NBCC (India) Limited (534309) Earnings Call Transcript & Summary

Order inflow has been INR 12,700 crores until now.

But sir, just to understand this better. I mean if I were to adjust for Amrapali, we've not had much in terms of order inflow for us. So do we see the current trend, and if I were to adjust for let's say I mean INR 8,800 crore rupees on Amrapali, and then we've done only around like INR 300 crores or INR 400-odd crores, this kind of number in almost 9 months now. So is this the run rate we're looking at? Or do you get to see this number going up substantially?

See, out of INR 12,700 crores, Amrapali is INR 8,000 and rest is -- we have this [ INR 5,515 crores ]

Okay. So INR 4,700 crores over the last 9 months is -- is there an element in terms of monthly that you would want to have? Or you are expecting more than this?

We are expecting another 2 months, we will expect some more [indiscernible].

So basically I understand that whatever the targeting [indiscernible] lower on a Y-o-Y basis, but how about FY '21 because I'm assuming by then you would get to have some more clarity on Nauroji and some of these other projects that we [ won’t ] tender out. So what is the growth that we're targeting for next year, FY '21 revenue growth?

Next year, we are targeting around INR 9,000 crores, including the revenues from redevelopmental projects.

Okay. And this would be against what base, sir? This year, what is the number that we are targeting now?

This year we are targeting around INR 6,500 crores.

Okay, okay. So we're looking at almost around 40% kind of growth next year?

Yes, because our redevelopmental projects will start and then we'll make the revenue from that.

Sure. Are there any -- so last year, we had a pretty good year in terms of real estate revenue booking not sales, revenue booking, because we book on project completion basis now. So any big project that is due for completion this year and which could come for recognition in Q4?

Yes. Yes, we expect some projects to complete in this -- I mean in this quarter, we will get completion certificate for some projects. And definitely we will have substantial -- some turnover against the sale of these completed projects.

Next question is from the line of [ Rajiv Rupani ], individual investor.

Yes, sir, you have talked about Nauroji Nagar. So could I have an update on Sarojini Nagar project and Netaji Nagar, that also starts?

What Nauroji Nagar and...

No, I want an update on Sarojini Nagar and Netaji Nagar projects?

You see Sarojini Nagar and Netaji Nagar, after the order instructions to really think through the layout, we'll change the layout, and we have taken almost all the approvals. They are in process. And I think within 2 months, we'll have orders in place, except Forest, which we are pursuing vigorously. So next financial year, we will see -- we can see revenue from these 2 projects also.

And what is the revenue that we expect next year from these projects?

From these projects, at least INR 3,000 crores.

In 1 year, from these 2 projects?

3 projects including Nauroji Nagar.

We take the next question from the line of Dipan Mehta from Elixir.

Just if you could refresh our memory regarding the redevelopment project. So how does the revenue flow work for the year? You still assured the 10% profit margin in consulting, and there is upside based on real estate sold. Could you just briefly explain to us how this is going to work?

With regard to your question, can you repeat?

Yes. So the redevelopment projects, which we have So what is the business model around them? Are you assured of a 10% project management consulting and we get upside if you sell the real estate? Or how does the whole formula of revenue sharing work?

See, the business model of NBCC is like a project management consultant, for which we are paid 10% of the actual cost of the construction. We do not get any upside on difference between sales revenue and construction cost. It is passed on to the land owner, which is the government of India.

But then we are selling real estate as well. I heard you say you are booking sale of property as well, so how...

No, no, we are not booking sale revenues. We are booking actual cost of construction plus NBCC management target.

No, no, you just mentioned that we are expecting INR 100 crores worth of sale of properties, which would kind of...

That is -- please understand, we have 3 business verticals. One is real estate, which we have -- we own the land and we own our properties and we sell it in the market. That is -- from that component, INR 103 crores has been mentioned. We have sold our own property. That is not redevelopment work. Redevelopment work is for on behalf of the landowner or the government which is not being sold by NBCC. It does not cover -- revenue recognition does not take place for that on sale.

Okay. So what is the land bank which we have for this total area which we can construct and what percent has been sold or booked?

We have around 58 acres of land in different parcels, different places in the country, and we are monetizing it as and when the market improves in these cities.

Okay. Just one suggestion, sir. It's a large company with so many projects and so many divisions in the company. Can you please come up with a detailed press release or investor presentation, it will certainly help a lot. And also, all these questions which we're asking all those can be answered by giving all the details in one shot. Please consider.

The management is planning an investors meet very soon in the coming months in Mumbai.

Yes, but this should be more of a quarterly feature. So we know exactly what is the progress on each project and what has been the bill amount and potential revenue. Just helps create a better understanding of the company and more transparent also.

We are not having an overall press meet -- investors meet, but definitely one-to-one interactions are continuing at our office. You are most welcome to come to our office and have a one-to-one meet with the management.

[Operator Instructions] We take the next question from the line of [ Aniket Kulkarni ], individual investor.

Sir, my question is regarding the margins of the company. When we are going through the margins of our PMC business, so I'm talking about profit before tax margins. So in December 2018, it was around 6% which came down to 4.56% in September '19, and 3.96% in this quarter. The same story is for the consolidated business as well. So my question is, what can be the realistic margins that we can expect going forward for our PMC business?

You can see from our results that our overheads are constrained and by the increase in the top line, we are able to enhance our bottom line. And further, with the sale of the real estate also that will contribute to our bottom line. So we are...

Ma'am, I'm just talking about the PMC vertical. I have already excluded the real estate. Just separating the PMC vertical out, it is 3.96% in this December, whereas it was 5.98% last December on a stand-alone basis. So there is a drop of around 2 percentage points. So I need clarity on that.

See, actually, the margins are also going down and the second factor, which I have told you, that our cost is fixed as regards to our salaries and the other expenses. And it seems, in case our bottom line will improve suppose by INR 1,000 crores, as you see, there is a difference between the 9 months turnover for top line in the last year. So you could assess on the INR 1,000 crores of turnover, my average profit works out to be 6%. So INR 60 crore is the straight cut. So that is the major difference. And second difference is on account of my real estate margin. So this year, you are talking about only on the PMC's margins?

Yes, only on the PMC margin.

So, that is basically because of the lower turnover.

Okay, got it, got it. Another question is regarding Nauroji Nagar. So this project comes from PMC model, am I right?

Yes.

So you will be getting 10% fixed fee on that project. p

Yes.

Sir, and my third question is regarding our real estate inventory. So what's the unsold real estate inventory on our books?

INR 1,400 crores.

INR 1,400 crores of unsold inventory. And what inventory are we getting from the Jaypee deal?

That is not part of this. That -- when that company we will acquire, then only it can be considered.

No, but just out of curiosity, I just need to know what is the deal with the Jaypee.

[indiscernible] we can still say that when it comes to NBCC, then we can openly tell you what things are there.

We take the next question from the line of Prem Khurana with Anand Rathi.

Ma'am, I just needed the cash in hand number for the stand-alone entity as well as the consolidated entities and our subsidiaries?

We are having sufficient cash in hand as regards to our subsidiaries is concerned. You can consider our own funds to the tune of INR 450 crores. Overall, we have the deposits of more than INR 4,000 crores.

Okay. And of this stand-alone entities will have how much?

Stand alone, our own margins are around INR 100 crores and subsidiaries are around INR 1,600 crores.

Okay. INR 1,600 crores is between the subsidiaries?

Yes, more than INR 2,500 crores belongs to subsidiaries out of INR 4,000 crores. Right?

One more question is regarding -- so this INR 3,500 crores that you're targeting for given tendering is in Q4 FY '20, if I'm not mistaken, am I right?

Sorry, I don't -- can you repeat your question?

So sir has said that we're targeting INR 3,500 crores of tendering process in Q4 FY '20.

Yes.

And so what will be this number for the whole year in FY '21? Because we are expecting our redevelopment projects also to come in.

Yes, yes.

So what is your total figure, if I'm looking to tendering out?

Tendering out, INR 10,000 crore approximately.

INR 10,000 crores. And of this, my redevelopment projects will be approximately how much?

INR 5,000 crores you can consider.

Is INR 5,000 [indiscernible].

It is approximate. I can't give you now just the figures, right?

And the next question is from the line of Amar Kedia from Emkay Global.

I have 2 questions. One, you mentioned about...

Can you be loud, please?

Yes. Am I audible now?

Yes.

Sir, my first question is about your PMC order book of about INR 34,000 crore, where you mentioned that out of this, about INR 15,000 crore is what you have already awarded out to subcontractors and about INR 3,500 crores to INR 4,000 crores is what you're looking to award in the next 2 months. Is there any reason why the balance, INR 15,000 crore or so is not being ordered out right now?

Balance is about INR 15,000 crore only. So balance INR 15,000 crore actually [indiscernible] of the detailed borrowing and [indiscernible] estimates. So many things are in process, actually. And in some cases, we have to get final approval from the government for the [ DPR ]. So we are awaiting, in fact, all INR 15,000 crore, it is in process, actually. So it will depend on the approval of the government and approval of the statutory local authorities, et cetera, and approval of the [indiscernible], but we are working on the entire balance projects, all balance projects to be awarded.

Okay. The reason I asked this question is because as per my understanding, these orders are with you for more than a year. Even on a straight basis, this year, you have got about INR 12,700 crore of order inflow, while INR 15,000 crore or more is yet to be awarded out any which way. So it's definitely more than a year since you already have these orders with you. So drawing generally doesn't take that much long?

Yes, [ I agree ].

Is there any -- I am trying to understand is that -- is there any stuck project even within the PMC order book?

No. PMC, normally, there is no issue, [ drawings ] and all, I agree with you because it doesn't take much time, maybe not more than a year, it takes 5 to 6 months in Delhi. In Bombay, it takes a little bit more time. But sir, I said [indiscernible] and approval of the final DPR is also stuck up in some cases, which are in process.

Okay. All right. Second is on your INR 37,000 crore of redevelopment order book. I mean how much would be the 3 big projects, which is Netaji Nagar, Sarojini and [ Netaji ] out of the INR 37,000...

It is INR 24,000 crores.

Okay. All right. Is this INR 24,000 crore or even this INR 37,000 crore number, is it something that a part of the contractual agreement that you have with the customer or is it more of a number that you believe is what it is?

No these 2 -- these numbers are already approved by government. Actually, these redevelopment projects, these 3 major projects, these projects are approved by cabinet. So all detail -- estimate detail [ sanction ] is there. And already MOU signed with the government of India.

All right. So in case there is a layout change that happens, we don't know as yet. But in case the court suggests some layout change, then is there a possibility of this INR 37,000 crore number being revised downward significantly?

No. It will have only marginal impact. No substantial impact will be there.

All right. Just one final question. Is that -- you mentioned that roughly INR 4,000 crore of the redevelopment orders are currently tendered out. And you're expecting to book about INR 3,000 crores of revenue out of those INR 4,000 crores next year?

No, I said INR 4,000 crores are -- we know already awarded. Correct. It is 1.5 years that we awarded work of INR 4,000 crore. And we had a substantial phase like Phase 2 and Phase 3. Also we had invited tender for both Netaji Nagar and Sarojini Nagar, but because of this uncertainty, we canceled the tenders actually. So once the projects are cleared, immediately we will invite tender for another INR 5,000, INR 6,000 crores.

Next question is from the line of Ashi Anand from Allegro Capital.

I wanted to understand, as we've seen a fairly large ramp up in terms of revenue, just wanted to understand what kind of operating leverage we should see in terms of margins on the PMC businesses and from where we are currently [Technical Difficulty] able to go back to the 6% kind of margins we were doing in the first half of last year? [Technical Difficulty]

We have the management reconnected. Also, we have the question for [indiscernible].

So the question really was, as we're seeing a large ramp up in revenues next year on the PMC division, should we -- I just wanted to understand what kind of margin expansion we could expect because of the operating leverage come through. So if we look back, say about a year back, we were doing at least around a 6% EBIT margin on PMC. Should we be able to head back to those kind of numbers as redevelopment projects start?

Overall, if you see our operating margin, the gross margin is in the range of 7% to 8%. But due to the lesser turnover, we are not able to reach the EBITDA target that we are talking about around 6%. But even then, as we ramp up our revenues in the next financial year, we expect a greater improvement in the margins because our large value redevelopment projects with a higher PMC margin of around 8% to 10% [indiscernible] and then we can expect a higher EBITDA on that [indiscernible].

Sir, secondly, if you could just give some update on the various companies that we had acquired, HSCL, HSCC, PIL. What is the status in terms of each of those? How are they doing or any order book or ramp up margins, et cetera, if you could just give some highlights?

We had acquired 2 companies. Hindustan Steelwork Construction Limited, HSCL and HSCC, which is Hospital Services Consultancy company. So we can tell you the consolidated result.

Actually, I was just trying to understand some qualitative kind of feel in terms of how the acquisitions have turned out. As I understand, last year, we had some problems, if I'm not mistaken, on HSCC in terms of accounting or something. I just wanted to understand, just broadly, how have they -- are they are growing, the profitability?

Yes, HSCC is doing fine. They have contributed overall turnover to the extent of INR 1,400 crore for the 9-month period to NBCC's consolidated results, if you will [indiscernible]. And regards to that issue of some unaccounted entries in the HSCC, for that forensic audit is going on and that we have been able to resolve out of the 4 accounts, 2 accounts have already been reconciled. There is an issue only with 2 accounts, and we are hopeful that there has been [Audio Gap] come up now. And rather they have already made a huge provision in their books of accounts to the extent of INR 30 crores, whereas it will come out to a low number, maybe around INR 5 crores only.

Okay. And if we adjust for the impact of the forensic audit on these unaccounted entries, are both HSCC and HSCL, are they both profitable? What sort of margins do they make at the EBITDA level?

Yes. Both the companies are profitable and HSCC's EBITDA level is 1.81% and HSCL is around 1%. And HSCL will further improve because they faced the IR issues. Now the company is stable and doing good and also getting the order book, which we will share with you through e-mail, right?

Well, ladies and gentlemen, that was the last question. I would now like to hand the conference back to Mr. Viral Shah for his closing comments. Over to you, sir.

Yes. Thank you, everyone, for participating in the call. I especially thank the management of NBCC India for giving us an opportunity to host the call. Thank you.

Thank you very much. We are expecting a bright future. Thank you so much.

Thank you. On behalf of Prabhudas Lilladher, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.