- #NLCIndia's surpasses annual capex target
- What led to #AzkoNobel's higher Q3 profit?
Hiral Dadia and Hersh Sayta bring you small and midcap stocks to keep up with on 'The SMID Show'. #NDTVProfitLive
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- What led to #AzkoNobel's higher Q3 profit?
Hiral Dadia and Hersh Sayta bring you small and midcap stocks to keep up with on 'The SMID Show'. #NDTVProfitLive
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TVTranscript
00:00 [MUSIC PLAYING]
00:03 Hello and welcome.
00:09 You're watching NDTV Profit, and you're
00:11 tuned into the Small and Mid-Cap Show.
00:13 I am Heeral Dhadia, and with me is Harsh Saita.
00:16 Good morning, Harsh.
00:17 We have Prasanna Kumar, who is the CMD at NLC India,
00:22 who is joining us.
00:24 So if you can help us dissect the numbers a little bit here.
00:28 You know, certain exceptional items
00:30 which continue to reflect in your profit and loss.
00:33 How should one look at the performance
00:35 given these one-offs?
00:38 Actually, as you rightly said, there
00:41 is some regulatory movement and some favorable orders
00:44 in favor of NLC India.
00:46 In the last quarter, that added to our revenue and profit.
00:56 But our performance levels also, compared to quarter one
01:01 and quarter two, it is better, both in the generation
01:05 as well as the coal production and lignite production.
01:09 And this affected because of some rains
01:15 in the southern part of Tamil Nadu
01:18 and Tamil Nadu in the entire state.
01:22 That affected our generation and production levels.
01:24 Otherwise, there is a lot of improvement in comparison
01:28 to quarter two and quarter one.
01:29 And in the quarter four, we are expecting
01:33 that our performance will be improved,
01:36 and we will be reaching whatever targets are set by the government
01:39 of India.
01:41 Right.
01:41 Prasanna, one question I have with regards
01:44 to the exceptional item in terms of this quarter.
01:48 There has been an expense worth almost 1,638 crores
01:52 in the third quarter of FY23 versus a gain of 63 crores
01:57 in the third quarter of FY24.
01:59 Now, it says this has been--
02:02 what does this pertain to?
02:04 Because if this was taken into consideration,
02:08 then the numbers would have looked a little different.
02:12 Actually, there was some appeal pending with the Airtel
02:16 after the CERC order regarding the lignite transfer price
02:22 determination.
02:24 That came in the favor of NLP India Limited.
02:27 So this is mostly related to the Airtel order related
02:31 to the lignite transfer pricing.
02:33 So that is added to the regulator moment
02:37 to this financial balance sheet.
02:41 Sure.
02:42 So you've guided for a target of 100 MTPA
02:47 with regard to your mining capacity by 2030.
02:50 How do you intend to phase this in?
02:54 How quickly do capacities start getting added?
02:56 If you can give us a visibility, maybe over the next two years,
03:00 how much does your capacity go?
03:01 You're currently at 50 MTPA.
03:05 We are currently at 50 MTPA, 30 MTPA lignite, and 20 MTPA coal.
03:12 And our one mine, Pachavara South Coal Block,
03:16 which is in the state of Jharkhand,
03:18 is on the verge of starting the production.
03:21 We are expecting the production by June 2024.
03:26 That is a 9 million metric ton capacity mine.
03:31 And in addition to that, recently we
03:33 won one commercial block, North Dadu,
03:37 in the state of Jharkhand, of 3 million metric ton per annum
03:42 capacity.
03:44 And we also participated in recent commercial options,
03:50 where we are expecting a major block in the name of Energy
03:54 India Limited.
03:55 With all these things, we are hopeful
03:58 that we will be reaching the 100 million metric ton
04:01 target by 2030.
04:03 And we are envisaging a capex of more than 9,000 crores
04:07 for this mining business by 2030.
04:11 OK.
04:12 Overall, if you see in terms of the renewable space as well,
04:17 Prasanna, the government has come up
04:18 with a couple of announcements in the budget
04:21 as well, specifically with regards to wind and solar.
04:25 Now, if you have to take solar into consideration,
04:29 how is it that NLC stands to gain out of the announcements?
04:35 Madam, actually, NLC India Limited
04:36 was the early starter in the solar.
04:38 We were the first company in the country
04:40 to add one gigawatt capacity.
04:43 And we are targeting to become a six gigawatt company by 2030.
04:48 So already, two gigawatt projects
04:50 are in pipeline at the state of Rajasthan and Gujarat.
04:53 And as you rightly said, whatever the announcements
04:56 were made during the budget speech,
05:01 the focus was being given more to the rooftop solar capacity
05:06 addition, as well as offshore wind capacity.
05:11 And both the measures are very much useful in reaching
05:15 the target of 500 gigawatt addition by 2030.
05:20 So we are already taking all the opportunities,
05:23 exploring all the opportunities for the rooftop solar.
05:28 And also, we will be making due diligence
05:31 for the offshore wind outputs.
05:34 Understood.
05:35 And so a ton of CAPEX, which is in the pipeline as we see it,
05:41 how do you plan to fund all of this CAPEX?
05:44 You've recently paid down on debt.
05:47 I mean, by recently, I mean over recent years,
05:49 the last couple of years.
05:51 Would you start to now scale back up with regard
05:54 to your borrowing plan?
05:57 Actually, as you rightly said, we
05:59 are having a CAPEX plan of almost 82,000 crores by 2030.
06:05 Out of that, we are spending 46,000 for the thermal,
06:09 24,000 for renewables, and around 9,000 crores
06:12 for the mines.
06:13 And recently, Honorable Prime Minister
06:15 laid foundation stone of our 3 into 800 megawatt
06:19 ultra-supercritical thermal power station
06:21 in the state of Orissa, with investment
06:23 of more than 27,000 crores.
06:25 So with the debt equity ratio of 70/30 for thermal and 80/20
06:32 for renewables, we require an equity of around 21,000 crores
06:37 by 2030.
06:39 So we are planning to fund this equity
06:42 through the internal resources and the asset monetization
06:45 program of the renewables of 1.4 megawatt, which
06:49 we are doing through our 100% owned subsidiary,
06:52 NLP India Renewable Energy Limited.
06:55 So Prasanna, with everything said and done,
06:58 FY23, we've seen a revenue number of almost around 16,200
07:04 odd crores.
07:05 Margins were in that range of 35%.
07:07 Profits in that 1,400 to 1,500 odd crore kind of a range.
07:12 What is it that you will look at in terms of FY24 and FY25?
07:18 Because clearly, if you see from a margin perspective,
07:21 we've seen a dip this time around as well.
07:24 So what's that number looking like for both the years?
07:27 Well, the dip in margins in some areas,
07:31 that was on account of some post-measure conditions
07:34 and the weather condition.
07:36 Otherwise, we are hopeful that in '23, '24,
07:41 it will be better than the last financial year.
07:46 And going forward with the commissioning of our Gattampur
07:51 Thermal Power Station unit number one,
07:53 our margins and revenue will further increase.
07:57 Right, and talk to us, sir, about pricing.
08:00 We've seen lignite prices fall over the last maybe three
08:06 to four quarters.
08:07 Reached its peak around April, May.
08:09 Please correct me if I'm wrong.
08:11 So where do we see pricing now?
08:13 Do we see it stabilizing at these levels?
08:15 Or how should one look at it?
08:19 Actually, the last two years were exceptional.
08:22 There was a coal and lignite shortfall scenario.
08:26 That's why the rates were very high.
08:30 But now the rates are stabilized.
08:33 Both the coal and lignite prices are stabilized.
08:36 And although we are getting less price per ton for the coal,
08:43 our revenue from sale of the coal
08:47 is more because we increased our production levels
08:50 so that the revenue from sale of coal
08:53 is more than the last financial year.
08:56 Right, so that's with regards to NLC.
08:59 Thank you, Prasanna, so much for speaking to us at NDTV Profit.
09:03 If you see the stock as well, it has been a multi-bagger.
09:06 Let's just pull up a one-year chart.
09:08 You'll see today the stock is trading slightly
09:09 under pressure.
09:10 And I think mainly it's the margin profile as well,
09:13 which has played a small sport this time around.
09:16 And if you see from a profitability perspective,
09:19 it's just the exceptional that we're taking into consideration.
09:22 But clearly, almost 3 to 3 and 1/2 times
09:25 is the kind of gains that we've seen in the last one year.
09:28 Axon Noble, that's a stock to focus on as well.
09:32 It's Dulux paint brand that all of us are aware about.
09:35 The stock is down 1.3%.
09:38 Overall, if you go to see, the profits have climbed.
09:41 And this is mainly on the back of a strong demand.
09:43 They've surpassed a top line of almost 1,000-odd crores.
09:47 Margins have improved as well on a year-on-year basis.
09:51 Let's welcome in Rajiv Rajgopal, Chairman and Managing Director
09:55 at Axon Noble.
09:56 Rajiv, good morning and welcome to the show.
09:59 My first question coming to you is, overall,
10:02 from an earnings perspective, improvement
10:05 in terms of margins and profitability, what has worked
10:09 and where do you think is the deficiency?
10:12 Good morning, Bill, and good morning to all the viewers.
10:15 Yes, so we've had what I would say a productive performance
10:19 in the last quarter.
10:21 It's been a bit broad-based.
10:22 Where we've done well on the decorative paint
10:25 side of the business has been more in the luxury segments
10:28 as compared to the adjacencies of waterproofing,
10:31 as compared to some of the economy and the mass, which
10:35 is also reflected in our stronger contribution margins.
10:39 Yeah, the second, in my view, when
10:42 you look at the coatings business,
10:43 I think we've had a fantastic performance
10:46 in the industrial coating outer business
10:49 and in our automotive and refinished business.
10:51 We've had a bit of a challenge in the meridian protective.
10:53 It's only in the quarter, nine months,
10:55 they are still doing very well, largely
10:57 because of some back-end orders which
10:59 have got sort of delayed due to various reasons
11:02 and a bit on seasonality.
11:04 Yeah, so that's the sort of performance.
11:07 The margins were pretty good because the raw material
11:10 deflation has continued.
11:11 We've seen a bit of a stronger work happening
11:15 on a lot of cost efficiency programs.
11:17 And also our digitization at our back end has been strengthened.
11:22 So that's in all what I couldn't sort of talk about,
11:25 which is reflected in the quarter gone by.
11:28 Right, Rajiv Harsh also joining in.
11:29 I want to talk to you a little bit about what you just
11:32 spoke about with regard to premiumization.
11:34 Is that also contributing to the margin uptake?
11:38 Because you mentioned three, four reasons
11:39 and premiumization wasn't one of them.
11:41 So what I actually want to try and delve deeper into
11:44 is how is this premiumization playing through?
11:46 Is it a one-off given the fact that October to December
11:49 was largely a quarter where you will see a lot of B2C happening?
11:54 Or was it more structural?
11:57 No, good question, Raj.
11:58 So firstly, I said if the decorative luxury is done well,
12:03 for us, luxury is a strong contributor as a part of premium.
12:05 And hence, yes, there is a premiumization.
12:08 We see slightly different perhaps from the industry.
12:12 We see premium continuing to do well.
12:14 Two, three reasons for it.
12:15 I think we've got fairly strong iconic brands,
12:17 whether it's Deluxe Velvet Touch or Deluxe Leather Shield,
12:20 where we've got three brands, Deluxe Leather Shield PowerFlex,
12:24 Max, and Deluxe Leather Shield Protect.
12:26 So we've seen a rebound in that segment.
12:29 One, because we provide the best in class quality.
12:32 Second, after we launched a program called Deluxe Assurance,
12:35 which is a money-back guarantee for any consumer.
12:39 Say, if, Harsh, you decide to paint your home
12:41 and you have a problem with either the color, consistency,
12:45 or coverage, it's an offer which is available.
12:48 And we've seen a tremendous uptick post that.
12:51 Because we are very confident of the quality that we offer.
12:53 And we are willing to do a money-back guarantee
12:55 with our customers and consumers.
12:57 So we've seen a strong climb back after that,
12:59 because consumers also have given a validation to the fact
13:03 that, yes, this is a strong quality brand.
13:05 So it's led by quality.
13:07 But you will see a lot more work happening on new product
13:09 launches as the year goes by.
13:11 As we start getting towards the festive this time,
13:14 Diwali is going to be in October.
13:15 So you'll see a lot more work on advertising, branding,
13:19 and in terms of digitization.
13:22 We are also into a lot of analytics
13:24 and also building our digital platforms
13:26 to try and make sure that we are also
13:28 able to serve a very small niche.
13:31 But consumers are also going into DIY.
13:33 A very small niche, I must say.
13:35 But you can see--
13:36 we want to be patient there, because that will suddenly
13:39 one day uptake.
13:39 And we want to be ready in terms of platform products,
13:42 availability, et cetera.
13:44 That's what's leading to the premiumization doing well.
13:46 And I think we are well-placed.
13:47 Is it a one-off?
13:48 No, I believe that--
13:49 I think it's going to be--
13:50 we shouldn't be able to continue that,
13:53 unless there are some headwinds that we
13:55 see where consumer purchases sort of come back there.
13:58 Yeah.
13:58 OK, I also want to understand, Rajiv, from you,
14:05 as to how volumes are doing in the business.
14:07 Because you've seen a bit of a volume uptake in this quarter.
14:11 Is that a trend which you expect to continue,
14:14 given the fact that generally, when the real estate
14:18 construction side of business does well,
14:20 as well as infra is doing well, that's not a cycle
14:23 we've seen too many times.
14:24 And both of that is playing in parallel this time around.
14:27 And pains generally benefits a year
14:28 after we've seen the real estate cycle benefit.
14:32 So please talk to us about how you believe the numbers will
14:35 change in FY '25, '26.
14:37 Yeah, so I believe that we will continue
14:40 to see a volume growth, at least for a year or so.
14:43 So at least in the coming fiscal,
14:46 we do see that we should, at least for the first nine
14:51 months of the year, we will see strong volume growth.
14:53 Why?
14:54 Because simple-- we have taken a lot of price increases.
14:57 The industry has taken a lot of price increases
14:58 due to raw material inflation, normal deflation.
15:01 Obviously, and the margins reaching where they have,
15:04 we believe that there'll be a lot of reinvestment
15:06 on the brands in terms of making sure we get the right price
15:09 points back, and making sure that we
15:11 are competitive enough to make sure that consumers buy us.
15:14 So we will see volume growth.
15:15 We will continue to see double-digit volume growth
15:18 going forward, not just in the current quarter,
15:20 but also in the fiscal '25, '26.
15:25 Two other reasons that we'll see it, from our perspective,
15:28 look, we are obviously slightly under-indexed in the mass
15:31 and economy segment.
15:32 And obviously, we are trying to make sure
15:34 that we start getting our fair share there.
15:36 That can be another reason for an uptick there.
15:38 So these are two strong reasons that I
15:39 believe that we should continue to see strong volume growth.
15:42 In the paying side of the business,
15:44 coding side of the business is going
15:45 to be driven by co-sector index.
15:47 It's a reflection of how the industries are doing.
15:49 At this point of time, we believe that it will.
15:53 But this is an election year, and we
15:55 must be a little practical in the fact
15:56 that typically in the months of April, May,
15:58 that's in the first quarter of the new fiscal,
16:01 you will see a little bit of a slowness
16:03 before the results are out.
16:04 And we know the government has put in place, et cetera.
16:06 And then we start seeing infrastructure again pick up.
16:09 So typically, we've seen this in '14 and '19,
16:11 that during the months of the election,
16:14 there is a little bit of a slowdown
16:15 for natural, obvious reasons.
16:17 But after that, again, you see a quick pick-up tick.
16:19 We believe that the same will get repeated.
16:21 Right.
16:22 Rajiv, overall, let's look at the margins as well.
16:26 We've seen a 16.1% this time around.
16:29 If you have to extrapolate from the top line, bottom line,
16:32 and margin perspective, what is FY '24 and '25 taking
16:38 into consideration the demand and the growth you're
16:40 envisaging into consideration on the volume front,
16:43 how will these numbers look like?
16:45 So let me--
16:46 I always believe that, look, ultimately, we
16:48 are in business because we've got
16:50 to make sure that we are a profitable player because we
16:52 are a challenger brand as a number four
16:54 brand in the decorative paint segment.
16:56 So I always start saying, look, I
16:57 think we want a fair share of the profits.
16:59 We believe that, look, 13% to 15% margin
17:02 is a good place to be in.
17:04 And then we start looking at saying, what really
17:06 do we want to do?
17:06 We want to now start gaining market share.
17:08 And that is what we'll start reflecting in the top line.
17:12 We don't give guidances in terms of where it is.
17:15 But I do believe that in the medium to long term,
17:19 we do intend to--
17:20 even if you look at our current performances,
17:22 we do intend to be in the top two players
17:24 in terms of incremental growth.
17:26 I think that answers your question better.
17:29 Right, absolutely.
17:30 Rajiv, my last quick question is you
17:32 have a year on the ground with regard to rural.
17:35 I want some guidance from you or some thought process
17:39 as to which direction is rural moving.
17:41 And you've invested a bit with regard
17:44 to even supply chain in rural in the last couple of quarters.
17:47 You've been doing that.
17:48 What's happening on the rural side of things?
17:50 Are you seeing a recovery?
17:51 And how is Agzo really tapping into it very quickly?
17:55 Yeah, so look, for me, rural is doing well primarily
17:57 because I'm very under-indexed in rural right now.
18:00 So what I'm seeing may not be reflective of the industry
18:03 or even if you take an FMCG in general,
18:06 it's likely different.
18:07 But what I'm seeing, since you're asking me the question,
18:09 I do believe that, look, I think there
18:11 have been inflationary pressures which
18:13 have impacted rural demand.
18:15 When I've traveled across and seen markets and looked
18:17 at consumption levels, and people are sometimes
18:20 getting gratification of certain categories,
18:22 but sometimes including us, right?
18:25 But I think that is now more or less settling down.
18:28 I believe that there will be a period of time in a month
18:30 or so when we will start seeing rural come back.
18:34 We had some unseasonal rains which impacted crop pattern
18:37 in certain states, which has also
18:39 been a bit of a challenge.
18:41 But I do believe now in the current quarter,
18:44 you may see a minor upswing.
18:45 But you will start seeing the real upswing
18:47 when the elections are over and everything is back.
18:49 People will start now really getting
18:52 into consumption demand.
18:53 I see this year as being a stronger year for rural
18:56 compared to the year gone by, the coming year.
19:00 Right.
19:01 So some positive there as well, Rajiv.
19:03 It's been a pleasure interacting.
19:04 We are completely out of time on this one.
19:06 But good luck on the following quarters,
19:10 and congratulations on a good set of numbers.
19:13 But with that, we're completely out of time
19:15 on this edition of the Small and Mid-Cap Show.
19:17 From Hiral, myself, everyone who puts the show together,
19:20 thanks so much for watching.
19:21 More on the other side, Ask Profit.
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