Today's Top Gainer
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MSTC has two core business segments namely e-commerce & trading. MSTC plays a very important role as a service provider in e-commerce and is a market leader in this sector. It has the distinction of serving majority of Central/PSUs/State Govt. Department and a few Private Institutions for providing transparent, fair & seamless e Commerce services to its clients.
Of late, MSTC has forayed into Recycling Sector and Joint Venture formation with Mahindra Intertrade Limited is a step in that directions.
A. E-Commerce Business
MSTC has become a major standalone e-commerce service provider in the country. MSTC is attempting new and diverse lines of business such as tea, sago, gorgon nut (makhana), black-pepper, pineapple, hill-grass in agri-products, tendu leaves, timber, sal seed in forest products, human hair, fly-ash etc. Apart from this MSTC has also undertaken the e-auction of land, apartment, banks NPAs and also assets under DRT etc.
E-auction of sand Mining blocks in UP and exim-products of lOCL have been the signature events in the recent past.
Selling Agency Business
For a long period of time now, MSTC is acting as the selling agent of a large number of government departments/PSUs for disposal of scrap, surplus stores, old Plant & Machinery, e-waste, hazardous items, obsolete items, etc. MSTCs processes enable the sellers to achieve their annual revenue generation target from such disposal activities. MSTC offers complete package of services from preparation of the auction catalogue to the issuance of delivery order.
Starting with sale of coal through e-auction way back in 2004, MSTC has been developing different modules of e-auction to cater to the various needs of different sellers of items. Besides coal, MSTC is selling other minerals like manganese ore, iron ore, lignite, chrome ore etc. and various other products, raw pet coke, pet coke, human hair etc. MSTC is a nominated agency for all major mineral blocks and minor mineral blocks in few states.
In e-procurement, MSTC provides e-Tender and e-Reverse auction sendees backed by mandatory STQC certificate for quality requirements. Although, MSTC made a modest beginning in FY 2013-14 but it has made a significant growth in the subsequent year and is poised for exponential growth in future. The system complies with the guidelines framed by STQC for quality and security checks.
During 2017-18, MSTC has delivered certain key e-bidding packages for various ministries of Government of India. The DEEP portal became fully operational for medium term PPA and PPAs worth more than one lakh MW was settled through this portal. MSTC completed the balance transaction under DDUGJY scheme for bulk procurement of transformers, conductors and cables for various DISCOMs all over the country. During the last fiscal, MSTC introduced the e-bidding platform for tariff based competitive bidding for selection of inter-state transmission sendee provider. MSTC also successfully developed and executed the bidding for discovered small oil & gas fields for Ministry of Petroleum 8s Natural Gas.
MSTC developed specialized portal sendees for a flagship scheme of Govt. Of India as Ude Desh ka Aam Naagrik (UDAN) which has brought laurels for the Govt, in Civil Aviation Sector.
a. EXIM Portal for Petroleum Industry
The main problem faced by the petroleum companies is the lack of a well-functioning market-determined price discovery system. In the traditional mode of export & import of products, the competition is not getting generated and therefore the fair market price is not discovered. This results in the draining out of financial resources of the petroleum companies.
For better price discovery, IOCL has appointed MSTC Limited for developing online platform for their Export & Import activities. The export module consists of the e- tendering and forward auction. The bidders first submit their tender price, which is opened by IOCL and subsequently the forward auction is triggered for further improvement in price. Likewise in the import the e-tendering is followed by e-reverse auction.
This export and import module, which is first of its kind in India, is a niche product developed in collaboration of IOCL, for the petroleum industries designed & developed by MSTC. The entire process of this online platform for Export & Import of petroleum products is a very complex and the same takes care of every aspect of the export & import. This platform has been designed to handle export 8s import of various petroleum products like HSD, gasoline, benzene, bitumen, Naphtha, etc.
b. e-RaKAM (e-Rastriya Kishan Agri Mandil Portal
MSTC Ltd has launched a nationwide electronic portal - eRAKAM for trading in the agriculture produces. The online trading platform which primarily deals in food grains, vegetables, fruits, spices and all agriculture related commodities and connected farmers directly with consumers, has launched forward trading in pineapple, ginger among a number of other such commodities to make the platform successful. Various agricultural produces like pineapple, ginger, pulses, litchi, etc. have been auctioned successfully through this portal.
c. Online Draw System for selection of LPG Dealership:
Online Draw System is the process to select the applicants out of the eligible applicants, in secured and transparent manner, without any human intervention. The current system, online applications are requested from the interested candidate and then from these candidates, eligible candidates are allowed to take part in the draw. This software
is used in events to conduct online draws and display the names of the winners on the screen. The system is easy to use and ready for more complex draws. The application is developed with random number generation algorithm for conducting on-line computerized+ draw of lots (Online Computerized Draw System) by selecting only one eligible candidate at each time out of the total eligible applicants. Shuffling will occur for the names of the applicants along with their details in random order at the press of a button. Visualization of the shuffling process for display on the screen is there.
MSTC has developed e-procurement services providing end-to-end solution to NTPL for their purchases of coal. In addition, MSTC has developed and implemented e-reverse auction portal for imported Thermal Coal which has made import of coal easy, hassle free and economical. NTPL has utilized the system for procurement of 2.4 million tons of coal and immensely benefited by reducing their cost of material. Taking a cue from this, other clients have also sought for the similar services of MSTC.
E-Commerce business constitutes about 89% (91% in. 2016-17) of the total volume of business of the Company during FY 2017-18 and has the potential to grow exponentially. It contributed 65% (74% in 2016-17) of the total operational income.
B. Trading Business
In trading business, which constituted 11% (9% in 2016-17) of the total volume of business during FY 2017-18. MSTC acts as a facilitator for procurement of raw material for secondary steel producers and petrochemical industry on behalf of buyers and charge mark-up on percentage basis.
This business contributed 35% (26% in 2016-17) of the total operational income of the Company.
The trading division is engaged in import as well as domestic sourcing of bulk industrial raw material for actual users as well as traders. This division looks after sourcing, purchase and sale of industrial raw materials like Heavy Melting Scrap, Low Ash Metallurgical Coke, HR Coil, Naptha, Crude Oil, Coking Coal, Steam Coal etc. on behalf of various industries. Though its activities are confined to mainly Trade Financing at the moment, MSTC aspires to become a full-fledged Trading House in the near future.
The business module followed by MSTC involves entering into an Agreement with the Organisation (Customer) specifying the commodities/raw materials which MSTC will import or procure from indigenous sources. Security Deposit is collected from the Customer. The Service Charge collected is a percentage of the actual procurement value. On signing the agreement, the Customer indents its requirements and the actual sourcing is done. The material thus procured either by wrny of import or indigenous mode is pledged back to MSTC and is kept in the custody of a third party custodian. Thereafter, the Customer lifts the material on cash and carry basis after due authorization by MSTC to the custodian.
MSTC has also developed another scheme under which procurement is done backed by BG from the Customer. Customers who have sanctioned BG limits can use the same to procure raw materials / commodities for their projects or for trading. In this model. MOA is signed with the Customer after collecting SD. Procurement is done on behalf ol the Customers backed by 110% BG opened on any Scheduled Bank. I he payment is released to the Supplier by way of LC/RTGS in facilitator mode for import or domestic
procurement. The material is directly shipped to the customer thereby eliminating the need for storage which results in saving on account of warehouse and custodian charges.
Trading division has contributed significantly to the top line as well as the bottom line. The Service charge earned from this segment was X 10,540 lakh during the year.
Import of Thermal Coal
This line of business was started in order to meet the demand for imported thermal coal by the various power utilities in India, MSTC has been supplying imported thermal coal to such buyers on door delivery basis. MSTC participates in the tenders floated by the buyers for supply of imported thermal coal through its business associates on back-to- back basis. The business associates are empaneled through an open tender by MSTC. MSTC has successfully supplied 5.61 lakhs MT of imported thermal coal valued at ? 27,215 lakh this year against 21.2 lakh MT valued at X 77,260 lakh in the previous year.
The demand for imported thermal coal has shrunk in recent times due to increased domestic production. This has resulted in reduction in the quantity of Coal imported during the year. Since MSTCs markup is based on %age basis of the price of imported coal, there was reduction in the service charge income due to the fall in the quantum of imports.
The total performance of Trading Division during FY 2017-18 stands at X 9,35,181 lakh.
MSTCs foray into recycling sector and has formed a Joint Venture Company "Mahindra MSTC Recycling Pvt. Ltd." with Mahindra Intertrade Ltd., now known as Mahindra Accello to set up of the first Auto Shredding Plant in India for which input raw materials like condemned automobiles, white goods, etc. are required.
A collection and dismantling centre with state of art technology has been set up in Greater Noida as a supply feedstock for the main Auto shredding plant. Foundation work for the shearer cum baler in the plant is nearing completion. Power connection of Noida Power Company Ltd is going on. Vehicles are already procured from individual customers, OEMs, Government auctions and institutions and dismantled in plant. Certificate of Destruction has been issued to the customer for all the vehicles. Deregistration process has started for these vehicles.
MSTC is also conducting auctions for scrap goods generated in the collection centre.
Diversification, of Growth and future developments
1. MSTC in association with the Ministry of Road Transport and Highways, Ministry of Heavy Industries, Society of Indian Automobile Manufacturers (SIAM) and other such bodies has taken up for enactment of a Law for incentivizing compulsory scrapping of End of Life Vehicles as existing in other developed and developing countries. In the near future, Govt, of India is coming up with a policy in this regard.
Future Growth and Development
1 MSTC has developed its e- shopping portal namely -"M3" MSTC Metal Mandi a virtual market place providing B2B & B2C facility for sale and purchase of Metal products.
"M3" portal provides a unique facility to Sellers and Buyers of metallic products and raw materials to carry out their day to day business in a hassle free and transparent digital platform on 24x7 basis. Several Road shows and buyer-seller meets had been organized by MSTC in association with organizations like AIIFA, MRAI and BA1 etc. in different parts of the country to give wide publicity to the portal.
The "M3" portal provides sellers a wider exposure thereby enabling them to enlarge their market place and the buyers get a platform to shop in an open, competitive and fully transparent digital environment to get the best price on the other. The M3 portal provides a one stop shop for both sellers and buyers. Registration of Sellers and Buyers on the portal is continuously going on and the same is being offered totally free of cost as an early bird incentive.
In addition to the fixed price sale model, as per requirement of RINL, an additional feature namely: "Enquiry Based system" has been incorporated on the portal to obtain quotations from prospective buyers. The same has also been extended to various other sellers like Essar Steel India Limited, SAIL etc.
Transactions have already started taking place on the portal and products like High Carbon Ferro Chrome, High Carbon Ferro Manganese, MS Channel, MS Billet, ISHB, and Ferro Silicon have already been sold through "M3" portal and the business transacted through the portal has crossed Rs. 130 crore mark during the financial year.
1. North East Region is rich in agri and forest produce such as ginger, pineapple, black pepper, cardamom, amla, orange, kismis, orchid, etc. But the growers do not have any market access for their produces and the logistic support, which renders them hapless for their minimal remuneration.
Looking at the vast potential of North Eastern Region MSTC has embarked upon developing eco system bringing all the enabling partners such as North Eastern Regional Agricultural Marketing Corporation Ltd (NERAMAC) as an aggregator, Central Rail side Ware housing Corporation (CRWC), for logistic support.
This eco system will not only improve the financial status of the growers but also prevent the crops from colossal wastage and make available niche products to the rest of the country. This collaborative effort may play an important role as envisaged in the Government policy for the development of the North East Region.
2. MSTC is spearheading the initiatives of framing a recycling policy for India which will pave the path of converting presently an unorganized sector into an environmentally sensitive recycling sector.
Going forward a proposal for setting up of an e-Waste recycling Plant is also a business opportunity that MSTC is looking into. Efforts are on to explore the possibility of inclusion of e-Waste recycling plant with the proposed Auto Shredding Plant which can also extract & recover precious metals availability in the e-Waste.
MSTC is increasing the e-commerce Business exponentially to exploit the available potential with a focus on e-auction of mining blocks (both coal & non-coal), minerals. agri& forest produce and e-procurement. MSTC has plans to launch e-shopping malls for handicrafts, apparels, painting, etc. in various States to promote Cottage Industries.
3. MSTC e-procurement focus on private customers for all type business particularly E commerce.
4. Some of the major opportunities MSTC is pursuing:
1. MSTC is working with NTPC & CRWC for evacuating the abundant fly ash lying with
some of the Power plants where demand in the vicinity is very scanty. The fly ash from these Power plants will be transported in a specially designed wagons to the Cement plants which may buy fly ash at much higher rates (achieved in e-auction conducted by MSTC) to meet its requirement of raw material to make cement.
2. The recent initiative of the Government for sale of mineral blocks, both major and minor, through e-auction has also opened window of opportunity for MSTC and it has signed agreement with most of the State Governments which may yield positive results to the revenue of MSTC.
3. MSTC is making efforts to resurrect the dwindling trading business by ramping up the 110% Bank Guarantee based procurement business model. Besides this, MSTC is gearing up to take up e-commerce enabled trading business which will be less risky business than the existing trading business model. It will jack up the turnover of the Company significantly due to pure trading business.
4. MSTC has signed an agreement with NAFED to sell the food grain lying with various godowns in the country through e-auction. Procurement of the same is also within the ambit of agreement through e-reverse auction.
5. E-procurement is another potential area in which MSTC is making a rapid stride to grab the business. MSTC has introduced multi broker facility to make much deeper dent in the e-procurement domain of business
6. Govt, of Rajasthan has appointed MSTC for e-Auction of Royalty Collection Contract, excess Royalty collection contract (ERCC), Prospective License-cum Mining Lease (PL cum ML) and Mining Lease for minor minerals.
7. Govt, of India has engaged MSTC for implementation of its various flagship of Innovative schemes through its e-Commerce portal some are already implemented and some are upcoming. One such scheme is disinvestment of CPSE through e commerce route and is being spearheaded by DIPAM.
8. MSTC has successfully conducted e-auction of coal linkages for unregulated sector such as cement, steel, sponge iron, etc. The e-auction of coal linkage is on the anvil under Shakti scheme by Ministry of Coal.
9. The successful portals for exim products for IOCL may be extended to other OMCs both public and private.
Statements under "Management Discussion and Analysis" are on Companys projections and estimates. Actual results may materially differ from such projections and depend on economic condition and industry demand in the relevant domestic and international market. Government regulations including fiscal regulations and other incidental factors may also affect the projections and estimates.
Discussion on Financial Parameters with respect to Operations and Performance
A) Agency Business
This year the total volume of Agency Business stands at ? 36,39,015 lakh, against ? 32,71,682 lakh in 2016-17. Break-up for the year 2017-18 vis-a-vis 2016-17 is as follows:
Volume of Business (Rs. in lakh)
|Iron ore e-auction||6,84,976||5,33,455|
|Total (A) :||36,39,015||32,71,682|
Volume of Business (Rs. in lakh)
|Sale of Scrap||19,58,152||17,21,604|
|Sale of Coal||9,95,887||10,16.623|
|B) E- Procurement|
Volume of Business (Rs. in lakh)
|Total (B) :||36,26,896||14,04,149|
|Total (A+B) :||72,65,911||46,75,831|
The performance of the Trading Division shows a total volume of business of ? 9,35,181 lakh, against ? 4,59,765 lakh in 2016-17. Break-up for the year 2017-18 vis-a-vis 2016- 17 is as follows:
Volume of Business (Rs. in lakh)
|Total (C) :||9,35,181||4,59,765|
|Grand Total (A+B+C) :||82,01,092||51,35,596|
Risks and Concerns Agency Business
The Selling Agency business has inherent risk since principal can any time decide to do the selling job themselves. Of late, principals are resorting to tendering and small players are quoting very less rate of service charge owing to their less investment in infrastructure and nil obligations towards CVC guidelines and IT Act, 2000. However, because of quality and transparency, MSTC has retained most of the business in this segment.
Being a PSU, MSTC has to follow all the guidelines issued by CVC, regulation of IT Act 2000 and other audit requirements of STQC for which, MSTC has to invest huge amount towards Systems infrastructure, whereas, the private players are not under any such obligation. Therefore, unless Government Departments and PSUs insist upon fulfillment of criteria in line with CVC guidelines by the service providers in the tender documents, it would be increasingly difficult for MSTC to get orders, since private players, having scanty infrastructure, can afford to quote very low service charge.
Trading Business (Import & Export)
This segment mainly functions as sourcing of raw materials for industries either through import or domestically. The materials remain pledged to MSTC and delivery is given to the customers on payment basis. There is an inherent risk of not lifting material as per schedule by the customers mainly due to change in their production schedule and volatility in the market. However, the risk is substantially reduced for sourcing materials against receipt of Bank Guarantee for 110% of value from the customers.
MSTC is pursuing e-commerce enabled trading business which has minimum risk involved as compared to existing trading business model.
Risks, Internal Control Systems and their adequacy
Risk Management Policy in MSTC for trading was introduced in the year 2008-09. The policy has been last revised on 05.04.2018. MSTC makes it certain that the internal control system functions within the risk appetite of the Company and is being fine-tuned to include more safeguards for being more effective.
Risk Management Policy for another segment of business i.e. e-commerce has also been introduced in 2015-16 to have necessary safeguards in this business too.
M/s. M.C. Bhandari 8s Co., Chartered Accountants was assigned with the Internal Audit function of the Company for the year and their reports are put up to the management at regular intervals and summarized statement of important issues are placed before the Audit Committee. The Audit Committee analyses the functions of the internal control system and recommendations of the committee are put up to the Board and those are implemented as per the considerations of the Board. Audit Committee also considers various financial statements for risk analysis and control.
Conservation of Energy and Resources
MSTC works primarily in the field of procurement of scrap materials, especially ferrous scraps from different consumers and trading of those scraps for recycling. Thus, MSTC works for the conservation of the natural resources, reduction in pollutants, conservation of energy by recycling ferrous scraps into a re-useable form. MSTC is in a way recycling Company that consolidates facilities and auctions scrap of various types for reuse after processing by its buyers.
Information on development of HR, Industrial Relations and Corporate Social Responsibility is mentioned in the Directors Report.
The Auto Shredding Plant being planned by MSTC will be first of its kind in India, will promote Secondary Steel making in India using IF and EAF routes. These processes consume less energy and pollute less than primary process of utilizing BFs and Convertors etc.
The productivity under this route is also much higher than the conventional methods.
For & on behalf of Board of Directors