Nava surges 13%, hits record high in weak market on heavy volumes

Shares of Nava (formerly Nava Bharat Ventures Limited) hit a record high of Rs 465.65, as they rallied 13 per cent on the BSE in Thursday’s intra-day trade on the back of heavy volumes in an otherwise weak market. The trading volumes on the counter jumped over three-fold with a combined around 3.6 million equity shares of the company changing hands on the NSE and BSE till 11:11 AM. In comparison, the S&P BSE Sensex was down 0.66 per cent at 66,366.

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In past four months, the stock price of Nava has appreciated by 84 per cent after the company recorded a remarkable financial performance for the June quarter (Q1FY24) with its highest quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) of Rs 572.4 crore & profit before tax (PBT) of Rs 415.9 crore on consolidated basis.
 
Maamba Collieries (MCL), a stepdown subsidiary of Nava, recorded growth in profitability, contributing from an impressive power plant availability rate of 95.2 per cent and significant mining revenue.  MCL accomplished a significant milestone of repayment of the overdue principal amount of Rs 890.2 crore ($ 108 million), which has now made the loan outstanding current and standard.

The company reported a continued impressive momentum in the energy segment, with 31.6 per cent growth in revenue, in comparison to the previous quarter. The growth was fuelled by improved operational performance from the 150 MW power plants in Odisha and NBEIL's 150 MW facility in Telangana, Nava had said.

Nava has diversified businesses in Metals, Energy, Mining Resources, Agri-business and Emerging Businesses. It operates in geographies of India, South-East Asia and Africa.

The company is a leading manufacturer and exporter of Manganese Alloys and has installed capacities of 125,000 TPA & 50,000 TPA, in Telangana and Odisha States respectively. NAVA leverages captive power and long-term tie-up for Manganese Ore in the business.

Nava has energy generation capacity of 434 MW in India including that of 150 MW under subsidiary Nava Bharat Energy India Limited (NBEIL) and 300 MW capacities in Zambia under MCL.

MCL is also in the business of coal mining with coal sales to external industrial consumers. In recent years, Nava has made investment in healthcare enabled services based in Southeast Asia and in Agri-business development of Avocado plantation on large scale in Zambia.

The company has limited capital expenditure (capex) plans in its ferro alloys and power businesses in India. The company, however, is planning multiple projects under its overseas subsidiaries including – power plant expansion under MCL from 300 megawatt (MW) to 600 MW, agri-business (avocado plantation) in Zambia, and manganese ore mining in Ivory Coast.

These are expected to be funded through internal accrual. CRISIL Ratings understands that debt raised for these forays will be non-recourse to Nava and its balance sheet will not be leveraged.

Meanwhile, the overall financial position of Nava’s stepdown subsidiary, MCL, has improved. MCL had entered into arbitration with Zambia Electricity Supply Corporation Ltd (ZESCO, the state discom of Zambia) for resolving its receivables issues (pertaining to generation prior to May 2022).

The arbitration was ruled in favour of MCL and out of the arbitration award of $518 million, MCL is expected to receive $338 million by December 2023 and another $180 million by December 2024. As on August 31, 2023, MCL has received $226 million from ZESCO. Furthermore, the subsidiary continues to receive timely payments for generation from May 2022, CRISIL Ratings said in rationale.