Refex Industries Limited (532884) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Earnings Conference Call of Refex Industries Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Samiksha Ramteke from Kirin Advisors. Thank you, and [indiscernible].

On behalf of Kirin Advisors, I welcome you all to the conference call of Refex Industries Limited. From management team, we have Mr. Anil Jain, Chairman cum Managing Director; Mr. Dinesh Agarwal, Whole-Time Director and CFO. Now I hand over the call to Mr. Anil Jain, over to you, sir.

Thank you so much. Good evening, everyone, and a very warm welcome to Refex Industries Q3 and 9 Months FY '25 Earnings Conference Call. Over the years, Refex Industries has transformed into a diversified investment organization, consistently embracing innovation and sustainability at its core. First and foremost, I want to extend my heartfelt greetings to all of you on the occasion of the 76th Republic Day. It's a privilege to address you all as we collectively contribute to India's growth story. Before diving into the financial highlights let me take a moment to reflect on some of the significant milestones that have defined our journey this quarter, including a few material business highlights till today. Performance highlights. Turning our attention to company's financial performance for Q3 and 9 months FY '25, I'm slated to share that we have achieved robust growth across all business segments, underscoring the resilience and strength of our diversified business model. Let me start off with stand-alone results. Total income for Q3 FY '25 stood at INR 733.48 crores, reflecting a growth of 140.71% year-on-year. For 9 months FY '25, the total income increased INR 1,853.44 crores, showcasing a year-on-year growth of 77.7%. Net profit for Q3 FY '25 surged by 200.12% to INR 59.04 crores. For 9 months FY '25, net profit increased by 103.58% to INR 132.31crores. Earnings per share basic for Q3 FY '25 stood at INR 4.7, up 162.56%, while for 9 months FY '25 it is at INR 11, reflecting a growth of 86.44%. Next, we move on to the consolidated results. Total income. Consolidated total income for Q3 FY '25 has reached INR 741.92 crores, a 139.97% growth compared to the previous year. For 9 months FY '25 it grew to INR 1874.14 crores, up 78.38% year-on-year. Net profit. Consolidated net profit for Q3 FY '25 rose to INR 52.05 crores, up 198.1% and 9 months FY '25 it increased by 85.98% to INR 110.46 crores. Overall, the coal and ash handling business segment remained strong force behind the growth of Refex Industries, contributing to about INR 1,643 crores in 9 months FY '25 and INR 683 crores in FY '25 Q3 alone. Green Mobility is contributing to INR 22.2 crores for 9 month FY '25, highlighting the company's focus on sustainable and future-focused business initiatives. Green Mobility has also entered into a strategic arrangement with Gensol Engineering Limited to take over 2,997 E-cars from Gensol and then lease it to Blu-Smart. As we chart the path forward our focus is firmly on capitalizing our core strength with an unrelenting commitment to innovation, sustainability and operational excellence. Refex is poised to lead India's green transformation and drive meaningful change in the industry we serve. Every milestone we achieved stands as a testament to the trust and confidence of all our stakeholders and the unwavering commitment and dedication of our exceptional team. Together, we are shaping a future defined by growth, resilience and a shared vision for a sustainable tomorrow. Thank you for your continued support, trust and encouragement. Today -- together, we are confident in building a path forward for a long-term growth and consistent value creation. Thank you so much. I look forward to engaging in a discussion ahead with all of you. We can now open for questions. Please.

[Operator Instructions] The first question is from Krishan Choudhary, who is an individual investor.

Am I audible?

Yes. Not very clear, but yes, we can try and manage.

Okay. I'll try be a bit more clear, sir. I have a few questions, sir. So first of all, I would like to ask about the ash and coal handling business. In the previous con call, sir, we had mentioned that we had completed about 5 million tonnes of handling in H1. And the full year guidance was 18 million. So that comes to about 13 million for H2. So I would like to know, sir, out of the 13 million, how much have we achieved in Q3, and what is the estimate if you could give for Q4?

See, these are the strategic information. I'll give you -- anyway, I'll give you on -- the data on this. We have completed 8.5 million tonnes of the work, and we'll cross this year more than 10 million.

Okay. So for Q3, we have done about 8.5 million tonnes, right?

Yes.

Okay. And the -- okay, we'll surpass the given target also. That's great. And as I saw your presentation, sir, you have also increased the daily handling capacity from 50,000 to 70,000, sir. So sir, have we added new customers, new sites? And is this sustainable sir, in the coming quarters?

Yes. This current quarter is a peak season, and it is sustainable.

Okay. Great, sir. And sir, I would also like to know that we have been able to increase our revenues in this segment lot, sir, but the margins, sir, they are not increasing as generally when you increase revenues, the operational leverage also kicks in. But in our case, the margin has been stable to a little lower, sir? Is there any reason for that? And can we expect some improvement in the coming quarters?

We have started a lot of new plants, and initially, when we start a new plant, there is a mobilization of team happens before the real work starts in the plant, that is the reason overhead and other expenses will be more in the initial time, which get amortized once the full fledge work happens. Initially, the cost, which is incurred in the setting up of the new plant, I mean starting up the new work at each of the new plant because of that margin is kindly dropping.

Okay, sir. And since you put in initial investments, sir, so these would be long-term contracts, like approach how many years, if you could give a rough idea, sir?

Anywhere between 1 to 3 years.

Okay, sir. And secondly, I have a question regarding EV Green Mobility business of ours. So as we see -- yes, sir. So in this quarter the loss has increased from INR 5 crores to INR 8 crores, sir. So I just wanted to know, sir, when can we expect it to positively contribute to a net profit of this segment?

So I think with the increase of number of vehicles, the time taken to get 100% utilization of each vehicle takes almost 6 months. So as we are increasing the vehicles, we foresee this loss to happen at least for next few quarters. While operating operationally, we are profitable, but PAT level we are making loss. But in the next few quarters, we'll achieve profitability.

Okay, sir. And the recent acquisition about 3,000 EVs from Blu-Smart. So just I wanted to know what is the idea regarding how would we monetize them? Would we rent them out to Blu-Smart or will we use them for our own brand EVs? So what would be the [indiscernible].

They are a very strategic long-term dry operation lease model where we have taken over the vehicles from Gensol and we'll be giving it to Blu-Smart on a drive per month basis lease to us.

The next question is from Nishant Gupta from Minerva Global Capital.

Just wanted to understand what is the rationale of getting more CapEx heavy on the EV acquisition from Gensol? Basically leveraging your company and giving the OpEx benefit to Blu-Smart, so what is the rationale of acquiring that fleet? And what is the kind of IRR that you are expecting? And are these like the new cars that you have received from them or these were used and it has transferred at a lower price than the retail?

So currently, the vehicles are transferred at the book value to us. It's basically an inorganic expansion of our fleet. We're also looking at taking over the operations of these fleet forward. Slowly, we're going to start off with one city in a small number and our long-term aim is to convert this into a completely operational fleet under us. Just looking at the long-term dry, once the financial approval comes, we'll be able to come back on what is the IRR we are making on this. Currently, it is still under negotiation because the financial transfer has to still happen.

Got it, sir. And sir, you have taken INR 315 crores of bank loan for this. So is there any part of internal accruals that will also go for funding this acquisition of 2997EVs?

No. Currently, we're just taking over the loan fully, plus there will be a INR 40 crores of equity infusion in this apart from the debt.

Okay. Got it. And how long is the tenure with the Blu-Smart that you have negotiated in this?

Five years.

Five years. Okay. Sir, the next question is on the Torrent solar power. So this wind power project, what is the total amount that you will be receiving from Torrent Power, you mentioned the megawatt of -- but the contract size is not mentioned in INR crores?

I think that number is -- we are not supposed to disclose that value, only the megawatt is to be disclosed. The -- in this junction it does not allow us to disclose the value.

Okay. That's fair, sir. Sir, but you'll be executing it by 16th April '26. So the invoicing and the receipt of payment, I believe would be by -- maximum by May, June of '26 or that might extend later?

Can you repeat, please?

Yes. Sir, I'm saying from the invoicing point of view, whatever the amount that you'll be receiving. So you will be completing this project by 16th April '26, which is mentioned in the document. When will you be receiving the payments from this?

So this will be completed only by March next year -- April next year, sorry.

Yes, yes sir. I understand. But I'm just trying to understand how will the cash flows look like? Like is it kind of a lumpy payment which will come after the project is delivered in full, or you'll be receiving some milestone payment that is [indiscernible].

So there are multiple milestones. The first payment will start coming in from September this year.

Okay. From September onwards, it will come.But is it like safe to say that the majority of it will come after the project is completed?

Yes, just in a phased manner, I would not say a majority. At every stage wise, there are various payment milestones, there are totally about 7, 8 milestones. But every stage, there'll be payment, which will be coming.

Okay. Got it. Sir, one final question, so more from a long-term perspective, not on a quarterly guidance, but more from a long-term perspective, where can we see the growth rate in the topline and the revenues to -- and the margins to stabilize?

So I think on the ash and coal handling, the revenues will keep growing going forward because we're having a lot of contracts now, and we also see margins getting better over there, sir.

Sir, any comment on the number, because margins have been up and down. So maybe 10%, 10%, 11% is something we can see in the long-term, EBITDA margin to pan out?

Yes, around that.

The next question is from Rahul Gupta, an individual investor.

Sir, my question is, what role does technology play in the research of Green Mobility's operations, particularly in providing the EV services to corporates and aggregator platforms?

So basically, the technology helps us to scale up quickly, and we have our own in-house tech team, which is building this platform. Basically, the telematics is built in-house. So technology plays a very important role in growth, sir.

My next question is, can you provide the insights for the future research and development initiatives under the Venwind Refex Power Limited? And how will it be aligned with our renewable energy focus?

Yes. So we are still in the process of developing a plan for R&D. So hopefully, in the next 2 quarters, we'll be able to give a clear projection on what are the R&D plans for us.

Next question is from Vignesh Iyer from Sequent Investments.

Congratulations on a very strong set of numbers. So my question is on the fleet acquisition that we did from Gensol and give it to Blu-Smart to operate, so a few things I wanted to know. So if I understand, we have our own businesses, right? EVs, which we run. So what is the rationale of giving -- I mean, running the fleet on our own vis-a-vis giving it to Blu-Smart? Is our IRR coming on to be really good when we are giving it on lease to be Blu-Smart?

Sir we are a pure B2B player. Even in our regular EVs, we don't have any -- other than the Bangalore Airport, which we do B2C, all our other fleet is deployed for B2B. So even Blu-Smart is a very strategic B2B option for us where we have taken over the fleet from Gensol and giving it to Blu-Smart on a B2B basis, where we have a fixed revenue from this fleet. It is up to Blu-Smart to get customer acquisition, operate and et cetera.

Next question is from Deepesh Sancheti from Manya Finance.

What are the growth drivers ahead for the company coming for next year.

Sorry, can you repeat, please?

I'm saying what are the growth drivers for the company for the next year?

Yes. Like I mentioned that ash and coal is going to be our focus, where we already have multiple orders on hand, and we'll be growing business over there. And apart from that, EV fleet also is going to grow. As I mentioned earlier, this year, by March, we complete about 4,800 vehicles. So both these sectors will grow for us for next year also.

You said ash as well as EV sector, right?

Yes.

Okay. And I think recently, we raised capital from a number of investors. What has been the utilization so far?

So this is being utilized for the regular business, both in working capital and the CapEx requirement for vehicle EVs, et cetera.

So we haven't reduced any debt or anything with this?

We have reduced INR 150 crores of working capital and...

INR 150 crores of working capital is reduced?

Yes.

Okay. Because the ROE -- and what is the ROE expectation of the company going ahead maybe in FY '27? Will we get back to a 30% kind of levels? Or we will be still in the same -- I mean, right now, what we are saying?

Can you repeat that? I think you're breaking up completely. You said ROE, right?

Yes, I was asking about the ROE.

Yes, you mean for which year, current year?

No. I'm talking about ROE for FY '26 and FY '27? What is the expectation of the company?

I think we will be growing -- around FY '27 we could be somewhere around 20%, 22% ROE.

20%, 22%. So we don't see ROE again coming back to the FY '23 levels of 30%, 35%?

Because the business growth is offset, if you see the PAT levels are growing and the order side -- and the revenue size has also increased a lot. Capital size also has increased a lot, capital base.

And the PAT margins also, we expect at around 7%, 7.5% only going ahead?

I think it will go up to 10% going forward, between 8% to 10%.

Between 8% to 10%. So what are the challenges, which we see going ahead? Are there any particular challenges in terms of environmental clearance or any other things which we see?

No, I think scale is the only challenge for us because with the number of contracts growing, we have to really build a strong team to scale. We don't have any environmental issues, et cetera. Instead we are the company who are helping the power plants achieve the environmental compliances. For us, scale is the only challenge.

Scale is the only challenge. So the orders are there, but only the execution is the main challenge, right?

Yes.

Okay. So I mean, if that is so, what -- in execution, it's only about the team or it's also about the money which is going to be needed?

Currently, we have enough money. It is only the team we need to [indiscernible].

Okay. And what are we doing about that?

We've already hired, we have doubled our number of employees in the last 6 months, and hopefully, we should be able to hire better people and more people by end of next quarter. Currently, we are at 413 people from 296 last quarter.

We've seen a phenomenal sales growth in the ash and coal handling business, do we see the similar kind of growth going ahead next year?

Yes, yes. I think we see better growth going ahead next year.

If you can quantify it in terms of number, I mean what kind of...

We haven't made any number quantification yet, but yes, the growth will be good.

Is an expectation of around 20% to 30% of growth will be reasonable?

We cannot comment on that now.

I mean, anywhere around 20%? I mean, is that okay? I mean -- or we are expecting more?

No, we have not been making any forward-looking numbers yet. But yes, we will see how to formalize this and bring it to shareholders to notice.

Okay. So the growth which we have done up till now, will that be in the same lines? I'm just trying to take it out from you...

Yes, yes, we're growing.

The next question is from Krishnan Choudhary, who is an individual investor.

So I just have a follow-up on the coal and ash handling business. So sir, previously, you had mentioned that there is some push from the government regarding the disposal of legacy ash also in the water bodies if I am right? So is there any update or progress on that, sir?

Sorry, can you repeat your question? We can't hear you.

Sir, previously you had mentioned that there is a push from the government regarding the disposal of legacy ash also in the ponds and water bodies, so is there any...

That rule is the still there, and it is continuing. There is no change in the rule.

So have we seen some on-ground execution of that, if you talk about that...

Yes, yes it is being seriously implemented by all the power plants including all the government power plants.

Okay. So we are currently doing that also, sir?

Yes. Because of that only business is happening.

Okay. And sir, regarding the power trading business, sir, so why is there such variation in the quarterly numbers? Is it because of the seasonality factors in that particular segment or what?

We are not focusing more on that now because the margin is too low and we have a good opportunity in other businesses, and our concentration is there in this businesses where higher margin is there. Power trading agreement will not be a focus further, and we'll be continuing focusing on the other businesses.

Okay, sir. And regarding the newly incorporated subsidiary, when will Refex Power Limited, so how do we plan to use that? Like we have already given 1/3 of the equity to outside partners, so how would that benefit to our main company service?

No, that is a synergy. And we have both -- that is the reason we have brought an expert into the -- as a partner, and we'll be working together for a growth of the business.

Okay, sir. And my last question, sir, like we have multiple businesses. So are we planning some sort of a demerger in the coming years? Or have you looked on that, sir?

No, we have not planned anything now, but we'll come back if we have plan of something.

Next question is from Deepesh Sancheti from Manya Finance.

Just a question regarding your segmented results when I was seen in the segmented results and profit and loss before the interest and tax, there is something mentioned as corporate. If you can just elaborate on that?

Sorry, what? Which one, can you repeat, please?

In the segmented results of the consolidated one. There is something mentioned number 2, of corporate?

That is the corporate overhead, which is not eligible to any of the specific segment.

The corporate overhead, right?

Yes. These are the all corporate expenses, which is not directly identifiable to any segment.

Okay. So I mean, the sudden increase, can I allocate it to the increase on number of people, which you just mentioned...

Yes, multiple factor, number of people, there is a technology advancement is happening, there is a technology expenses because we are -- since we are scaling, there is a development of technology, implementation of new technology is also happening. There is -- I mean, because of the people, there is a multiple offices are being set up. Multiple things are there, which is not directly identifiable to any specific segment.

Okay. Okay. And if I...

Which is directly identifiable, has already been allocated to specific segment.

If I can come to your EV business. I mean, how does your EV business work? I mean you take -- you give the cars to Blu-Smart and Blu-Smart hires it to the corporates? How does that business work?

Blu-Smart is a B2C player. We have a B2B business where we give vehicles to large corporates for their employee transportation. We do more technology and the vehicle for that. Blu-Smart is a dry lease where we've give only vehicles to Blu-Smart. They will have their own drivers and operations, and they will do it for B2C. They will -- customer acquisition will be their scope. So for us, it is a B2B2C for Blu-Smart. And all other customers are also direct B2B.

Okay. So B2B clients are ours, right?

Yes.

And Blu-Smart, we have a stake in them, and that's where all the B2C happens from the Blu-Smart?

No, no. Blu-Smart is also a B2B customer for me. For me, Blu-Smart is a customer to whom I'm giving vehicles on long-term dry operational lease. I have no obligation to get any customer there. And we don't have any stakes also.

You don't have any stake in Blu-Smart?

No, we don't have.

Okay. The company or the promoters don't have any stake in Blu-Smart, right?

Yes, the company doesn't have, yes.

What about the promotors?

Promoters don't have. Promoters through one of their funds have a very small stake, which is very negligible, less than 1% -- less than 0.5%.

And how do we plan to scale this business?

We are continuously getting more and more B2B customers. So we are -- our focus is going to be B2B customers only.

And if you can just mention how -- I mean how -- for how long are these contracts? I mean, does the vehicle life...

Between 1 to 3 years and Blu-Smart is 5 years contract.

One to three years, okay...

B2B contracts are between 1 to 3 years.

One to three years. And what is the margin profile in that?

So it depends. Different customers have different way in which we build them from our trip basis, some are monthly, some are number of hours, number of kilometers. On an average, we have close to about 20% gross margin on them.

Yes. Because -- I mean, something, which was -- I mean, since our coal and ash businesses doing so well, I mean, why would the company actually go into EV business? And that was one of the question that how do we plan to scale it? Because...

It is in a subsidiary company, and this business is growing as a subsidiary company directly. And again, if you look at our coal and ash also, it's a logistics business, where I'm only moving the ash and coal from one place to another, I'm doing logistics work. Similarly, EV is also a logistics business for me. Yes, I mean it's a complete operational. So the expertise of our operational efficiency can be at both the places. I mean, they are in line with our original business.

So all these big corporates which we give, are we giving them with the drivers, I mean, for handling the stuff? Or it's only that we're giving the cars?

No, for all the B2B customers, we have drivers, which -- we have our own driver, and we operate the car for them, we do charging, et cetera, everything for them.

Okay. So basically, it's like a fleet management?

Yes.

Next question is from Swaraj Gandhi, who is an Individual Investor.