Unlisted Shares

Revenue:

• Revenue grew by 25% year-over-year (YOY) in FY23 due to a surge in sales.
  • HSD volume increased by 13% compared to the industry's decline of 43%. Market share expanded to 6% from 4% in FY22.
  • The company expanded its customer base by entering new segments and markets.The company signed agreements with major paint manufacturers for the sale of MTO. Market share for MTO increased to 11% from 8% in FY22.
  • Sales to domestic OMCs grew by 61% YOY, while export sales grew by 23% YOY. Sales to retail outlets decreased by 18% YOY due to price controls imposed by the government.
• Net profits surged by 9x YOY in FY23 due to several factors, including:
  • Crude oil price volatility caused by the Russo-Ukrainian conflict and trade sanctions that led to the redirection of Russian crude to Asia
  • Tight product balances amid fears of scarcity from sanctions.
  • Pickup of fuel consumption and industrial activities and pent-up holiday travel demand.
  • Refined product margins remained strong throughout the year, with most Indian refineries operating at high capacity utilization rates.
    

Returns​

• The company's profitability metrics soared in FY23, with a significant year-over-year increase in ROE, propelled by a substantial surge in NPM. Additionally, the asset turnover ratio improved from 1.2 to 1.4, demonstrating enhanced operational efficiency. Furthermore, leverage (asset multiplier) decreased from 3.7 to 3.2, indicating a healthier balance sheet structure.
• Nayara Energy's disciplined investment approach in high-quality assets yielded impressive returns, with a return on capital employed of 43.25%. This strategic focus, coupled with favourable market conditions and effective risk management practices, contributed to a notable increase in ROA.

Investment Thesis: Despite the unprecedented challenges posed by the Ukrainian conflict and the lingering effects of the pandemic, Nayara Energy has emerged as a beacon of resilience and strategic acumen in India's fuel retailing sector. The company's exceptional performance in FY23, driven by favorable market conditions and astute crude oil procurement strategies, has solidified its position as a leading player in this dynamic industry.

Key Investment Highlights

• Navigating Market Dynamics: Nayara Energy's ability to navigate complex market dynamics and adapt to changing market conditions demonstrates its agility and management prowess.

• Operational Excellence: The company's unwavering commitment to operational excellence has resulted in improved asset turnover ratios and enhanced efficiency.

• Financial Prudence: Nayara Energy's prudent financial management practices, reflected in a decrease in leverage, have strengthened its balance sheet structure.

• Strategic Investments: The company's disciplined approach to investing in high-quality assets, as evidenced by its return on capital employed of 43.25%, underscores its commitment to long-term growth.

Future Growth Prospects

• Renewable Energy Integration: Nayara Energy's partnership with NTPC for green hydrogen storage in Delhi aligns with the growing demand for renewable energy sources.

• Retail Network Expansion: With its extensive network of over 6,500 retail outlets, Nayara Energy is well-positioned to serve as a reliable partner and backbone to India's energy supply.

• Revenue Diversification: The company's strategic diversification into oil-to-chemical (O2C) through its 450 KTPA polypropylene plant and its foray into solar power generation indicate a commitment to expanding revenue streams and mitigating industry-specific risks.

Attractive Valuation

Nayara Energy's compelling valuation metrics, including a return on equity (ROE) of 36%, a price-to-earnings (P/E) ratio of 4.9, and a price-to-book (P/B) ratio of 1.8, make it an attractive investment opportunity in the current market environment.

Conclusion

Nayara Energy's remarkable resilience, strategic vision, and commitment to growth position it as a promising investment opportunity in India's energy sector. The company's ability to adapt to changing market dynamics, coupled with its focus on operational excellence, financial prudence, and sustainable energy solutions, paints a bright picture for its future success.

Key StakeHolder:

• Rosneft Oil Company is a Russian multinational oil and gas corporation headquartered in Moscow. It is one of the largest oil companies in the world by revenue and production. It holds 49% of NEL.
• Mareterra Group is an Italian energy investment group with a focus on energy and carbon efficiency infrastructure. The group has a portfolio of investments in renewable energy, energy storage, and energy efficiency projects. Mareterra Group is headquartered in Rome, Italy. It holds 24.5% of NEL.
• United Capital Partners is a Russian investment firm with a focus on private equity and venture capital. The firm invests in a variety of industries, including energy, technology, and retail. UCP is headquartered in Moscow, Russia. It holds 24.5% of NEL.​