NAVA Q1 FY27 earnings call

Nava Limited commenced FY27 on a strong note, achieving an all-time quarterly high consolidated total income of INR 1,269 crores. The stand-alone total income also reached a record INR 689 crores. This robust performance is attributed to the strength of the company's diversified portfolio and disciplined cost management, alongside lower coal and manufacturing costs and dividend income from Nava Global.

The commissioning of Phase 2 of the MEL thermal plant, a significant expansion, has been delayed by a couple of months to Q2 FY27-28 (June-July timeframe) from the initial Jan-Feb FY27 target. This delay is due to logistical challenges and global conflicts affecting critical material shipments. Conversely, a 100-megawatt solar power project is on track for commissioning by the end of September 2026, marking a new strategic direction. The sugar plant in Zambia is projected for commissioning in Q4 FY28, with an expected annual revenue of INR 55-60 million.

The company maintains a consistent debt profile for its projects, with the MEL Phase 2 project costing INR 400 million, funded by INR 300 million in debt and INR 100 million in equity. Management affirmed that all current and envisaged projects are adequately funded through existing equity and cash reserves, negating the need to sell assets under distress. Nava Global's dividend policy is set at a minimum of 30% of PAT.

Nava Limited continues to carry its land assets, including 65 acres in Hyderabad and 200 acres in Samalkot, at historical cost as per accounting standards. While acknowledging the significant appreciation in value, management has engaged a third-party to study current asset values and explore potential options for these assets, with the study currently ongoing. This review aims to maximize shareholder value from these long-held assets.

Operations in Zambia remain unaffected by recent elections, with the company having navigated multiple political changes previously. Exploration for lithium and manganese mining is underway, though experiencing a slight slowdown due to elections. Initial indications for manganese are promising, with efforts to convert the exploration license into an exploitation one. The Maamba power plant and other international assets are held under Nava Global, which is 100% owned by Nava Limited.

The Zambian energy segment's EBITDA margin saw a decrease due to less reversal of ECL credit, but management projects a sustainable margin of 45-50%. The consolidated EBITDA is expected to be between 35-40%. The metals business faced margin struggles, but management anticipates stability or a slight increase by the end of the financial year. Sales in the metals segment were slightly impacted in Q1 due to a shutdown of the Orissa unit for maintenance, which resumed operations on August 1st.

Nava Limited is actively exploring new avenues in power generation, particularly in the renewable space, including solar, wind, and battery storage solutions for round-the-clock power. The company is also evaluating the emerging small modular reactor (SMR) technology. These expansion efforts are location-agnostic, focusing on opportunities that offer the best returns and risk profile, both in India and internationally.