year. This move was specifically aimed at reducing overall debt and paying off secured loans. While the coffee business was profitable, management noted it yielded low returns relative to the realizable value of the land parcel, prompting the strategic exit.

Growth in Industrial Segments

The Auto Components (Electro Mags) and Healthcare (Dental) divisions showed robust growth. Auto component revenue rose 14% to ₹151.7 crores, benefiting from increased automobile demand and a growing middle class. The Healthcare division saw a 50% turnover increase to ₹29.17 crores, driven by the reopening of dental colleges and clinics post-COVID and a better product mix.

Agricultural Segment Headwinds

The tea business faced challenges as production fell to 37.38 lakh kilos, a decrease of 4.34 lakh kilos YoY, primarily due to excessive rain at the Mudis estates. This led to a ₹4 crore decrease in tea revenue despite a higher average price per kilo. Conversely, coffee production increased to 639 metric tons, and Tanzania tea operations reported improved revenues due to better pricing.

Capital Structure and Future Funding

The company is seeking shareholder approval to issue redeemable non-convertible debentures (NCDs) up to ₹300 crores to bolster liquidity. This capital raise, combined with the proceeds from asset sales, is intended to stabilize the corporation's financial position as it moves past the GoAir crisis. Management remains optimistic about the long-term growth of its core industrial and healthcare verticals.

This is an AI-generated summary of a publicly available earnings call transcript.

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