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

Good afternoon, everyone. I welcome everyone to the Q4 and FY '20 Earnings Con Call of NBCC (India) Limited. We have with us today Mr. P. K. Gupta, Chairman and Managing Director; Mr. Rajendra Chaudhari, Director, Commercial; Mr. Neelesh Shah, Director, Projects; Ms. B.K. Sokhey, Director, Finance. We would start the call with opening remarks from the management, followed by the Q&A. Thank you, and over to you, sir.

Very good afternoon to all of you. I'll start with the -- our order book. We have current order book of INR 70,000 crores, out of which work worth INR 13,000 crores are under execution at different stages. That means this is the balanced value of the work. And in the current year, we plan to start the work worth INR 24,500 crores. This mainly includes our Amrapali project amounting to around INR 7,500 crores and Netaji Nagar and Sarojini Nagar redevelopment projects. And a few other projects on PMC, like IIM Sambalpur, IIM Visakhapatnam. These are 2 major projects. Then we have an hospital in Chamba being built for Himachal Pradesh government. So these are major projects which are likely to start shortly in the current financial year. In the current financial, we have already awarded the work amounting to INR 263 crores. And tenders amounting to INR 8,300 crores are in pipeline at various stages and likely to be awarded shortly. In the later -- last part of the last year, in February, there are major positive development that stay order on our Nauroji Nagar redevelopment project were lifted and we could restart the work. But unfortunately, the pandemic came and work was again stopped. But then we have restarted the work. Currently, we have -- there is a shortage of labor at various sites, but we have been able to remobilize around 18,000 labor till now. And the process of remobilizing the labor is going on. Work has been started at around 121 sites out of the 170 running sites. Rest are stalled due to pandemic, containment zone and various other reasons. Last year, our total income has been INR 5,445 crores. And in the last quarter, the income was INR 1,635 crores. So this is all about my opening remarks. You can start the questions.

[Operator Instructions] The first question is from the line is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, my question is just mainly on the current site level, you hinted that close to 18,000 laborers are currently working. But if you could throw us more on -- more color on what exactly is in terms of percentages. How much work is actually happening on the ground? And what is the likelihood of overall execution in this particular fiscal?

So currently at about -- work is going at about 35% to 40% speed, which could have been achieved had there been no pandemic. So our current requirement of labor at our site is around 40,000, and currently, we have 18,000. So about 40% -- at 40% speed the work is going on.

Sir, and on the guidance part, that is how much you are expecting in this year in terms of revenue?

We have a planned target of INR 6,500 crores. And we are expecting that effect of pandemic will be over by September and full fledge work will start by October.

Okay. Sir, in terms of the INR 24-odd-thousand crores number that you talked about, Amrapali Project, Netaji, Nauroji where the work will restart. How much of the funds have been mobilized on these projects? And what is the quantum of projects that is awarded to the contractors?

In these 3 projects, around INR 2,000 crores worth of contracts have been awarded. And INR 6,000 crores worth of contracts for Amrapali, they are in pipeline. The tenders have been floated, some tenders have been opened and are in processing stage and some tenders will be opened shortly. And rest of the tenders are to be floated.

Okay. Okay. Sir, on -- coming on to the margin front, especially the PMC part, how much do we expect? Do we expect any normalization? I'm not talking about EBIT margins. Let's assume even if I have to normalize it, strip out the other income part of it and then look at a normalized gross margin level, what could be the quantum of margins that we can book in PMC segment in this fiscal?

Our Director, Finance, will answer.

Good afternoon. Am I audible?

I was talking about the PMC margins for this particular fiscal? How much would it be likely?

[indiscernible] PMC company, and we [indiscernible] fixed cost, which is mainly related to our current lower price. And in [indiscernible]

Ma'am, sorry to interrupt. You are not audible. We are unable to hear you. If you could come closer to the phone?

Yes, yes. I have come closer to the phone. Yes, I'll continue. Actually, our overrides are fixed related to the salary part, which are approximately to the tune of INR 250 crores. And since our turnover has reduced this year due to broad real estate projects to the extent of INR 3,000 crores to INR 4,000 crores and that has affected our margins in the PMC sector -- segment. And in case we turnover in phases, so definitely this will proportionately be increased accordingly.

So madam, what is the likelihood of margins in this particular fiscal or maybe even by FY '22, can we come back to the normalized margins of 7%, 8% kind of number, EBIT margin?

EBITDA -- you are talking about EBITDA margin?

No, no. EBITDA -- yes, either way, you can touch upon those points.

Yes, yes. Actually, we will not expect the same level of margin, which we have been achieving so far. There are 1 or 2 reasons for that. One thing is, earlier we have been getting the works in the range of 7% to 10% PMC fee. Now that has been slightly reduced from the range of 5% to 7%. And another thing is, definitely, in case we are able to achieve the real estate sales part, so then we have been able to achieve the same levels of margins. Otherwise, this will be on the reduced side only.

The next question is from the line of Viral Shah from Prabhudas Lilladher.

Sorry, I missed the opening remarks. Just wanted to understand what will be our order book due for the quarter and can you -- would give break up of the same in terms of the redevelopment projects and the other...

You are not audible. Can you repeat, please? You're not audible.

Sir, can you hear me now?

Yes, you're better.

Sir, basically, I just want to know 2 things. One is in terms of order book, what is the order book as on quarter? And can you break this order book into 2 segments, that is PMC and redevelopment? That is first question of mine.

Yes, about 47% of our order book is in PMC segment, PMC and EPC. And 53% is in redevelopment segment.

And what will the absolute order book be, sir?

It's around INR 70,000 crores.

And out of this order book, sir, how much will be slow-moving or nothing, we could say that, which has not moved over the past 6 months to 1 year, barring the 3 redevelopment projects; Netaji Nagar, Nauroji Nagar and Sarojini Nagar?

If I may say so that around INR 13,000 crores of work are already underway. They are in progress at different stages. And we will be starting -- during the current year, we'll be starting work worth INR 33,000 crores. So INR 46,000 crores work will be under progress. And balance INR 24,000 crores can be called slow moving, which will not be started in this year, and which will start in next year.

Fair enough, sir. And sir, what is the update in -- on our Nauroji Nagar sales? Because we are hearing that we had a good month in the month of May for our Nauroji Nagar sales per se.

We were able to sell property worth INR 521 crores in the month of May. And the sale is still open, and we plan to sell something in the month of July. So far INR 2,500 crores worth property has been sold.

Yes, sir. And how have been the number in terms of pricing and all? Are we able to attain the same pricing what we've had for INR 2,000 crores of property which we have sold.

Yes, our pricing is fixed. Pricing in Nauroji Nagar is fixed, and we sell at fixed rate. So there is no change in pricing.

No change in pricing. Fair enough, sir. Fair enough. And when do you expect the construction activity to start in this period? Or it has started there?

Construction activity at Nauroji Nagar has already started, and around 300 labor is available. And work is already on, and we are trying to mobilize more labor.

And has the agreement reached with our subcontractors for whatever the delays were there, so the cost overruns and all. Has that also been taken care or still there is no discussions on that?

That is going on with our contractors. Whatever delays were there, if they ask for some compensation, that is still under process. We have provided some as per government instruction, but mainly this is going on.

Fair enough, sir. Fair enough, sir. And lastly, if I may ask the last question. Sir, has the work started on Netaji Nagar and Sarojini Nagar or still...

No, Netaji Nagar and Sarojini Nagar, 1 tender in each project has been awarded, but work has not started. We plan to start the work shortly.

The next question is from the line of [ Sumit Arora ] from [ SmartDhan Capital ].

Sir, I have few questions, I mean, which I want to understand from you, sir. Firstly, what is the total cash we have today? And how much of the cash we have is customer advances and how much is the cash which belongs to us? Secondly, sir, if I heard you correctly, you said that you're expecting a revenue of about INR 6,500 crores. So sir, is that basically on a consolidated level? Or is that on a stand-alone level? And sir, I want to basically now understand from you what is your road map for this company? Because, sir, over the last 2 years, we have seen a sharp degrowth in terms of revenue or collapsed income in terms of profitability. So basically, sir, I want your thoughts on basically how do you look to the company from here? And basically, what are your plans going ahead? Secondly, sir, I also want to understand this COVID impact. As you said that we have about 18,000 people who are working now. So when do you basically believe that we should come back to full stream? And in terms of order book as well, I heard you saying INR 70,000 crores is the order book. So sir, when do you think that we can be able to execute this entire order book which we have of INR 70,000 crore because our revenues actually have been falling, so can you please help me understand, sir?

Okay. Second question I'll take first and first question will be answered by my Director, Finance.

Sure, sir.

So we are thinking that by September, the -- we'll be able to mobilize full labor which is around 40,000. That is our requirement at the various sites. Currently, we have 18,000 labor. So in September, we are thinking that we should be able to mobilize full labor. As far as the projects are concerned, some of the projects will be taken up only in next year. Earlier also I told that in current year, we'll have the project by the end of the year. We'll have the projects running amounting to INR 46,000 crores. And balance INR 24,000 crores we'll take up only next year. So regarding the finances, our Director, Finance, will tell you the detail.

You [Technical Difficulty] anything.

Yes, ma'am, because I mean [indiscernible] NBCC, so we wanted to understand in depth now.

Yes. Yes. Actually, the total cash of all the subsidiaries and including our own company comes out to INR 5,000 crores. And out of which you can consider the amount of INR 350 crores of our own cash, including in our subsidiaries. NBCC is having around INR 50 crores, and the rest belongs to our subsidiaries.

So INR 350 crores, I mean, is the cash which NBCC owns per se.

Yes. We -- that is our own cash, yes, as a group.

Okay. Understood. Understood.

Any other question?

Yes, ma'am. And secondly, ma'am, so basically, I mean, what sir just now said that INR 46,000 crores of projects will be awarded in this financial year. So in terms of revenue, okay, because why I ask you this question is basically in FY '19 we were at about INR 10,000 crores, then this come down to about INR 8,000 crores. And if we are now -- get -- we're going to get to INR 6,500 crores. So we basically are falling quite rapidly in terms of revenue. So I want to understand that how do you see revenue trajectory shaping up for this year and for next year, ma'am?

As regard the revenue falling part is concerned, we have -- sir has already explained that it is mainly because of our sold redevelopment projects at Nauroji Nagar.

Okay.

Now we have got a green go-ahead for that project and the work is going on. So definitely, the revenue will be increased from that project itself. And as regards the other projects, the guidance has been already given by CMD sir.

Okay. Fair enough. Okay. So just 1 thing. Is that in the PMC you have it. Sir mentioned that now it's come down to 5% to 7% and earlier it was 7% to 9%. So all the projects which were awarded in the regime where the margin was 7% to 9% stand at 7% to 9%? Or they have also been reduced now to 5% to 7%? How do we understand that?

The old works which have been awarded at 7% to 9% remains at that level only. And these -- and I have talked about the new projects which are coming up, those are in the range of 5% to 7% margin.

Okay. Fair point. Okay. And just 1 last question, basically, ma'am, on the order book. So currently, our order book is at about INR 70,000 crores which is executable. So are we basically also anticipating a further increase in orders? Or is there something in the pipeline which we can think of?

Can you please repeat?

Sumit, please repeat your question.

Yes, ma'am. I heard sir saying that our order book currently is at about INR 70,000 crores. So I want to now understand that in terms of future order book, I mean, in terms of future projects, I mean, are we basically expecting a further increase in order book? I mean, what's the order inflow guidance, maybe if you can share or something of that sort?

Our Director, Commercial, will give you the answer.

You see this business development is a continuous process. And we are looking for new work and we contact various ministries, clients for getting more work. So the business development will continue, and we have a target of around INR 12,000 crores for this year also. So order book will increase and whatever is executed during this year, it will be...

Retail work that we are expecting in this current financial is the acquisition of JIL, Jaypee Infrastructure Limited. NCLT has already given the order, our -- NBCC will be working as a part of the interim monitoring committee. And that we are likely to take over that company during the current year and that will give major business.

So basically, sir, I mean, since you mentioned that you will take over Jaypee Infra. So I hope there will be no debt obligation of Jaypee Infra which will be obliged to take on?

[Foreign Language] There will not be any debt obligation on our part, and we will manage it out of our own resources only.

[Operator Instructions] The next question is from the line of [ Himanshu Shah ] from [ Potentialities Unlimited ].

Sir, I heard you saying INR 6,500 crores for the current year as revenue guidance. Is that a figure coming -- any amount coming from the redevelopment of Nauroji Nagar project? I mean Sarojini Nagar and that group?

Yes, around INR 1,000 crores in this will be coming for redevelopment projects.

Okay. Okay. And sir, the INR 2,500 crores collected, that sum will lead to what kind of a turnover from that kind of a redevelopment [indiscernible]

That will be used in financing these redevelopment projects.

Correct. But what kind of revenues that money collected would generate?

No, that money does not generate any revenue directly. That is used especially for payment to contractor.

Correct, but...

We generated -- we get 8% fees for the construction done in these redevelopment projects. And that is the revenue that we get. The INR 2,500 crores is not our money. That is ministry's money. It will be used...

Is there any anxiety on the front of selling off that project, the Nauroji Nagar project? Or is it selling well?

Your question is not clear.

Ma'am, are we selling that project well? Or is it very slow?

Till now, it's okay. But due to COVID, there is definitely some impact on the sale of commercial property. So...

Okay, sir. Okay. So 1 more question on the MTNL redevelopment thing that you said in one of the interviews. Any progress on that front because MTNL had to pay the stamp duty for its land and everything. So any progress on that front that we have?

So MTNL has got lot of properties in and around Delhi and other parts of country. So at the moment, we are in talks with them for their plot in Connaught Place area. So that proposal has already gone into ministry. And very soon we are going to get the sanction from the ministry.

And what kind of a size that would entail?

Sorry?

What kind of a size that would entail?

That will be in the range of INR 200 crores.

That's it, okay.

Yes, INR 200 crores.

Sir, and there is a lot of confusion around Jaypee Infra project. So we are not sure whether it's going to be -- what kind of revenue accretive, profit accretive. So can you throw some light on that?

See, as far as JP is concerned, we have jot down whatever is the expenditure and whatever money will be coming from the buyers who have not paid their dues. And with the -- by hiving off the express highway, we are able to meet the construction, plus we will be having something around of 2,000 acres of land. Recently, 800 acre has also been given in favor of Jaypee Infra, JIL. So as far as NBCC is concerned, we have planned in such a way that there is no effect, rather we get some positive results from execution.

Okay. Sir, and the INR 46,000 crores that we are planning to take over from this year onwards, will it get over within the next 3 years? Or there is no time line as to that?

These are likely to be completed in the next 3 to 4 years.

3 to 4 years, INR 46,000 crores, okay. Sir, any reason for the weak guidance apart from the corona thing, I mean, going on in the labor and stuff like that? Any other reason, projects stalling or some court cases and stuff like that?

The COVID reason is 1 and then there is a downfall in real estate market. That is also the effect of COVID. And there is a downfall in real estate market. That is a little bit apprehension. Otherwise, there is no other issue. Availability of labor and downfall in real estate market.

[Operator Instructions] The next question is from the line of Ashi Anand from Allegro Capital Advisors.

Just had a few clarifications. The INR 6,500 crores revenue guidance, is this consolidated revenues or is this stand-alone revenues? And is it only PMC or does it include all the other segments as well?