Nava Bharat Ventures Ltd Management Discussions.

Industry Structure and Developments The Global Economy

In the world over, Covid-19 is undoubtedly the upper most concern in everyones mind. This pandemic has delivered a global shock of enormous magnitude; protection measures necessitated by it are severely impacting every kind of economic activity all across the world. While the growth rate of global economy at 2.3% for 2019 itself was the lowest of the decade, the International Monetary Fund (IMF) has predicted that the global economy will contract sharply by 3% in 2020, much worse than in 2008-09 financial crisis. Countries and corporates are being pushed into unchartered territories and challenges, with hardly anyone being able to see a clear picture. In its Annual Report on the World Economic Situation and Prospects 2020, the UN said growth slid in virtually all the major economies and slowed in all geographical areas except, to some extent, in Africa. Amid rising tariffs and rapid shifts in trade policies, business confidence has deteriorated, dampening investment growth across most regions. In addition, softening demand has also affected global commodity prices, particularly oil and industrial metals. On the positive side however, the Report said, the recent US cuts in the Federal Rate may promote some economic activity. But, the continuing policy uncertainty, weak business confidence and slowing job growth are likely to weigh heavily on demand. Pursuant to the Covid-19 pandemic, causing widespread global disruption, IMF envisages the global GDP to see a contraction of 4.9% in 2020. In a baseline scenario which assumes that the pandemic will fade in the second half of 2020 and containment efforts can be gradually unwound the global economy is expected to bounce back and grow by 5.4% in 2021, as the economic activity normalises, helped along, by vigorous policy initiatives. A sharp economic rebound would begin promptly if pandemic-control measures could be largely lifted in the near term, and fiscal and monetary policy responses succeed in supporting consumer and investor confidence, leading to a prompt normalization the unleashing of pent-up offinancial demand.

The Indian Economy

It has been quite challenging for the Indian economy, which saw a steep decline in the July-September quarter of 2019, when Gross Domestic Product (GDP) was at its lowest in seven years at 4.5%. Several sectors chiefly real estate, aviation, automobile and construction suffered a constant decline in demand. The banking and financial services sector also witnessed a serious crisis due to rising Non-Performing Assets (NPAs), bad loans and squeezing credit limits. The cumulative effect of these adverse developments is seen in the envisaged growth rate of 4.2% for 2019-20, a sharp fall from 6.1% in 2018-19 and this is further accentuated by the Pandemic outbreak in March 2020.

A massive contraction is expected further in the 1st quarter of 2020-21, due to the two-month lockdown, thereby pulling down the full-year growth by 5-7%. The RBIs Monetary Policy Committee has however, refrained from providing any growth projections for the first time in its history, citing the huge uncertainties around the pandemic and its impact on various sectors. fis deficit for 2019-20 stood at 4.59% of Indias the GDP, against the revised estimate of 3.8%. This puts a limit for the government to offer fiscal relief to companies hit by the pandemic.

Moodys Investors Service has predicted that the Indian economy will not grow in the current fiscal because of the ‘deep shock triggered by Covid-19. It has only predicted a 2.5% growth for FY 2021.

Opportunities and Threats Ferro Alloys

Indias bulk Ferro Alloys market is 5.10 Million Tonnes (MT), as per June 2019 Ferro Alloys Association of India. Ferro-Manganese and Silico-Manganese are both manufactured under bulk Ferro Alloys, but Silico-Manganese has become the more important of the two.

Potential Problems for the Industry

The industry has been going through a slowdown for the last five years and the production of Ferro Alloys has stagnated. The industry needs to be promoted through a mix of progressive market development strategies to offset cheaper imports.

The following lockdown-induced bottlenecks are likely to hamper the industry in the near future:

Getting transportation to move goods to the required destinations would be a challenge.

Manpower available to factories will be in short supply to run operations at optimum capacity.

Due to closure of Manganese and Chromite mines either due to lockdown of mines worldwide or delays in operationalizing the mines that have recently gone through auction process there will be a shortfall of Raw Material, which will pose a problem.


Indias per capita consumption of steel is 69 kg, as against the global average of 214 kg. In 2019, India was the worlds second-largest crude steel producer with 111.2 MT. By comparison China, the largest producer with 996.3 MT, has a per capita consumption of 590 kg.

The steel sector has borne the brunt of the recent setbacks in the Automotive, Construction and Rail sectors caused by the Covid-19 pandemic. This says the Indian Steel Association (ISA), will cause a 7.7% drop in demand. According to CRISIL, this drastic fall in demand, logistical constraints and huge labour shortages will lead to deferment of large infrastructure projects.

Even before the pandemic, the steel sector had been facing challenges that need to be addressed, if India is to bounce back. Three important challenges calling for urgent action are: 1) dependence on imported coking coal, 2) high logistics costs and 3) import of high-grade steel, which is used in power, defence and automobiles. Currently, India is heavily dependent on Australia for its coking coal. Such dependence on one country being inadvisable, new markets such as Russia and Mongolia are being explored by Indian steel producers, contingent on logistics and other terms being favourable.

Opportunities for Growth

The Governments new Industrial Policy is beginning to give a growth-oriented push to the sector. Liberalisation has brought in private players, investments for modernisation and technology infusion. Removing it from the list of industries exclusively reserved for the public sector and releasing it from compulsory licensing has led to the setting up of new cost-effective steel plants that use state-of-the-art technologies. The recent developments in the IBC process could also result in revival of defunct capacity on brown field basis thus ramping up the steel production in the country.


The Indian power sector has a total installed capacity of 3,70,348 MW, which is set to meet any surge in demand in future. But the current peak demand at just 1,82,533 MW is barely 50% of the total installed capacity. This reserve capacity of 50% in India is uncomfortably high, leading to reduced use of base load capacities, especially in thermal power segment. As per the Central Electricity Authority (CEA), the Plant Load Factor (PLF) of thermal units in FY 2019-20 was just 56.1% (the lowest in a decade) and is expected to fall further in 2020-21. Nearly 262 thermal power plants which had a capacity 65,133 MW are now shutdown for want of demand. The Governments avowed intention of ramping up the share of renewable energy from the current 24% could work against the interests of thermal power plants, especially those dependent on coal. In the short to medium term thermal power plants could however look for steady supply of coal at a reasonable cost though that would not salvage the deceleration being faced by this sector. The Covid-19 pandemic has added an entirely unexpected and new dimension to these problems.

Measures needed to Improve the Power Sector

To make this sector more efficient (since we have surplus units with high variable costs need capacity),inefficient to be weeded out. Indias per capita consumption of power is comparatively low at 1,181 units which should be leveraged to pursue power intensive manufacturing and higher retail consumption through an attractive tariff regime.

Tariffrationalization is also an urgent requirement, as industrial consumption has reduced and domestic / agricultural i.e., low-paying customers demand has shot up in recent months, especially in the wake of the

Covid-19 pandemic. Tariff rationalization will mitigate power manufacturers cash flow problems. The right price needs to be paid for electricity consumption; sections of society that get preferential rates should be covered under the Governments Direct BenefitTransfer. An independent regulator is needed to carry out these corrective measures.

Segment–wise Performance Ferro Alloys

Nava Bharat Ventures Limited (NBVL) is a leading manufacturer & exporter of Manganese and Chromium Alloys. NBVL makes bulk Ferro Alloys (both Chromium and Manganese) for consumption by steel producers. The Company has operating capacities to produce 1,25,000 TPA of Manganese Alloys and 75,000 TPA of Chromium Alloys. The current capacity utilization of more than 80% is considered above par as per industry standard.

The Companys Ferro Alloys capacities are supported by captive power giving them certain inherent advantages in terms of availability of power and control on costs. Advance procurement of manganese ore, committed orders with reputed steel companies and the conversion arrangement with Tata Steel helped the Company overcome the severe sector volatility during 2019-20. The following table shows the quantitative performance of the ferro alloy business in 2019-20 comparable to that in 2018-19 after considering the lockdown affect in March 2020.

Ferro Alloy Volumes

Year Production MT Sales MT
2018-19 1,66,203 1,67,178
2019-20 1,69,460 1,66,655


The power business of the Company is driven by its industrial power plants aggregating to 204 MW capacity catering to the entire power requirement of the ferro alloy production besides merchant sale of surplus power as is permitted and wherever it is providing a better overall contribution to aid better recovery of fixed costs.

On a consolidated basis the Company has capacity aggregating to 434 MW in India. Barring independent power plants adding to 90 MW in Odisha and Andhra Pradesh, the rest have contributed to the overall profitability of the Consolidated Operations. The inoperation of 90 MW capacity was on account of certain legal impediments in Odisha and generally very weak power realisations in spot markets through power exchanges with no bilateral short term contracts being around.

The 150 MW independent power plant of Nava Bharat Energy India Limited (NBEIL) in Telangana had an erratic power dispatch schedule from the Discoms during 2019-20 impacting its performance which was sub par.

Power Business – India

Nava Bharat Ventures Limited (Standalone) NBEIL (Subsidiary)
Location Paloncha, Telangana Kharagprasad, Odisha Dharmavaram, Andhra Pradesh Paloncha, Telangana
Capacity 114 MW (1 x 50 MW, 2 X 32 MW) 150 MW (1 x 30 MW, 2 X 60 MW) 20 MW (1 x 20 MW) 150 MW (1 x 150 MW)
CPP - 90 MW
Plant Type Coal Fired Power Plant (CPP)* Integrated Power Plant (IPP) - 60 MW IPP IPP
Fuel Source Mix Coal Linkage Coal Linkage Coal & Bagasse Captive Coal E-Auction

Overview of the Power and Coal Business of Maamba Collieries Limited (MCL)–Zambia

MCL operates Zambias only integrated coal fired power plant with installed capacity of 300 MW representing about 10% of Zambias total installed power generation capacity. MCL has a long-term 20-year PPA for net capacity of 267 MW with the state utility (ZESCO), backed by Sovereign Guarantee. The PPA is based on Declared Availability under a "Take or Pay" arrangement. The coal mining and the 300 MW power plant operations andintegratedbusiness to the consolidated financials of the Company. w issues concerning flo Therehavebeencertaincash the power sales to ZESCO and the receivables from it have substantially escalated in 2019-20. Though ZESCO and the Sovereign Guarantor are fully committed to discharge the outstanding receivables, reportedly fiscal imbalances and revenue mismatches of the Utility had a deleterious affect resulting in a stalemate. Consequently, the committed debt repayment program of MCL has also been adversely impacted giving rise to severe breaches of loan covenants by MCL. MCL has chalked out a multi-pronged action plan to set right the cash flow concerns due to payment shortfalls by ZESCO. This involves enforcement of certain dispute resolution rights under the PPA, prospective adjustment of power tariffand simultaneous restructuring of the remaining long term debt of US$ 413 Million. These are long haul activities and are expected to be spread over the next two years, following which MCL should be in a position to distribute equity returns. The time line is justified in the context of value creation for MCL

Healthcare Enabled Services

Our foray into international healthcare reflects our assessment of the long-term potential of the healthcare sector which, spurred by rapid advancements in diagnostic services and treatment, is one of the fastest-growing sectors globally.

The Companys investments in this business are routed through a Singapore Joint Venture Company with a 65% stake. The exclusive distribution rights of Monofer in Malaysia have received an impetus through distribution rights in Singapore as well. While it is in early stage, the foray has earned a good name for the Companys subsidiary which should fetch other related businesses in its fold spurring up the enterprise value.

Operations & Maintenance Services

The Companys foray into O&M services for power plants took genesis with the service offering to MCL.

These services have been delivered in accordance with the O&M Contract which underwent thorough scrutiny of the lenders as well as the JV partner in Zambia. Nava Bharat Group Companies have pursued a risk matrix based on onsite and offsite deliverables under the Contract and have helped MCL maintain an optimum performance of its 300 MW Power Plant subject to local grid and other limitations.

The Standalone financialsof the Company derive benefit of the O&M support revenue though it is neutralized in consolidated financials.

The Company plans to leverage upon its experience of running medium sized industrial and independent power plants in India, ideally supplemented by its O&M experience in Zambia, to pursue other business opportunities in this space.

Outlook Ferro Alloys

The Company expects significant erosion of the revenue and profits in ferro alloy business for 2020-21, arising from the complete disruption of businesses across the supply chain in 1st quarter and the lasting volatility owing to the pandemic outbreak of Covid-19 in 2020-21. The manganese alloy production could keep of pace for the rest of the year although same cant be said in respect of sales and revenue which are critically dependent upon business continuity at the steel customer end. The Conversion arrangement with Tata Steel which expired on March 31, 2020, has continued with TSL taking control of all the Chrome ore mines that have been auctioned so far. The Company has been engaged with Tata Steel on the commercial side of the conversion arrangement for ore from its new mining concessions, to take effect in the later part of 2020-21. The arrangement could however continue for a number of years if the interests of both the parties are aligned for mutual advantage.

Power Sector

Indian Power Operations

The Company expects that captive consumption remains the sole driver of business in 2020-21 with merchant sale of power in the spot market through Power exchange proving to be extremely unviable.

For the Independent power plants the scenario for 2020-21 looks grim with no bilateral short term contracts in sight and alternative power dispatch is unviable. The Company is however looking at putting together a consortium of bulk consumers to see whether an arrangement could be worked out within the regulatory framework to provide stable power generation in its IPPs aggregating to 210 MW.

The 20 MW multi fuel based process power plant and the huge tract of industrial land appurtenant thereto are planned to be monetized and the Company is exploring various options.

Zambia Power Operations

MCL envisages coal mining at its optimum scale with a new mining block also being operationalized in 2020-21 and so expects to deliver strong financialperformance under this segment.

The 300 MW Power Plant will undergo major overhaul as mandated by the Original Equipment Manufacturer (OEM) recommendations in 2020-21 and which could impact the availability and related revenues for about four months. Barring that MCL expects to run the power plant at its full capacity for the rest of 2020-21, especially given that Zambia is likely to face a severe power shortage on account of reduced hydro generation in the second half of 2020-21. MCL also expects some interim cash flow solutions to emerge during the later part of the year paving way for a better financial position.

Risks and Concerns

All the Companys businesses are commodity driven in one way or other. The associated risks and concerns relate to troughs in trade cycles and vulnerability to the lack of control on input costs as well as pressure on margins.

1) Ferro alloys

Demand for ferro alloys is singularly dovetailed with the prospects of the steel industry. Moreover, the fortunes of the steel industry mirror the economic climate prevalent across the globe. Alloy manufacturing industry is highly fragmented marked by the presence of a large number of unorganized players. This is because the entry barriers to the ferro alloy industry are low on account of low technology intensity.

The Company expects that Covid-19 induced slow-down could affect the entire supply chain of the ferro alloys in 2020-21. Procurement of a third of annual manganese ore requirement on a long term firmcontract and certain process innovations that the Company is pursuing, should help it obtain reasonable control on the costs in this year. This facilitates the Company to be vibrant to volatile market developments to ensure that quantitative parameters are duly kept up at an optimum level. The Conversion arrangement with Tata Steel, though not devoid of margin changes, largely insulates the Company from the volatility seen in High Carbon Ferro Chrome market worldwide.

2) Power generation

The thermal power generation sector, although accounting for more than 60% of the power generation in India, continues to be plagued with multifarious issues, principal issues being the spiraling coal costs from the state run coal companies and drastic fall of industrial power consumption in the country. Coal auctions have not yielded the desired cost advantages especially in power generation. A certain overweight on renewable energy through solar power bids, made thermal power generation a costlier proposition. The cumulative affect of all these factors are seen in power dispatches through exchanges at marginal costs which are highly unviable in the long term for the sector. The cash strapped power distribution companies have been relying more on spot markets at these low prices of exchange giving merchant power market a short shrift. Very few Distribution Companies are pursuing bilateral tenders in both short and medium terms increasing competition amongst thermal power generators and further eroding opportunities in this space.

The Company has therefore chalked out the business plan based on captive consumption of power for production of ferro alloys. Though it does not address the fall in optimal generation, the operations ensure that captive power is made available at a lower cost and that fixed costs are at-least completely recovered if not providing a margin above them, spanning about 204 MW of capacity.

For the balance merchant power capacity of

210 MW the plan is to tie up similar captive usage by bulk consumers within the regulatory framework.

Riskprofile Investments of

The Company has investment exposure for the integrated Coal & 300 MW Power project of MCL in

Zambia, development cost of the commercial agriculture & processing in Zambia, seed capital for health care enabled services in Asia Pacific (APAC) region. The investment in MCL through Nava Bharat (Singapore) Pte. Ltd. (NBS) comprises equity share capital (65%), Shareholder Loans and interest accrued thereon. The Company considers that the Enterprise Value (EV) of MCL adequately covers this exposure and that the suite of internationally enforceable financing and documents including Sovereign Guarantee provide the requisite safeguards to the investment exposure. Once the systemic imbalances with the Utility being the sole off taker are addressed either through dispute resolution process or through bilateral discussions, the Company expects due returns on this investment to commence in about two years, spurring up the EV further. Though the Government of Zambia has been urging MCL to take up expansion of power generation to 600 MW, an appropriate investment decision is still a long way pending the streamlining of operations and cash flows at the prevailing capacity.

The Development cost of Commercial agriculture and processing project is at a nascent stage and is confined to base infrastructure development at the project site of 25,000 acres. There will be marginal expenditure towards care and maintenance of the project site infrastructure till such time as the Government fulfills its committed obligations of proper approach road and power connectivity to the project site which is expected by mid to end 2021. The Company has in the interim been evaluating the technical and economic feasibility of various project options and will launch an appropriate scheme thereafter. The Seed capital investment in the Health care enabled services in APAC region has obtained reasonable traction. While the outbreak of Covid-19 pandemic distinctly sowed the progress, the Company expects that the envisaged business objectives of this service offering will receive the boost following a widened market space covering Malaysia and Singapore. The business spurs up attendant opportunities to distribute other life style medical devices, diagnostic services so as to deliver a EV commensurate with the investment. Typical of multi geographical investments, the consolidated financials are subjected to mark to market changes of reported currencies resulting in wide changes in Other Comprehensive Income. As all the investments are without recourse to the Sponsor, the Company does not consider the Foreign Currency exposure by way of Long term debt in MCL as risk other than to the extent of changes in reported financial positions.

Internal Control Systems and their Adequacy

Adopting stringent Internal Control Mechanisms are vitally important in a dynamic and competitive environment that witnesses frequently shifting paradigms. Our Internal Control Mechanisms seek to safeguard the organisations assets as well as authorise, record and report all transactions correctly and in a timely manner. They ensure that we not only conform to local statutory requirements, but meet the highest global standards and practices as well. Our carefully structured Internal Control Framework project constantly monitors and assesses all aspects of risks associated with current activities and corporate profile, including scientific and development risks, partner interest risks, commercial and financial risks. Our Control Processes 1) safeguard the organisations assets, 2) prevent / detect frauds and errors, 3) ensure accurate and complete accounting, and 4) facilitate timely preparation of reliable financial see to it that manual and automated processes for transaction approval and recording are adequately and effectively reviewed. They also ensure compliance with various policies, practices and statutes in keeping with the organisations growth and business complexity. Our Internal Control Systems are reinforced by regular Management Reviews and verification by Internal Auditors. Further, all internal control functions and its entire gamut of activities are covered by independent audit, conducted by separate internal auditors, whose findings are reviewed regularly by the Audit Committee and Management of the Company. A Board-appointed Audit Committee is entrusted with the task of 1) reviewing the Internal Audit Plan, 2) verifying the adequacy of the Internal Control System, 3) marking its Audit Observations and 4) monitoring the sustainability of the remedial measures.

Discussion on Financial Performance with Respect to Operational Performance Indian Operations Ferro-Alloys:

Ferro-chrome conversion business registered its highest ever production and sales in 2019-20. Conversion revenues including other incidental income for the year increased by 8% to 211.70 crore backed by a healthy 12% growth in the conversion volumes. Silico manganese sales volumes and revenue were adversely affected during the year by the sluggish steel demand globally. It reported revenue including other incidental income of 671.4 crore in 2019-20 (lower by 13% year-over-year). However, the silico manganese business ended the fiscal year on a strong note, as the segment reported higher revenues and double-digit growth in sales volumes during the fourth quarter. Overall, the ferro alloys division reported revenue of 883.1 crore and EBITDA of 45.1 crore in 2019-20 (EBITDA Margin: 5.1%).


Nava Bharat Ventures has four power plants in India spread with a total capacity of 434 MW. Standalone

Power Operations have an installed capacity of 284 MW, of which 204 MW are primarily used for captive consumption in ferro alloys. Additionally, the captive power plants remain opportunistic and export surplus power whenever the merchant rates are remunerative bringing in incremental revenue. Aside from this, the companys subsidiary NBEIL operates a 150 MW merchant power unit in Telangana.

During the year, Indian power division delivered a mixed performance. Merchant power sales suffered due to the lower off-take by the Discoms; and the Covid-19 induced shutdown in March. However, the captive power division continued to deliver a steady performance. Indian Power operations reported a Revenue of 752.80 crore, and EBITDA of 173.6 crore (EBITDA Margin: 23.5%) for the year 2019-20.

Standalone Power Operations: The parent companys operational power plants at Telangana & Odisha having a combined capacity of 204 MW continued to operate profitably and achieved an average PLF of 64% during the year. Standalone power operations generated a Revenue of 504.6 crore and EBITDA of 126.9 crore in 2019-20.

Telangana: The performance of the 114 MW power plant at Paloncha was impacted by lower external sales as to the corresponding period in the previous year. Captive consumption of power continues to ensure sustained value addition despite the dip in the Plant Load Factor.

Odisha: The performance of the Power Plant at Odisha is stable as the captive consumption of power and value addition thereof afforded the Unit with the requisite stability despite lack of remunerative prices on power exchanges. The Second 60 MW IPP Unit continues to be idle as the legal resolution in respect of metering issue is still awaited from the High Court of Odisha.

The 150 MW unit of the subsidiary NBEIL registered an average PLF of 46% in 2019-20. Efficient raw material procurement (through a mix of washery rejects and coal) and prudent cost management helped NBEIL report healthy profitability at the EBITDA level, despite the lower off-take by the Telangana Discom. NBEIL reported revenue of 248.2 crores and EBITDA of 46.7 crores in 2019-20.

Sugar Operations

Sugar & Allied operations include 1) 4,000 TCD Sugar Plant, 2) 20 KLPD Distillery, 3) 30 KLPD Ethanol Plant and 4) 9 MW Power Plant. All the divisional assets are based in Samalkot, Andhra Pradesh.

For the year, Revenue of the Sugar division de-grew by 8% to 12,773.71 lakhs, as the performance was impacted by the decline in sugar volumes old and lower molasses and spirit sales. Strong performance of the ethanol business and better sugar realizations helped to offset the decline.

The company announced the discontinuation of its Sugar business in March 2020, given the progressively unviable operations on account of the diminishing sugar cane availability over the last few years and increasing employee costs. Following the announcement, the Company has achieved a smooth cessation of Sugar operations post the crushing season. The financialresults for the full year 2019-20 reflect the effect of these discontinued operations as a separate line item as the division assets are now held for sale under Indian Accounting Standards (Ind AS). The Company is in the process of selling the sugar and distillery assets including the land appurtenant thereto.

After accounting for the severance compensation of all the employees following the cessation of operations and inventory valuation with a bearish outlook, the Sugar division ended the year with a loss of 377.02 (before tax).

International Operations Africa Operations

Nava Bharat Ventures Limited subsidiary MCL is engaged in ‘power and ‘mining operations in Zambia. NBVL has a 65% equity stake in MCL through its wholly owned subsidiary based in Singapore. Maamba Collieries reported revenue of US$ 213.8 Million and EBITDA of US$ 130.90 Million in 2019-20. Net profit for the year more than Million in 2019-20 in comparison to last year net profit of US$ 27.05 Million, led by decline in finance costs and overall lower tax expenses. The company pared down its long-term debt by US$ 29.5 Million during the year. Overall debt of MCL stands at US$ 413 Million vis-a-vis US$ 442 Million at the end of last fiscal. Further, MCL has cash and cash equivalents of US$ 27.8 Million as of March 31, 2020.

Power Operations

During the year 2019-20, MCL operated the integrated 300 MW coal fired power plant at 77% availability and 76% PLF, reporting revenue US$ 201.9 Million and EBITDA of US$ 104.1 Million.

Performance of the Zambia power division was impacted by the unplanned maintenance related shutdown taken in the third quarter, which reduced the plant availability to 77% in 2019-20 versus 87% availability achieved last year. Notwithstanding the unplanned shutdown, the power division continued to deliver a strong operational performance. Furthermore, the plant continued to operate uninterrupted throughout the fourth quarter despite the Covid-19 disruption, supplying power to the residential & commercial customers when they needed it the most.

Since MCL commenced billing ZESCO for power from July 2016 onwards, it has cumulatively realised ~64% of the amounts billed, as of March 31, 2020. Owing to economic slow-down and the consequent non-receipt of bulk payments from the power utility ZESCO, the Zambian step-down subsidiary MCL could not make the debt repayment due in March 2020, though the interest has been paid. It has approached the Lenders for a stand-still arrangement till March 2021, by when an appropriate debt restructuring plan can be put in place. This plan envisages a prospective adjustment of power tariff for which both the Parties are engaged in discussions. MCL hopes to resolve the issues with ZESCO in the fiscal year 2021 to pave the way for smooth cash flows thereafter.

Coal Mining Operations

Mining operations witnessed strong growth in revenue and profitability during the year driven by the increase in merchant coal sales coupled with better realizations achieved for the high-grade coal.

Mining Revenues were higher by 10% at US$ 42.5 million in 2019-20. EBITDA for the year grew by 36% to US$ 26.78 million led by the expansion in gross margins and a forex gain of US$ 1.0 Mn.

Maamba Collieries Business Performance

Particulars 2019-20 2018-19 Growth (%)
Turnover (US$ Mn) 213.8 220.2 -3%
EBITDA (US$ Mn) 130.9 157.35 -17%
PAT (US$ Mn) 54.9 27.05 109%
External Coal 2,41,016 2,33,754 3%
Sales (MT)
Power Production (Mn kwh) 2,010 1,959 3%
Average Availability (%) 77% 87%
Average PLF (%) 76% 75%

Asia Pacific

Nava Bharat forayed into the healthcare sectory. by acquiring 65% stake in TIASH Pte. Ltd. by Nava Holding Pte. Limited in Singapore. TIASH has operations in Malaysia and Singapore via two of its subsidiaries ‘The Iron Suites-Medical Centre (Singapore), and ‘Compai Pharma (Singapore).

The Iron Suites-Medical Centre is a medical clinic in Singapore specializing in the& Loss and change in treatment of iron deficiency predominantly with IV iron. The business saw good traction in the second half of the year as the IV iron administrations increased by ~40% when compared to the first half of the year. Further, additional screening tests have been added to broaden the scope of patients and income sources. The company has also strengthened its management team by bringing onboard a new Medical Director in October 2019.

Compai Pharma Pte. Ltd., is a pharmaceutical company headquartered in Singapore that in-licenses medical products for promotion in Malaysia & Singapore.

Malaysia: Compai Health care Pte. Ltd., (subsidiary of Compai Pharma) has exclusive distribution rights for Monofer in Malaysia. At present, Monofer is listed into 50+ private hospitals. Listing into public hospitals is expected by the end of CY 2020.

Singapore: Received approval for the sale of Monofer in Singapore in November 2019. Currently, the company is supplying to the Iron Suites clinic. Compai Pharma Pte. Ltd., is also assessing other business opportunities that are synergetic with Monofer. During the year, Compai appointed a new COO having significant experience in the pharma industry for Malaysia operations to expand the business. Further, Compai is also looking to raise equity capital to strengthen its sales team and improve medical awareness regarding iron

Financial Performance (Based on Consolidated Financial Statements)

Despite facing multiple macroeconomic and sectoral headwinds, Nava Bharat reported a resilient performance for the year 2019-20, owing to the industry and perseverance of the entire team.

Statement of Profit Return on Net Worth as compared to the immediately previous financial year

Revenue from operations for the year stood lower by 6% at 2,758.7 crore compared to 2,946.0 crore in 2018-19; and EBITDA declined by 14% from 1,393.4 crore in 2018-19 to 1,200.3 crore in 2019-20. The decline in revenue and EBITDA was primarily due to the 3 major factors - 1) unplanned maintenance related power plant shutdown at Zambia during the third quarter, 2) sluggish steel demand impacting the silico manganese business performance, and 3) reduction in merchant power sales due to lower off-take by the Telangana Discom & unremunerative prices over IEX. Net Profitimproved sharply during the year aided by higher other income, decline in finance costs and lower tax expenses. Profit After Tax for the year stood at 530.8 crore higher by 57% as against 339.0 crore in 2018-19.

Balance Sheet

Shareholders Fund increased from 3,68,918.98 lakhs as on March 31, 2019 to 4,18,514.68 lakhs as on March 31, 2020 led by ploughing of operational surplus into the business. Net debt stood stable at 3,49,191.65 lakhs as on March 31, 2020, even as the depreciation of the rupee against led to higher repricing of debt at MCL. Net debt-to-equity ratio improved to 0.83 in 2019-20 (0.93 in 2018-19).

Key Ratios (based on Consolidated & Standalone Financial Statements)

Particulars Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
EBITDA Margin (%) 22.2% 23.8% 41.7% 45.9%
PAT Margin (%) 11.4% 12.9% 18.4% 11.2%
Return on Capital Employed (%) 6.8% 8.7% 11.82% 15.24%
Return on Equity (%) 4.4% 5.9% 12.52% 8.34%
Debt to Equity Ratio 0.1x 0.1x 0.9x 1.0x
Debtors Turnover Ratio 5.6x 6.7x 1.5x 2.8x
Inventory Turnover Ratio 1.8x 2.3x 2.55x 2.88x
Current Ratio 2.6x 2.2x 1.9x 2.0x
Interest Coverage Ratio 11.9x 15.7x 2.8x 3.0x

Details of significant changes (i.e. change of

25% or more as compared to the previous financial year) in key financial ratios, along with detailed explanations: Standalone

Net profit for the year came in lower at 128.6 crore (-22% YoY) as the power and ferro alloys segment profitability was adversely impacted by the lower take-off in merchant power and in Q3 FY20 due to lower merchant power sales, and subdued performance of the silico manganese business given the slowdown in steel demand globally. This led to a contraction of ~145 bps in Return on Equity to 4.4% in 2019-20 versus 5.9% in the year 2018-19.

EBIT declined by ~20% to 219.5 crore in 2019-20 (275.5 crore in 2018-19). This led to reduction in interest coverage ratio from 15.7% in 2018-19 to 11.9% in 2019-20.


Strong growth in consolidated net profit (+57% YoY) led to expansion in PAT Margins by 720 bps to 18.4% in 2019-20 and helped achieve a higher Return on Equity at 13.5% in 2019-20 vis-a-vis 9.6% in the year 2018-19.

Decrease in the debtor turnover ratio in 2019-20 was mainly due to the increase in receivables at the Zambia Power Business (Gross receivables increased by 84% from INR 1,146 crores in 2018-19 to INR 2,107 crores in 2019-20)

Material developments in Human Resources / Industrial Relations front, including number of people employed

Nava Bharat believes in creating an environment, wherein human resources derive a sense of purpose, passion and personal growth at work, leading to organizational performance. Towards realizing this, the company relies on the four pillars, namely, performance management, talent engagement, capability development and maintaining cordial industrial relations.

It also believes in review of its HR processes and systems on an ongoing basis to optimize costs, time and labour.

Performance Management

To drive high performance culture, a defined performance management system is in place with pre-defined targets and assessment thereon. The variable-pay program, a part of the performance management system, enables identifying high performers for suitably rewarding them.

Talent Engagement

Talent is critical for success of any organization and the company believes in this philosophy and as such has built systems for developing a committed, engaged and efficient employee base. ces and Units, which is Offi culturepervadesatallour achieved by conducting regular activities as part of annual day celebrations and on the occasions like New Year, Republic Day, Safety Week, World Environment Day, etc. The employees are also recognised through rewards and prizes for meritorious performance in various sports activities, competitions conducted and for their long service. Continuous improvement of the existing facilities and creation of new facilities is taken up at the workplace and in residential colony for creating conducive work environment and improving work-life balance.

Capability Development

The company believes in skilling and re-skilling of its employees through various programs, spanning technical and behavioural competencies. The competencies are built through on-the-job, internal and outbound trainings by engaging internal and external expert faculty.

Industrial Relations

The company has an impeccable record in terms of maintaining harmonious industrial relations. The year gone by too did not lose a single man day on account of any industrial strife/ disturbance.

The number of permanent employees on the rolls of the

Company stood at 824 as on March 31, 2020.