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

Ladies and gentlemen, good day, and welcome to the NBCC (India) Limited Q2 FY '21 Earnings Conference Call hosted by Yes Securities (India) Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Alok Deora from Yes Securities. Thank you. And over to you, Mr. Deora.

Thank you so much. Good afternoon, everyone. I welcome you all to the Q2 FY '21 Earnings Conference Call of NBCC (India) Limited. We have with us today Mr. P. K. Gupta, Chairman and Managing Director; Mr. Rajendra Chaudhari, our Director, Commercial; Mr. Neelesh Kumar Shah, Director, Projects; Mrs. B.K. Sokhey, Director Finance; Mr. Pradeep Sharma, GM Engineering. We will start the call with opening remarks from the management, followed by Q&A. Thank you. And over to you, sir.

Am I audible?

Yes, sir.

I'm P. K. Gupta, Chairman and Managing Director, and we welcome to all to this investor call for quarter 2 of NBCC. And a very happy Diwali in advance. Just a few opening lines. Our order book in earlier quarters has also been robust. But a big difference that we are now making is that we are placing the orders continuously. So during this financial year, we have placed a contract worth INR 8,500 crore. And contract worth INR 3,000 crore are in pipeline likely to be placed in another period of 2 months or so. We have balanced 4, 4.5 months of this year left, and we want to further add up the -- further contracts. So that is going to improve our delivery, which was a little sluggish due to corona and several reasons. But now it's all part that and we plan to have a very bright future during this year and during the next financial year. Our current contracts, which are in execution are about INR 20,000 crore. All these are running projects, and there is no problem of funding in this, and there's no problem of any site-related issues that kept . So all these works are going on. And the Amrapali has been a major booster for us. Except 2 projects, we have awarded all the contracts of Amrapali, and most of the works have already been started. About 700 houses, we have handed over to home buyers and balance works are going on.

Hello? Hello? Hello?

Now Mr. Rajendra Chaudhari, our Director, Commercial, will take over and brief you about the redevelopment projects.

Hello. I'm Rajendra Chaudhari. You see as far as redevelopment of the projects are concerned, recently, we secured projects from DTC to redevelop their lands. Initially, they have given us 4 land parcels to redevelop. And we are also in touch with Delhi Transport Board, again, for development of their properties located in Delhi. So these are the new things which has happened in this quarter regarding redevelopment.

It is all from our side now. Now you may please start the question and answers from the investors or analysts side.

[Operator Instructions] The first question is from the line of [ Sunil Bansal ], who's an individual investor.

Sir, I've been following NBCC for a long time, and I see this operation -- operating margins and net profit margin for NBCC is much, much lower. And particularly, excluding the interest component, income from other sources. So do you have any plan of streamlining this operation, cost-cutting measures? Because I can't understand having INR 8,000 crores turnover and net profit margin is 1% or 2% range. This is my first question, sir.

Actually, the main reason for the reduction in the operating margin is lower turnover. And as the situation has improved now in this quarter, and we see the recovery is very fast. And we could be able to achieve the turnover at par with the last year's quarters also this time. We are hopeful that our operating margins will also increase. There is another reason for the lower operating margin is the reduction in the PMC fees margins from all other clients, which were earlier in the range of 7% to 10%, now it is between 5% to 7%. The third reason is the real estate fees, which could not happen much in these quarters, in these 2 quarters, but we are hopeful in the next 2 quarters.

My second question is just for clarification. I understand NBCC has a total bank balance of INR 5,000 crores, including the customer advance. But I do not see this interest component properly in the results declared. Even at 17%, this should have been INR 300 crore something income from this interest. So does it -- you share with the customers' interest or it is with NBCC only, please?

Actually, we have been now showing the net of interest in our books of account. Whatever interest is to be passed on to the client has already been passed on separately, and that is shown, which is the NBCC's account. And out of the total cash and bank balances, we are having the INR 4,000 crores of client deposits. And the balance amount, around INR 750 crores, is our own funds on a consolidated basis.

[Operator Instructions] The next question is from the line of Pankaj Kumar from Kotak Securities.

Yes. I would like to know about the current order backlog and the status of the Nauroji Nagar project.

Yes. We have a total order book of INR 72,000 crores. And the Nauroji Nagar construction has picked up. Now we have almost 2,200 labor there, and we need to increase to 3,000. So as far as [Technical Difficulty]

Hello?

We seem to have lost the line from the management. Please stay connected. I'll reconnect the management line.

Yes.

Participants, thank you for patiently holding the lines. We have the line for the management reconnected. Over to you, please.

Yes, sir. On the Nauroji Nagar, you were giving the update?

Yes. Nauroji Nagar, almost all the sites of NBCC have picked up. Nauroji Nagar has also picked up. We have 2,200 labors. And in the meantime, we could sell also something around INR 700 crores in Nauroji Nagar. So during COVID period also, we have been -- we have sold around INR 700 crores. So we hope that next 2 quarters will be as good as previous years' quarter.

And in terms of awarding, what is the value of project we awarded in these 3 projects?

We have awarded INR 1,950 crores.

Sorry. How much?

INR 1,950 crores awarded. You are talking about Nauroji Nagar or you are talking about...

Nauroji Nagar and other 2 colonies as well, Sarojini Nagar and...

Sarojini Nagar and Netaji Nagar, we are in the process of tendering.

Okay. And sir...

And overall, we -- so far this year, we have awarded to a value of INR 8,500 crores.

Okay. So current contracts under execution is INR 20,000 crores, which includes your INR 8,500 crore awarded project as well?

So currently, it was INR 20,000 crores, INR 20,000, not INR 30,000.

Yes. Yes. Correct. Yes. Correct. INR 18,000 crore is running value of the contract, INR 18,000 crore.

INR 18,000 crore.

Yes.

And what is the value of the project that you plan to award in, say, next 6 months, say, by the end of the year?

We are -- in pipeline, there are INR 3,000 crores worth. In total, it will be around INR 12,000 crores we'll be awarding this year.

And maybe even more than that.

And any revenue guidance you would like to give for the year?

We are estimating INR 6,000 crores.

[Operator Instructions] The next question is from Parvez Akhtar from Edelweiss Securities.

Yes. A couple of questions from my side. Sir, in our INR 72,000 crore order book, what would be the quantum of redevelopment or what we call the self-revenue generation projects?

INR 37,000 crores is for redevelopment.

out of

Out of INR 72,000 redevelopment on self-sustainable basis is INR 37,000 crore.

Okay. And sir, if you could help us with the status of Netaji Nagar and Sarojini Nagar. What is the progress? You said that we are looking to award contract. Have we done all clearances, et cetera? I mean is all that process complete?

See, in one of the projects, we have done the part for its clearance. And we are in the process of getting the balanced clearances. But in order to save time, we are finally going with tendering activities. The work will only be started once all the approvals are in place.

And in terms of labor availability, where exactly we are? I mean as a percentage of pre-COVID levels, where will we be today?

We are at 66%. We need something around 60,000 labor. We are having almost 40,000 labor.

Sure. And lastly, for FY '22, I mean, obviously, this year has seen a lot of disruption. But when we look at, let's say, FY '22 and assuming everything gets normalized, what is the kind of margins that we can think about?

The margins now at this moment, it is slightly difficult to exactly tell you the margin guidance. But definitely, it will improve a lot. And we will draw the current percentage from less than 1% to at least 1% to 2% operating margin.

The next question is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, I believe that you yourself signed the value. So what is the criteria for excellence? What is the revenue target over there?

Actually, the revenue targets are around INR 6,000 crores. And with the operating margin -- INR 6,000 crores.

Excellence?

In the excellent, it is INR 6,500, yes, and with the operating margins of 1.205.

Okay. So this is for stand-alone?

This is a stand-alone. Yes.

Okay. And in terms of the remaining order backlog, madam, we have like one we said INR 37,000 crore, which is the self-generating model. And INR 35,000 crore that you have roughly is actually your -- where funds are already tied up in place. So in that model, why the orders haven't been awarded to contractors or why there is a slow-moving phase in terms of execution?

You are talking about redevelopment projects or...

No. The non-redevelopment portion in your order backlog.

Out of order book of INR 72,000 crore, PMC is INR 37,000 crore, right? Participation is almost similar in the redevelopment. Out of that, INR 17,000 crore is ongoing work. And we have been able to award works of INR 8,700 crores so far, and we are expecting in pipeline is INR 3,000 crores. But we may tender more and award more beyond INR 3,000 crore also. So this is something around INR 17,000 plus INR 12,000 will work out INR 29,000 crore.

Okay. You still have INR 8,000 crore left, sir?

Yes. You see every project has got some decision thing with the local approvals across India. That takes some time. And without having proper statutory clearances to go ahead every time for tendering, it becomes a little bit difficult cumbersome.

Sir, this INR 8,200 crore that works you have awarded so far, what is Amrapali's portion in that?

Amrapali's part is .

INR 6,000 crores.

So Amrapali, you don't consider that as a part of your self-generating model. It's actually...

No. No. It is no self-generating model. It is PMC on -- we are able -- it's PMC on behalf of Supreme Court of India at 8%. So the money -- the fund arrangement is being done by the learned court receiver who has been appointed by Supreme Court.

Okay. Okay. Sir, regarding Jaypee, what is the situation over there? When do you expect the...

Final hearing of Jaypee has happened in the Supreme Court. Order is to come. That's all.

Sir, if I look at -- I have gone through the Jaypee resolution plan. You have articulated the portion of close to INR 20 billion of debt to be raised. And there are some land banks to be sold. Can you walk us through that model exactly how the land bank will be carved out? How -- what exactly the bankers will have? What is the debt will be in the demerged entity?

See, we have -- you people and we have waited up to this time. Let the segment come out, then we will tell all the modalities.

[Operator Instructions] The next question is from Binod Modi from Reliance Securities.

My questions pertain to, firstly, your revenue part. Sir, you are guiding INR 6,000 crore of revenue at a stand-alone, right? But if I look at overall first half performance, that has been around INR 1,400 crore or something, we have booked revenue. So it means in second half, we have to do around more than INR 4,500 crore kind of revenue. And given the fact still we have almost 66% kind of labor availability, how comfortable you are to meet the INR 6,000 crore of revenue, sir? That is my question one.

Yes. So shall I reply your question one, first question?

Yes. Yes. Yes. Yes. Please, sir.

See what has happened, actually, recently, we have awarded work of more than INR 3,000 crores. It is recently, it is awarded actually. So we expect to generate the revenue of 20% from INR 3,000 crores which is awarded recently. So that will boost up our, I mean, turnover. Second thing now, the labor position is further improving. And in some places, some project, it is almost -- we have attained almost 80%, 85%. So overall, it is 66%. So it will improve. And if you see our track record actually also, we have been achieving more turnover in third and quarter.

Yes, that I understand, sir. The 60%, 65% comes in the second half. But still, even if I consider 30%, 35% in first half, it looks to be a very daunting task for second half.

So what happened actually, this time, scenario is a little bit different because the labor position will improve now. And second thing, recently, we awarded some new ones, big ones, big projects. So these are all big building projects. So definitely, we will achieve. Because the turnover depends on the number of projects, value of the project. So this time, all work, which has been awarded, is more than INR 300, INR 400 crores value of each project. So we'll be able to achieve the target activity.

Okay. And my second question pertains to Amrapali project, sir. I remember there are total 25 projects under Amrapali, right? And the balance I think after delivering some of the projects, the balance was around 23 something. Out of 23 last quarter, previous quarter, I think we had awarded almost 17 projects of that. So what is the status as of now? We have awarded all projects, sir, from this Amrapali thing?

Except 2, we have awarded all the projects. And these 2 projects also, the decision of court receiver came just I mean 15, 20 days back or maybe a month back. Otherwise, we have awarded all. Thank you.

And, sir, from the same project, how much amount we are supposed to receive as of now from the existing home buyers? And how much we have already received?

We are supposed to receive something around INR 4,000 crores from home buyers.

[ I have to check ].

And what was your next question?

My next question, did we receive any amount so far?

You see this money, INR 409 crore has come. And this money is regularly coming in the forms of -- related to Supreme Court and court receiver. We are not directly receiving this money.

Okay. Great. And last, sir, you said about this park clearance for this -- forest clearance part for this Netaji Nagar and Sarojini Nagar. So this park clearance will be obtained for both these projects or...

You see, we -- after it -- the decision bodies took a long time because Delhi government was in the process of formulation of -- a law for forest. Now they have formulated and they started I mean giving clearances. So in order to start in phase-wise manner, we have gone to Delhi government to give us a wise policy, which they have given us, and it will continue like this.

So essentially, I mean in coming months, at least, we can, I mean, award some sort of projects out of these 2 programs.

Definitely.

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

Sir, can you just elaborate more on the current position that we have on Hindustan Steelworks Construction? What is the order backlog? How much is the execution over there? What margins are they booking and even at HSCC?

You see, the order book is something around INR 3,000 crores. We recently got...

Is this for service, sir, Hindustan Steelwork?