MSTC Ltd.: Growth through to E-Commerce

An informative thread on MSTC.

Disc: Invested

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Only for government and PSU. Applicable from April 1, 2022.

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Good read shared by Jeevan Patwa on twitter

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FSNL Divestment:

Disc: Invested

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Nitin Gadkari to hold a discussion on scrappage policy on 24th April.

Looks like things are moving in right direction.

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Another positive…

Disc: invested and biased

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In the segment wise AR & Quarterly results, i see a business segment listed as “others (unallocated)” where they are always reporting losses - it was 87 cr in Fy20 and 48 cr so far in Fy21.

Can somebody help in understanding what this line item is and why they are reporting continuous losses under it ? Has the management shared anything about the scope of future losses under this segment.

it is not mentioned as one of their identified primary business segments anywhere and it raises curiosity

Disclosure: Not invested

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Another small development:

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Sir, i had a question regarding the e-commerce business of the company. Even though it is dominant in it’s niche in the commerce business, it has not been able to grow this segment’s revenue even with all the tailwinds since the last 3-4 years.

Do you think the company can now grow its ecommerce business at 15 Percent
because the underlying tailwinds are the same and the company has not been
able to take advantage of its dominant Position.

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The company is mostly dependent on government orders, hence I don’t feel the growth will be superlative in eCommerce business. The play is more on vehicle scrappage. While the eCommerce business will ensure a healthy cash flow, scrappage business JV with Mahindra will provide the growth opportunity.
Regards,
Raj
Disc: Invested

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Good show by MSTC. Balance sheet improvement is in play. Also eCommerce revenue have shown good growth.

Regards,
Raj

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Hello guys,
Going through the AR of the company and found out below points. Any view on this appreciated

AR 2018-2019
Qualified Opinion
According to the infonnation & explanations given to us and
based on our audH, the following material weaknesses havebeen
identified as at 3111 March, 2019 :-
a) The Holding Company did not have an appropriate Internal
control system for customer acceptance, credit evaluation
and asmbllshlng credit limits fer sales, which could potentlally
result in the Company recognizing revenue without
establishing reasonable certainty of ultimate collectJon. The
internal control over follow up with the wstxxners for recovery
of dues Is lnadequae.

b) The Holding Company did not have an appropriate internal
control system with regard to pledged stock of raw materials
procured by the Company on behalf of itscustomers and
kept under the control of the custodian appointed by the
Company resulting in unauthorized lifbnent of 1he materials
from the godowns.

AR 2019-2020

The title deed of the Company’s immovable properties have been found to
be held in the name of the company except a flat at Mumbai (book value:
gross / net ` 0.74 / 0.44 million respectively) for which no title deed could
be made available for verification.

In our opinion and according to the information and explanations given to
us, the Company has not defaulted in the repayment of dues to banks,
except subjudice cases of loans from Standard Chartered Bank and
Indian Overseas Bank 1436.20 million and 13.80 million as mentioned
in Note No. 20(a) and 20(b) of the notes to the standalone financial
statements. (The management explanation seems okay)

The Company falls short of exercising internal control system for
customer acceptance, credit evaluation and establishing credit limits for
sales, which could potentially result in the Company recognizing revenue
without establishing reasonable certainty of ultimate collection.

In the process of maintaining safe custody of pledged stock of raw
materials procured by the company on behalf of its customers under the
Company appointed custodian, it has been observed that there is
inadequacy of required internal control.

The Holding Company falls short of exercising internal control system for
customer acceptance, credit evaluation and establishing credit limits for
sales, which could potentially result in the Holding Company recognizing
revenue without establishing reasonable certainty of ultimate collection.

In the process of maintaining safe custody of pledged stock of raw
materials procured by the Holding Company on behalf of its customers
under the Company appointed custodian, it has been observed that there
is inadequacy of required internal control.

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Well organized informative video on MSTC stating key triggers like debt reduction, consolidation of business.

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You should do some homework and listen to last two concalls. The management has answered that exact question. Some spillover and legacy contracts remaining due to covid , most of which are expected to finish in next two years.
Those triggers have already existed for several quarters now. The new triggers are still unknown/ snail pace in nature. The new revenue is expected to come from platform business but being a government company, they have very less visibility/control( much lesser than non-gov businesses). They are also trying to enter in agri but I don’t expect any major good news for next many quarters.
Recurring businesses might include : Mineral blocks, e-procurement, e-Retail Software, Targeting private companies.
MSTC is casting more focus on the untapped e-Commerce business from the private sector and in this
stride MSTC has signed big ticket agreement with Reliance Industry, Indus Tower, Tata Power, Vedanta etc. to name a few. The size of agreements are not known though.

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#midcapmania

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MSTC has launched a newspaper advertisement declaring its ambitions to become a platform for buying and selling of spot power.

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Shawn, can you please post the copy of MSTC advertisement you referred, about MSTC intention of entering in buying and selling of spot power…

May be I am judging book by the cover but the MSTC website (navigate to any page) gives vibes of year 2000-2005. I understand the term e-commerce is a bit loaded in the context of MSTC but one expects the site to be a bit better. More so if the entry barrier to the business doesn’t seem to be hugely complex.

Keep the government entities (e.g PSUs) who use it for auctions and procurement out, and I don’t know what will be left.

With blessings from government, It perhaps has potential to monopolise its market similar to IRCTC but will have similar risks too.

Looks like Mukul Aggaral has exited MSTC.
This is only for information, not to speculate.

Disclosure: Invested from lower levels

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If I read the policy correctly the Arp 22 timeline applies for onky PSU vehicals. No sure what is the sizing of that segment.

Of other categories like individual PVs its still June 24.

Am I right?

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