📌 At a Glance

Nava Ltd has come a long way from being a desi ferro alloys maker to owning Zambia’s largest coal mine and power plant. It runs a ₹4,000 Cr business with 46% EBITDA margins, and has given a wild 86% stock CAGR over 3 years. But while profits doubled, revenue barely moved. So… is this a deep-value PSU proxy or an earnings mirage?

1️⃣ Business Model – Power, Ferro, Africa

Nava is essentially three businesses:

• India Power (434 MW): Telangana, Odisha, and AP thermal plants
• Zambia Power (300 MW): 65% stake in Maamba Collieries Ltd
• Ferro Alloys: Paloncha & Odisha plants

FY25 Segment Split:

• Energy: 75%
• Metals & Alloys: ~20%
• Others (Agri, Healthcare): Negligible

🔌 Power is the core. 70% of Indian power is under long-term PPAs. The Zambia unit is vertically integrated — owns the coal mine and sells power to the government.

2️⃣ Financials – Profits Up, Sales Not So Much

💡 3-Year Sales CAGR: 6%
💡 3-Year PAT CAGR: 24%
💡 Stock CAGR (3Y): 86% — yes, this is not a typo

So what’s fuelling the market hype? Simple: margins and Zambia.

3️⃣ Valuation – Still Reasonable?

• Market Cap: ₹16,430 Cr
• P/E: 15
• P/B: 2.2
• EV/EBITDA: ~7x
• Dividend Yield: 0.35%

🧠 Fair Value Range (EduEstimate): ₹600–700
Assumes ₹1,500 Cr PAT at 15–17x P/E, given power + alloy combo. Any further upside needs rerating or capacity growth.

The price is not insane, but the excitement is already priced in.

4️⃣ Balance Sheet – Repaired & Ready

• Debt: ₹893 Cr (Down from ₹3,074 Cr in FY23!)
• Cash from Ops (FY25): ₹2,157 Cr
• Capex: ₹575 Cr CWIP; more for Zambia Phase II (₹3,300 Cr est.)
• Net cash positive: Yes
• Interest Cost: Just ₹5 Cr in Q4 — from ₹397 Cr in FY23. Jaw-drop moment.

The deleveraging is real. In fact, they could fund expansion without raising equity or piling debt.

5️⃣ Strengths – Zambian Juggernaut

• 🇿🇲 Zambia Power + Coal Monopoly: 10% of country’s total electricity output
• ⚡ 50%+ Gross Margins: Thanks to captive coal, integrated infra
• 📉 Debt Down by ₹2,100 Cr in 1 year
• 🚀 High ROCE + Low Valuation = Rare Combo
• 🧾 Promoter Holding Rising: 50.13% in Mar 2025 from 48.85%

6️⃣ Risks – Zambia Ke Liye Visa Lag Sakta Hai

• 📉 Flat Revenue: 5-Year Sales CAGR = 7.6%
• 🌍 Geopolitical Risk: Entire Zambia bet hinges on one government
• 🏭 Single-Asset Dependence: The 300 MW plant is everything
• 💰 Low Dividend Payouts: Just 26% despite huge profits
• 🧾 Opaque Disclosures: Zambia numbers not always broken down fully

Also, inventory days and working capital remain elevated → cash conversion cycle is 300+ days. Not great.

7️⃣ Final Thoughts – Power Play With Africa Leverage

Nava isn’t your typical PSU or infra stock. It’s a capital-efficient, under-the-radar cash machine that’s just cleaned up its balance sheet, maintained high margins, and still trades at ~15x earnings.

If Zambia doesn’t throw a geopolitical tantrum, Nava could quietly compound from here.
But if something snaps in Africa, well… it won’t matter how good the alloy margins are.

✍️ Written by Prashant | 📅 20 June 2025

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