MSTCLTD - MSTC Limited Share Price

In the Q3 FY '26 earnings call, management expressed an optimistic outlook for MSTC Limited, highlighting a nearly double-digit growth in total revenue and EBITDA year-on-year. Key highlights include:

• Total revenue and EBITDA experienced a growth of approximately 9.87% and 9.61%, respectively, compared to the previous year, with revenue from operations reaching Rs.525.55 billion for the first nine months of FY '26.
• PAT has increased by about 10%-11%, excluding exceptional items, driven primarily by growth in the e-commerce segment.
• The e-commerce business, a key revenue driver, reported a year-on-year growth of 9.26%, increasing from Rs.197.91 crores to Rs.216.23 crores.

Forward-looking initiatives include:

1. Development of the country's first exchange for trading Extended Producer Responsibility (EPR) certificates, with trading expected to begin in FY '27, potentially opening pathways for additional commodities.
2. Successful allocation of the first tranche of gold bullion on an electronic platform by DGFT, suggesting a positive outlook for expanding this service to other commodities.
3. Introduction of a travel booking platform for both government and private sector, anticipated to launch in April FY '27.

Overall, management is confident in achieving continued growth, particularly from new initiatives like the EPR trading exchange and improved e-commerce operations. They expect to stabilize the newly launched platforms and generate substantial revenue from them within the next fiscal year.

Question 1: Why has the growth rate of the e-commerce vertical moderated in Quarter 3 and when can we expect it to return to double digits?

Answer: The moderation in e-commerce growth can be attributed to a spillover of sales from the previous quarter that inflated our Q1 results. E-commerce performance is affected by various factors like state government policies. We're optimistic about growth as we anticipate significant contributions from the new CPCB EPR Trading Exchange next fiscal year, which should help revive double-digit growth.

Question 2: Can we expect the growth rate to accelerate in FY 2027 over FY 2026?

Answer: By Q2 of FY 2027, we should have clearer insights into growth capabilities. The CPCB exchange will need some stabilization time, meaning growth might accelerate in the latter half of the year. We expect improvements as the exchange becomes operationally effective.

Question 3: What are the estimated CAPEX for this year and next year, and any plans for dividend payout?

Answer: Our dividend payout policy is to offer at least 30% of PAT or 4% of net worth, whichever is higher. As for CAPEX, we are currently assessing requirements for system upgrades and exchanges, so specific estimates will be shared as plans solidify. Our funding remains stable, allowing for necessary investments.

Question 4: Are there plans to utilize surplus cash such as through stock buybacks?

Answer: Utilization plans for surplus cash, including stock buybacks, depend on regulatory guidelines and market conditions. Our focus is also on managing rising OPEX, and decisions on cash distribution will align with government regulations and the board's recommendations as we assess future opportunities.

Question 5: Regarding the increase in employee expenses, should we expect this to be a steady state?

Answer: The increase noted includes a one-time fixed cost due to a change in gratuity limits for employees. If we exclude that, the growth in employee expenses is moderate. While future adjustments might occur, we expect to manage these costs effectively moving forward.

Question 6: What is the expected contribution to revenues from the Mahindra joint venture currently and in the future?

Answer: Currently, the Mahindra joint venture reflects a share of losses, but it demonstrates a downward trend in these losses, indicating future potential profitability. The positive operational modifications we are implementing should yield better results in upcoming quarters.

Question 7: How will implementing an AI platform support operational efficiency and revenue growth?

Answer: Implementing AI in our e-commerce business will enhance operational efficiency by automating processes, resulting in better user experience and customer satisfaction. We are already incorporating some AI tools and are in the process of exploring further analytics options.

Question 8: Can you elaborate on the revenue model for the travel booking platform?

Answer: The travel booking service will generate revenue through different means, including transaction fees and platform service fees for both government and individual clients. We are finalizing models but expect government deals to be more complex, taking about four to five months to establish. Revenue from individual services should start flowing in by next fiscal.

Question 9: What are the key growth drivers for e-commerce in the next 24 months?

Answer: The primary growth drivers will include the new CPCB EPR Trading Exchange we're launching, along with traditional sectors like iron ore and coal sales, which have historically supported revenue growth. We anticipate these sectors will remain robust contributors for the next two years.