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

Ladies and gentlemen, good day, and welcome to the NBCC (India) Limited Q2 FY '22 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rahul Modi from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Janice. Good afternoon, everybody. Thank you for joining us for the Q2 FY '22 Post Results Conference Call of NBCC (India) Limited. On behalf of ICICI Securities, we would like to welcome the NBCC India senior management led by Mr. P. K. Gupta, Chairman and Managing Director. Thank you, sir, for sparing your time. From the management, along with CMD, we have Mrs. B.K. Sokhey, Director of Finance; Mr. Rajendra Chaudhari, Senior Executive Director, Engineering; Mr. Pawan Kumar, Executive Director, Engineering; and Mr. Pradeep Sharma, Chief General Manager, Engineering. I would like to hand over the floor to Mr. Gupta for his initial remarks, post which we can have a Q&A session. Thank you, and over to you, sir.

A very good afternoon to all the shareholders present here and warm welcome to this investor conference for the second quarter results of NBCC. All of you might have seen the results already. So results are fairly encouraging, and I'm happy to announce again that there is an increase in turnover by 30% on a quarter-to-quarter basis. And on a half yearly basis to half yearly basis, it's 55%, though there was a spell of corona in this year also, similar to last year. And profit after tax, there is a major jump. On quarter-to-quarter basis, it is more than 90% increase. And on a half year-to-half year basis, it's 120% increase. So all these results are encouraging, and we have 2 very encouraging major developments. One of them is that we bid the highest port order till now in the history of the company. That is about INR 1,000 crore social housing project in the country of Maldives through Exim Bank on buyer's credit basis. All the formalities of this project has been completed. We have signed the agreement. We also signed the loan agreement. We have given the bank guarantee for the advance, and we are expecting the advance at any moment. We have also floated the tender for this work, and tenders will be opened during the month of December. And very quickly, we will finalize and start the work. The completion period officially is 30 months, but we have cut the completion period [ over ] 2 months, so that we have a grace period of 6 months in our time. So this is a remarkable achievement for the company, and I hope the work will be completed even time. Total business development till now in this year is around INR 4,100 crores. And major business out of that is -- one is this Maldives, which I have already told. And another is NIT Patna costing more than INR 500 crores: then additional work in National Sports University, Imphal for INR 400 crores; construction of FCIL building at Noida, INR 65 crores; and a new sector we have opened, that is hydropower. For Odisha Hydropower Corporation, we have bagged an order of INR 206 crores. So these are the major business development ventures in this year. We have got one medical college work in Knanpur Kalan, Sonepat, Haryana for INR 285 crores. Another sector that we are opening is the independent engineered services for international airports, which are being done through private sector participation. So we have bagged one work of independent engineered services for development of Jaipur International Airport. It's a purely consultancy contract, but cost of our fees will be around INR 12 crores. But there is a good margin and very good future business because a large number of airports in the country, probably around 100, they will be privatized or constructed through PPP. And all of them will require independent engineered services. And we have a good chance of getting business in this area. So this is all about business development. We are already over the second wave of corona, and all our works have started in full swing. Our major flagship project is Amrapali, which is costing around INR 8,000 crores. And we have to give around 46,000 houses to the homebuyers, out of which 8,000 were already constructed and 36,000 houses have to be constructed. These were at different stages. Most of them are the new ones. So the major achievement in this project is that we have been able to sign an agreement with SBICAP for getting INR 650 crore through SWAMIH fund. And the first installment of this fund is already with us. We have been able to pay to the contractors, if there were approved, pending payment that we have been able to pay to the contract. And this SBICAP funding is for 6 projects of Amrapali. For balance, 16 projects, we are tying up with the bank, and 3 banks have already given their positive indication. And Supreme Court, in fact, directed 6 banks to provide funding for Amrapali. So out of the -- we have given their positive indication. And balance, they are also likely to give their positive indication process. And after that, we'll be getting this money. So there was a shortage of funds for some time in Amrapali that we are likely to get over. The funds from home buyers are coming to the extent of around INR 100 crores per month. And just before Diwali, we have been able to hand over some flats to the homebuyer. And that has been a very big relief for them. We organized a ceremony in which the Honorable Court Receiver handed over the flats to the homebuyers. We are awarded the tender for around INR 1,800 crores in this year, and tender worth INR 3,000 crores there in pipelines and will be awarded by end of December. So on that front also, we are progressing mostly. So our future vision is that we want to go in a big way in our international business. So we are, in fact, with the several countries and on course to get to orders internationally. Another very big event during the second quarter was the inauguration of India Pavilion in Dubai Expo at Dubai by our Honorable Commerce Minister. This project has been constructed by NBCC and upgraded by [indiscernible]. And there's been a lot of proud teams at the Dubai Expo. Regarding the future business development work, we have submitted an offer to agricultural department for redevelopment of properties in Delhi, 2 properties there, around 25 acres space. So the redevelopment is planned. They invited the open tender, in fact. So we were the only bidder. We have submitted the bid, and we are likely to get order because since we are the only bidder. And [indiscernible] is going on with our ministry for redevelopment of their printing presses at 4 locations, so at Nashik, Kolkata, Mayapuri in Delhi and [indiscernible], modernization and demonetization of printing press. So this order will be worth around INR 1,200 crores. It is also, we are likely to get the order. Another order in the pipeline is the government project, for which the space has already been handed to Government of India. And that order also, we are expecting shortly. Now I'll hand over the mic to my Director of Finance, who will give further details of the results.

And good afternoon to all the investors and the analysts who are attending this conference call and very warm welcome to all of you. As the CMD has already briefed you about the results part, I would like to inform you, yes, that NBCC is able to achieve the good margin. One of the main reasons is that we have been able to realize our very old outstanding deals, because of which, now the ECL, which is expected credit loss, provision with the company was creating continuously is now getting reversed back. So now the results are -- we are getting the results of those efforts, which have been made for the last 1.5 years. And we are further expecting the good realization from our other clients also. And then on the other part, yes, there are 2 disclosures, which we have made this time. We have carried out the adjustment with regard to our one-off projects at IIT Kharagpur, because of which there is only a marginal dip of INR 1.50 crores in our margin. And that was only done in order to correct our books of the accounts. And there is no impact -- there is no other impact in the books of the account. And one -- we note -- as an account of the -- our projects regarding the 37D has also been given by the management in a very transparent manner, for which the decision will be taken in the coming quarters or by the -- by this year -- annual year-end. So with that, I would like to hand over now for the questions and answers from your side, please.

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

Sir, my first question is on that -- now that you have concluded your first half, does your guidance of INR 7,000 crore execution remain intact? Do we see that kind of momentum picking up?

Momentum has picked up. But since substantial time was lost in corona and then during rainy season, there was a slowdown, Rohit. But the momentum has picked up. We are expecting a turnover of INR 6,000 crores.

Okay. Stand-alone numbers, you are expecting INR 6,000 crore execution. Sir, in terms of the works awarded, the last, we were given to understand, we had close to INR 18,000 crore of work awarded to the contractors. What is that position looking like? Sir, if you could bifurcate both the cost-plus model and redevelopment project, what is the work totally awarded to the contractors?

Total INR 1,800 crore worth of contracts have been awarded [indiscernible] INR 1,800 crores. [indiscernible] contracts have been awarded?

I'm counting about, sir, also the INR 62,000 crore order backlog. What is the total awarded works to the contractors?

Ongoing work is around INR 18,000 crores. Ongoing work is around INR 18,000 crores.

Okay. Of which -- how much of that is redevelopment and how much is cost plus?

Redevelopment is around INR 5,000 crores, and the rest is [ CMP ].

Okay. And how -- what is this number likely to go up like by the end of this year?

By the end of this year, we are planning to award another INR 5,000 crore worth of work.

Okay. Okay. Sir, in terms of redevelopment projects, what is the monetization looking like? How much is the total monetization process till date you have done? Hello?

Monetization in our Nauroji Nagar property, the monetization has been a little low. And we have been -- till now, we have been able to sell around INR 3,700 crore worth of property in Nauroji Nagar. But this year, the property sold is only INR 62 crores. And in our -- we have one redevelopment project of Gomti Nagar railway station. There, we have been able to sell property worth [ INR 282 crores ].

Okay. Sir, in terms of execution, are we completely normalized? Or are we still creating some sort of a labor availability or some sort of executive challenges?

We are normalized. Now we are normalized.

So the peak labor requirement is like, what, 60,000 laborers. Now that is -- what level will [ you pursue ]?

We need around 60,000 -- 55,000 to 60,000 laborers.

Okay. Sir, then my question comes to the seed money part. You have invested INR 1,100 crores of seed money, which earns you INR 132 crore of interest. There is a good amount of number which wasn't realized. I think the cash wasn't coming through. This was more like an accounting [indiscernible].

We have realized the interest, what, INR 180 crores from that basis. That has already come to our account in installments of INR 60 crores. We have got that money.

Okay. And so how much -- what is the total quantum of outstanding amount which is still like an accounting number [indiscernible]?

We have invested the INR 900 crore worth of seed money in Nauroji Nagar project. And total interest outstanding was INR 230 crores, out of which we already received INR 180 crores. And only INR 50 crore worth of interest is pending [ in that way ].

Okay. Okay. Sure, sir. Sir, finally, if I may have a touch upon the Amrapali project. We are given to understand this is a INR 8,500 crore project, okay?

Around [ basis ].

Yes. So the funding, I'm given to understand, there is an unsold inventory, which will earn you INR 2,600 crores, which should be the same to be done by the [ FCCI ]. What is the progress over there?

I'm told inventory is INR 4,000 crores. And we have -- earlier, that was what was given to MSTC. But later on, Supreme Court, when MSTC could not do it, the work for sale was given to NBCC. We have already started selling that inventory, and we have appointed general partner for this one. [indiscernible] has been appointed as general partner, and they have started their advertisement and other activities. Two properties have already been sold directly by NBCC. So now the sale will pick up. And again, we also have been able to sell one FAR of INR 43 crores in Princely Estate in Noida.

And sir, of this INR 4,000 crore [ undetached ] amount, what is the total realization till date?

No. Sorry, this INR 4,000 crores has to come from the old inventory from homebuyers. Unsold inventory is INR 2,000 crores. Unsold inventory is INR 2,000 crores. Also, that, I think, about INR 100 crore worth of property we have been able to sell. But now with the appointment of general partner, sales has picked up.

Okay. Okay. So INR 4,000 crores plus INR 2,000 crores, 6,000 crores, we have got, maybe what, INR 200 crores, INR 300 crores, what we realized now?

No. We have -- out of this INR 4,000 crore worth of old property, we have received around INR 1,100 crores.

The next question is from the line of Ravi Naredi from Naredi Investment.

Sir, I have due regards to all of you, the management. But since last 8 years, I am the shareholder of the company. And what I am observing, I'm telling you, sir, you have huge order base book by, I think, last 7 to 10 years, when we became -- I became your shareholder. We always listen, we are doing fine, and we will do more projects in coming months or quarter. But it never happened so far. We knew education part is also not on your company part. But sir, can you tell whatever order book we are having of INR 80,000 crores, INR 70,000 crores? How many years it will take to complete the projects?

I'll tell you the reason. Because most of that order book is redevelopment projects, and redevelopment projects are depending upon the sale of the property, which is mainly commercial. And essentially, due to these 2 waves of corona, sale of property -- commercial property has gone down like anything because we work from home. It's somewhat offered by government sector and private sector lending. That is one major reason for low growth of sale of commercial property. And future tendering and future execution of redevelopment projects, that depends upon the sale of commercial inventory. To tide over this problem, now we have decided to sell residential property also in our 7 GPRA projects. We have reprocessed the case for the accrual of the government, that is the senior officers of the government. And because there is a good demand of residential property in this [indiscernible] area, which is touching the [indiscernible] and Gomti Nagar area. Commercial property demand is a little less due to work-from-home culture. So we have decided to sell past residential property by cutting down the number of the government recommendation that is to be going to government employees. So once that approval comes, we are likely to get better sales and increase the speed of execution of [indiscernible].

Yes. Can we know how much -- whatever our project order book, how much in redevelopment and how much in the clear project?

Around INR 32,000 crores versus in redevelopment sector. Around INR 40,000 crores is in redevelopment sector.

And the remaining? The remaining INR 30,000 crore order is there or INR 40,000 crore -- the total, INR 80,000 crores?

INR 40,000 crores, redevelopment sector and around INR 22,000 crores in PMC.

INR 22,000 crores, PMC. Sir, with the result of the quarterly, can you give the investor presentation so we can know more about the company? Why not you bring your conference results to the company culture? My point is that.

We'll upload the investors presentation on the website.

But you must upload before the conf call so we can see the investor presentation and we can ask questions according to the account. Why not you do this? Every company is doing. You are not extraordinary people. So why not you download the investor presentation before conf call?

We'll do it from the next quarter, sir.

[Operator Instructions] The next question is from the line of Parvez Qazi from Edelweiss Securities.

I'm sorry, I joined the call a little late, so pardon me if this question has been already answered. But what would be our consolidated order book? You said INR 62,000 crores is the stand-alone order book. So what will be the consolidated order book? redevelopment projects out of this?

Consolidated order book is INR 72,000 crores.

And how much will be redevelopment projects out of this?

INR 40,000 crores redevelopment projects are being done only by NBCC. Our subsidiaries are not doing redevelopment projects.

So in the current fiscal, which is the first half of FY '22, how many projects would we have awarded to contractors?

Pardon me, can you repeat the question?

So in the first half or in the first 6 months of this fiscal, how many contracts would we have awarded to the contractors at the consolidated level?

Consolidated, it's INR 2,800 crores.

INR 2,800 crores, okay. And we are saying we'll target another INR 5,000 crores award in the second half of the year. And lastly, what would be our guidance at a consolidated level in terms of revenue and EBITDA margin for the current FY '22?

It should be around INR 8,500 crores.

And EBITDA margin?

2% to 3%.

The next question is from the line of Anshuman Ashit from ICICI Securities.

Sir, just continuing on the last question. Could you please give us the revenue and EBITDA margin guidance for FY '23 as well?

Sorry, repeat your question.

The revenue and EBITDA margin guidance for FY '23.

Consolidated net sales, we'll plan for INR 10,000 crores. EBITDA margin will remain broadly 2% to 3% only.

Okay. And sir, in your initial remarks, you had mentioned about the hydropower project in Odisha. So could you please provide some more details about the project and whether there has been any financial closure and all, some more color on the project?

Yes. We have the PSU for state of Odisha, Odisha Hydropower Corporation. For this year, we have got this project. The financial closure is already done, and we have floated that tender for consultancy work for this project. That will be opened shortly. After that, we will close that tender for consulting. Financial closure, we've already done. MOU is already signed.

Okay. And sir, the margin expectation from this project?

It's about 6%.

6%. And sir, will we be interested in other energy sector projects as well like solar EPC and -- apart from hydropower going forward?

No. EPC, we are doing for a thermal -- one project for thermal power. For TSGENCO, we are doing in Yadadri already. That is worth of INR 500 crores.

Okay. But solar projects, we are not thinking about right now?

Solar projects, we are not.

Okay. And sir, in the recently announced Gati Shakti scheme, so are there any opportunities for us in that scheme?

Gati Shakti scheme is basically for transport sector. We are not into transport sector.

Okay. Okay. Sir, just finally, going forward, what are the opportunities in the pipeline in case of redevelopment, if you could just mention?

Yes. I earlier also told that 2 projects -- 2 properties of agriculture department research organization in [indiscernible] that we have already submitted the offer. The cost will be around INR 1,800 crores. That is one. And then the land parcels with Delhi at Visakhapatnam, our talks are in advanced stage. And there is one property of Delhi Jal Board in Lajpat Nagar. For that, all the talks are going on the Delhi government. And another one is a printing press redevelopment at 4 locations in India for our own Ministry of Housing and Urban Development. For that also, we have submitted the offer to our ministry. And for Delhi Transport Corporation, we already have 4 properties in hand. And further, we are exploring -- that balance property could also come to us. For that also, we have [indiscernible].

The next question is from the line of [ Rahul Davabala ] from [ SK Medical Agency ]. [Operator Instructions]

Recently, government has launched to form new SPV for land monetization. My question is that, is management of NBCC inclined to approach government to form this SPV under NBCC itself by utilizing their surplus cash on hand?

We -- specifically for land monetization, but they are likely to give the models to NBCC.

Yes. Exactly. But the...

So for land monetization, they are likely to give the order to NBCC.

Yes. Definitely. But that is a different structure from the government. So as a shareholder, I'm suggesting you that can you deliver sales to take this whole company as a subsidiary of NBCC by approaching the government? Because the next 10 to 15 years will be the biggest gains in the -- for the real estate if this -- all land monetization progress will be on our state because there are very amples of lands available with government.

No. This is -- you are talking about the [ DICOM ]. The [ DICOM ] has just introduced that we are going to form a -- join a subsidiary company. We will be owning the land assets of various PSUs. Is it that what you're talking about?

Yes. Exactly. I'm asking you for that. The government has decided to some land monetization corporation. So by utilizing our surplus cash, we can approach government to take that old company under NBCC.

No. That is -- that cannot come under NBCC. That is a separate company under [ DICOM ]. But that company will give work to NBCC because we are doing redevelopment projects and monetization of land parcel. So that is our model. And I think those models, they can award work to NBCC.

The next question is from the line of Pankaj Kumar from Kotak Securities.

My question is regarding the tenders that we are likely to award in FY '23. So this year, we are getting another INR 5,000 crores in H2. So what is the pipeline for FY '23 that we want to award?

You want to know about the working pipeline?

No, sir. Tenders tracker we are awarding basically out of the total order book that we have.

We'll be floating a tender for redevelopment projects as soon as the sale of properties pick up. We'll be floating the tenders for redevelopment projects of 7 GPRA, and we are likely to get the approval for Delhi Transport Corporation redevelopment project. And for that also, we are likely to float that tender. And some new work that we have recently received, that is [indiscernible] in Haryana and the recent business development work, that we are likely to float the tender.

So any ballpark number that you can give for FY '23? Like this year, we are doing roughly INR 7,800 crores.

So next year, we'll plan for INR 10,000 crores.

And in terms of guidance, you've given the INR 10,000 crores for FY '23 on consol basis. So what would be the stand-alone components?

Stand-alone will be around INR 7,000 crores. More than INR 7,000 crores will [ land ], but it will be on current level.

And sir, regarding this Ghitorni project, can you give some more details, so what would the size of the project? And how would be the monetization of that? Because as of now, we are seeing this slowdown in terms of monetization of projects. So how that will go about because...

240-acre piece of land near Ghitorni metro railway station. The land is owned by CPWD, and the project will be done jointly by CPWD and NBCC. So CPWD will be constructing the government accommodation. We will be constructing the private accommodation and commercial complex, through the sale of which the money will come and the financing of government accommodation will be there.

This is a mix of residential and commercial business?

This will be mix of residential and commercial, but mainly residential.

Okay. Okay. And any other tender pipeline that we have a -- project pipeline from the international side?

Twin Tower work in Bangalore. Twin Tower work in Bangalore.

International projects, sir?

International projects, we'll tell you.

International projects, we are just entering for [indiscernible] projects. And recently, we committed a bid for $130 million for a Burundi parliament building. So we are the only bidder there. So we are expecting that order. And some other new projects are being submitted. Prequalifications are being submitted for Ivory Coast medical colleges and some other building projects where we are considering those also. So we are expecting good business from overseas in the coming days.

So these are not through a tender basis. That is on a nomination basis.

No. They are tender -- only tender basis [ that has been made ].

Okay. So this $130 million parliament building is in which country, you say?

In Burundi, Burundi, in Gitega, the capital there.

The next question is from the line of Meet Parikh from Anand Rathi.

Yes. I just have a couple of questions. The first question is, sir, for the Delhi colony redevelopment projects or the Nauroji Nagar, what -- till date, you have sold around INR 3,700 crores of commercial real estate. What is the target for the year-end FY '22 and FY '23?

'22, '23.

Yes, sir. What is the target?

'22, '23, the target is to dispose all of the properties. And if there is no third wave of corona and commercial properties picked up, I hope that next year, we'll be able to sell all balance property of INR 8,000 crores.

Okay. So for FY '22, if you can give me a number?

FY '22, we kept a target of INR 2,000 crores. Till now, the sales have been sluggish mainly because of the second wave of corona.

Okay. So only INR 52 crores, which you had mentioned earlier. Okay. Okay, sir. And you also said you wanted to monetize some commercial space in the last conf call, and you had discussions with some corporations also. So any update on that?

This was regarding RINL property in Visakhapatnam. We have already submitted the report to our client. And based upon their feedback, we'll be taking [indiscernible].

Okay. Sir, on -- sir, again, sorry for harping back on the redevelopment project. Sir, the INR 2,000 crores means you -- do you expect to achieve it? Because if we have seen in the first half, it has only been INR 52 crores. So do you see a requirement -- sorry, not a requirement, but there is a lot of interest for -- to monetize the inventory for the Delhi redevelopment project. So you expect INR 2,000 crores will be achievable?

We are still expecting -- the talks are going on with many clients. We are still expecting that we'll be able to [indiscernible].

Okay. And sir, last one, a bookkeeping question. Sir, what would be the PAT margin for FY '22?

If the margin will be 2% to 3%, PAT margin will be 4% to 5%.

The next question is from the line of Swapna Batra from Creative Mindze.

Two questions here. First, I just want to check, for the international projects, are the margins better? Or are they in the same range as the domestic projects? Could you tell us a little bit about it?

The domestic projects, generally, the margins are better.

Okay. And to what degree, sir?

Pardon me?

How much better? So would you be able to quantify that?

All these projects, we are expecting a margin of about 10%.

Okay. Sir, that's happy to hear. And sir, another -- since you spoke about several projects, a few quarters ago, you had mentioned about [ unregistered ] properties also. And you were actively or already in advanced talks about that. Any information you could share on that, if there has been any progress?

Can you repeat, please? Because I didn't understand. Can you repeat your question?

You had spoken about some -- there is a property under urban ministry -- [ unregistered ] properties, right? You had mentioned a few quarters ago that you were in advanced talks with them. Any information on the redevelopment of their land parcels?

Yes. [ Unregistered ] properties, we are discussing with our ministry because [indiscernible] we are still under talks. Nothing is finalized. We are working on it. We got 2 land parcels, 2 in Delhi and 1 in Pune. So we are discussing that.

Okay. So both [indiscernible] and Delhi [indiscernible] and Pune separately.

Yes. Yes. In Delhi only, the talks are going on for [indiscernible] properties.

And any idea when you will come to know? Or is there a time line which they have indicated?

One of the land parcels is jointly with -- it has to be done with Tata Projects. So that discussion is going on between NBCC and Tata. So the modalities are being worked out. And once they're finalized, then we will [indiscernible] our decision.

[Operator Instructions] The next question is from the line of [ Atul Divedi ] from [indiscernible].

Yes. I'm audible?

Yes.

Yes. Yes. Okay. So I have 2 questions. First is, as you said that our consolidated order book is approximately 70-plus thousand, 80,000 or thereabouts. So my question is when we are planning to finish the current order book, I mean, how many have been required in a normal situation, not corona? And what is our plan to pick new projects every year for next 3 to 5 years, whatever? So that is my 2 questions.

Our plan is to wind up with backlog of order in the next 5 years, plus additional order for diversity, if there is no corona. And sale of commercial property is very important, commercial as well as residential. If there is no corona, probably, we'll be able to do it in another 4 to 5 years.

4 to 5 years. And what is our plan to take new projects in the next 3 to 5 years? Every year, I mean, in terms of how you're planning to go...

INR 7,000 crores to INR 8,000 crores worth of business development, at least, we will plan for in 4 to 5 years.

[Operator Instructions] Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments. Also, for any further questions or queries, please contact Mr. Balkishan Singla, Investor Relations, NBCC. Over to you, members of the management.

I'm grateful to all the investors and shareholders present here, for your patient hearing and your continued support to us. Hopefully, this year will be better than the last year, in all probability. And from next year onwards, our problems would be over, mainly of corona. And we should be able to wind up the pending order book, about which I can see the real concern from shareholders because of a very large order book. People have invested their money in the company. So another 4 to 5 years, we should be able to wind up the order book and take in order. The future of company is bright, and I'm again thankful to all the shareholders for their continued support. Thank you.

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