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

Ladies and gentlemen, good day, and welcome to NBCC India Limited Q3 FY '22 Results Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anshuman Ashit of ICICI Securities. Thank you, and over to you, sir.

Thanks, Sandy. Good day, everyone. And on behalf of ICICI Securities, I welcome you all to the Q3 FY '22 Post Results Conference Call of NBCC India Limited. Today, we are pleased to host the senior management of NBCC, represented by Mrs. B.K. Sokhey, Director, Finance; Mr. Rajendra Chaudhari, Senior Executive Director, Engineering; Mr. Pawan Kumar, Executive Director Engineering; and Mr. Pradeep Sharma, Chief General Manager Engineering. The call will begin with brief remarks from the management, post which we will open the floor for the Q&A session. I would now like to hand over the call to Mrs. Sokhey for opening remarks. Thank you, and over to you, ma'am.

Thank you. Good afternoon, and welcome to all the participants in the investor call of NBCC. And your company is able to achieve the total income of INR 1,508 crores and perform significantly better in operating margins and registered big growth in EBITDA of 34.33% and profit before tax 10.37% in the third quarter FY '20, '21 to '22 in comparison of previous year's quarter results, respectively. At consolidated level, company has secured the new business of INR 629 crore approximately and INR 4,760 crore at stand-alone level as on the current date in the current financial year '21, '22. Company has been able to award the works of INR 1,921 crores in the financial year '21 to '22. And on stand-alone basis and on consolidated basis, we could be able to achieve the target up to -- award the works of INR 2,920 crores. Yes. And I will also put a little focus on our overseas business. And we have been very pleased to get the Burundi Parliament and ministerial work, and the details will be shared by our Business Development Head, Mr. Pradeep Sharma, for other projects also. And as regards the 3 GPRA redevelopment project, our main projects going on is Nauroji Nagar project where the company has sold the commercial inventory of INR 538 crores in FY '21, '22 despite of pandemic, which makes the total sale of INR 4,177 crores out of the total inventory of INR 12,000 crores in this project itself. And the construction work is progressing well, and we have been able to achieve the 40% of the work has so far been achieved. And I will also put some focus on the Amrapali project where the total work so far has been executed is INR 806 crores, including the INR 291 crores executed in the third quarter for FY '21, '22. And we have also appointed the channel partner for the sale of deploying unsold inventory, and the sale has since been started. And some bookings have been done by the channel partner and it is in progress. And now the detailed questions will be answered by our team of business development, our Senior Executive Director Headquarter and our Executive Director Coordination. So kindly now the floor is open for the question and answer.

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

If I -- madam, if I understood your opening remarks correctly, you said that this year stand-alone works of order is almost like INR 2,000 crores?

Yes.

In the beginning of our this coverable product matters last quarter, we have targeted INR 6,500 crores to be awarded. And of which if we have done only INR 2,000 that really speaks that we will have a shortfall of close to INR 4,500-odd crores. Can it be awarded INR 4,500 within 2 months?

We work to the extent of INR 2,600 crores are in the tendering process.

Okay. Okay. This is expected to be awarded at what time?

Sometimes it depends upon the [Foreign Language] bids also. Though we are hopeful that we will be able to aboard by 31st of March, but it [Foreign Language] we are hopeful.

Sure, sure. Now let me give you a different picture, madam. We have currently, what, INR 18,000 crore of works being executed on ground. So of the INR 18,000 crores, if you don't even do INR 6,000 crores of order awarded every year, how are we going to achieve revenue growth of INR 6,000 crore and INR 6,000 crore plus.

You see the order book is presently INR 55,000 crores plus, out of which INR 24,000 crores is PMC and redevelopment is INR 30,000 crores. Our experience from Moti Bagh and Kidwai Nagar is that the decision period for these redevelopment programs are pretty high. So definitely -- since already 2, 3 years have passed and we have the work of major redevelopment of 7 GPRA colonies and work has started on ground on all the 3 colonies, which we are going to construct. We expect that by next year, there will be suitable jump in our revenues.

Sir, I appreciate your comments. But sir, if I have to understand the numbers correctly, INR 62,000 crores is your order backlog, stand-alone order backlog. And INR 24,000 crore is just cost-plus model. But the bigger picture is INR 18,000 crores is the projects awarded to the contractor, right?

Yes.

Hello?

Yes. Yes. It is.

Yes. And out of that INR 18,000 crores, we were looking to award further INR 6,500 crores?

Right.

However, we are already short of that number by a big margin. which means the next year's growth will technically speak not be a big jump unless we do something significantly different than redevelopment project.

No, you see as far as 7 GPRA colony is concerned, we have almost cleared all the statutory approvals. And we are well aware that the Nauroji Nagar and all the colonies were stuck because of court case for almost more than 1.5 years. So all these we have overcome and now we have a, I think, a very good chance of from next year to execute the works because these works are needed to be delivered also.

True, true. I appreciate that, sir. So my second question is on Amrapali project. I understand this is a INR 7,500-odd crore kind of a project, where you're booking only INR 2 billion or INR 200 crores every quarter. So why is the pace of execution so slow? What is the total contract awarded out of Amrapali project now?

INR 7,800 crores we have awarded.

INR 7,800 crores is awarded to contractors in Amrapali and yet our execution is only INR 200 crores per quarter?

No. But so far, we have executed INR 2,000 crores.

Yes.

So far, we have. But what is your quarterly execution?

INR 300 crores approximately per quarter we have been achieving.

Okay. INR 300 crores is the number that you are achieving in Amrapali every quarter. Okay.

I just would like to add here that actually this will further increase. The funding from the banks are expected in the next 10 to 15 days. So this will be definitely the increase -- the execution will be increased in the next quarter.

And you need to appreciate that during this -- again, the third wave and the NDT bands -- different NDT bands had also impacted the revenue -- the term...

Sure, sir. Sir, then moving on to this EBITDA margin. If I see -- madam, can you just help me with this other income. How much of that other income is booked as dividends, but not as cash realized, proceed then [indiscernible] ?

This time, actually, if you see the other income -- the last year, the other income is more just because the dividends were received in the Q3 due to the delay in the AGMs.

Okay.

Right. So that's why it is now appearing at some lower levels in this quarter.

Okay. But what is the cash realization out of the other income? Because this is more like an accounting income that is booked, but if there is no cash realization against it, right?

Cash realization of what?

The dividend that you have booked from in the other income part for the seed money.

Yes, yes. I will give you the update. Actually, so far, we have received INR 180 crores in the financial year '21, '22 cash realization the interest on the seed money and total...

But again what is the amount booked, ma'am?

Sorry, yes, yes. The balance interest accrued is INR 220 crores, out of which INR 60 crores has already been sanctioned, and we will receive in this quarter, in the fourth quarter.

[Operator Instructions] The next question is from the line of Nitin Gandhi from KIFS Trade Capital.

Madam, can you share execution of top 10 projects as far as out of INR 1,600 crore revenue for this quarter is concerned?

The top 10 projects are this: Amrapali, Nauroji Nagar, AIIMS [indiscernible]

Can I get figures also?

Yes. Yes. Just -- AIIMS Bilaspur also and then there are AIIMS Visakhapatnam, redevelopment of GPRA at Sarojini Nagar, IIT Bhubaneswar. So these are some of the project top 10 projects.

Okay. Can I have figures?

We will share those figures on the May.

Okay. No issues. Can you tell me how much funding facility will result in a ramp-up in Amrapali project? What is it likely to be FY '22 execution?

The point to the tune of INR 1,800 crores has already been received by NBCC. Yes. And the LCA caps has already sanctioned the 6 projects, and they are funding us INR 660 crores, and we have also been following up our funding of the -- with the other bank for INR 1,500 crores. And almost all the formalities have been completed by the bank, and we have many meetings with the bankers also. Where the lead banker is Bank of Baroda and followed by PNB, SBI, UCO and other banks also and they will give us the funding in the next -- we are hopeful in the next 10 to 15 days.

And what would be the ramp up and execution for thereafter?

Yes, execution will definitely ramp up.

But how much per quarter? Right now you are doing...

Currently, we are doing INR 300 crores. So I can just say that it will definitely ramp up to INR 500 crores per quarter, to be on the conservative side.

And Nauroji?

Nauroji 40% was already done and INR 750 crores out of INR 2,000 crore has been completed.

So FY '23 will be how much?

You are asking this financial year, next financial year?

Next financial year, FY '23.

We see balance work will get completed in this financial year. We have -- in some of the towers, we have achieved the last floor also -- skirting of last floor. The progress is satisfactory. And despite all odds, we have achieved 40% of the progress.

The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.

So couple of questions from my side. What can we are consolidated order book currently? And the consolidating them?

Our total order book on consolidated level is around INR 55,000 crores and stand-alone is around INR 56,000 crores.

I'm sorry, so at a consolidated level, you are saying INR 65,000?

INR 65,000 crores.

Okay. And sir, what would be the split between PMC and redevelopment orders in this INR 65,000 crores?

We see out of INR 65,000 crores, NBCC is INR 55,000 crores. In NBCC INR 25,000 crores is PMC and redevelopment is INR 37,000 crores -- sorry, INR 30,000 crores and rest HSCC and HSCL, they are all PMC.

Got it. So what can be -- I mean in terms of our execution going ahead, what is the kind of numbers that we can achieve at the consolidated level that in FY '23?

It will be around INR 7,500 crores.

We're talking about FY '23, right?

'21, '22.

FY '22. Got it. And what would be our cash levels at the consolidated level currently?

Cash level, yes, we are having INR 4,900 crores of cash and bank balances at consolidated level. Out of this, INR 4,000 crores pertains to our client advances and rest is lying in the nondedicated account. Out of this, we can say INR 500 crores is our own money.

And how much seed money have we invested in various projects?

INR 908 crores we have invested in Nauroji Nagar. And some portion is invested in Gomti Nagar Railway Station project around INR 36 crores and some more money in this -- one of the other project and just recalling the name. Yes, like INR 10 crores is also invested in one of the other projects.

And last question, how do we expect our margin trajectory going ahead?

Now the COVID situation has improved a lot. And we have been able to now working at our full capacity currently. So we are very hopeful that we will be able to achieve in the coming quarter and in the next financial year -- at a better margins and better...

One thing, out of the INR 65,000 crore order books, how many orders have already been awarded to contractors?

INR 16,500 crores is ongoing work. And tendering will be doing around -- the tendering [Foreign Language]...

INR 2,500 crores.

INR 2,500 crores.

The next question is from the line of Rajiv Rupani from individual investor.

I had a question. The company has a land bank of about 50 acres in Jaipur, Alwar and Coimbatore. So what is the update on that? And do we -- are we going to develop this land bank?

You see, definitely, we are going to develop these land banks. And we had -- we were planning to develop Jaipur first because that is going to better profit. But since the real estate market is now -- has just started picking up. So now we will be planning to take up at least Jaipur at [indiscernible] .

Okay. I have a follow-up question. How -- what is the land bank in Jaipur, Alwar and Coimbatore, could you give us separately?

Can we mail it?

Okay. I'll ask the question in mail. And I had a follow-up question. Earlier, you had told about the NBCC tying with Hemisphere for development of their land bank. So any update on that, sir?

Please repeat your question?

In the earlier con call, you had said that the NBCC is in talks with Hemisphere Properties, the demerged part of BSNL for development of their land banks. So any update on that?

Yes. Actually, Hemisphere Properties have contacted NBCC, and we are doing due diligence for their whole land parcels, in[indiscernible] so these are the regions and market studies is currently got going on. Once we get the market report, then we will be addressing Hemisphere Properties with the development metric, and we will have prolonged plan that construction activity accordingly.

So by when this due diligence is expected to get over?

2.5 months -- 3 months we will submit the report, all the reports will be submitted to them for their final approval.

The next question is from the line of Kumar, individual investor.

My question is regarding the overseas order. As I understand, this overseas orders are with higher margins. So I would like to ask that starting from which quarter would we like see a greater contribution to our bottom line from these overseas orders, as in like which quarter is it expected?

Actually, we received an [indiscernible] order of $130 million from Maldives, [indiscernible] for this. And currently, the tendering for 2 projects is completed, and mobilization is going on, on mobilizing. 1.5 months, we are giving for mobilization, 30 to 35 months delay. And we expect the turnover start coming from March -- next year -- next financial year onwards.

All right. Probably from Q1 of the coming financial year?

Yes, yes. Q1 of next financial year.

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

Yes. Ma'am, there is actually an auditor remark. This is more to do with qualified statement regarding irregularities in projects being executed by company and the consequent referral is being leased to Vigilance Department, Note #7a. What is it Madam? if you could give us some explanation on it?

No. Actually, it is with regard to IIT [indiscernible] project, where the company has taken the call and the matter has since been sorted out. And it is a normal process in case some procedure lapses are find out. So then the vigilance inquiries were initiated against all the officers who are involved in it. But as far as the accounting part is concerned, so there is no financial impact in the books of company.

Okay. Okay. Then the auditors also make some remarks on the real estate unsold inventory, unfavorable condition and deterioration in valuation of close to 20% of the value that you're carrying on your books. So is this something material in nature? Do you see that impacting particularly in the future quarters to come back, note #4, note #5?

Which project you are speaking about, Rohit?

This is -- I mean I see this a auditor's comment on [indiscernible] of at the note #4 regarding that there is a carrying value of INR 87 crore. This has got some of environmental clearance another startup over there. Now so INR 57-odd crore -- somewhere on that amount is unsold over 5 years due to unfavorable market conditions, and this could result in deterioration in valuation?

You are talking about Note #5.

Ma'am, note #4.

#4. Yes, I will brief you. Actually, this is one of the projects in Kochi where actually the -- some court case was filed where the stay was granted by the Supreme Court on the grant of environmental clearance. So there are no -- that stay has since been vacated, and NBCC has filed the environmental clearance application under the violation case and that is under process, and we are hopeful that we will get in this quarter itself. And then we will be able to move ahead in this project, right? So, so far, today's position is concerned, I'm very hopeful that there will be no financial impact on the company's financial statement. Then there is a second project of Alwar. There is an issue of completion certificate, which is under process for that also companies still dealing rigorously with the authorities, local authorities, and the efforts are being made to get it at the earliest.

Sure. Madam, coming back to this order backlog, I was given an impression that the company has INR 62,000 crores of order backlog at stand-alone level. This INR 400 billion in redevelopment and INR 220-odd billion in your cost-plus model or INR 40,000 crores or INR 22,000 crores. The revised number looks significantly different. Why is it so, ma'am?

Pradeep?

Our order book, as we have, is at INR 55,000 crores -- INR 52,000 crores.

INR 55,000 crores. That means there is a INR 7,000 crore reduction made from the previous quarter commentary?

Yes, after our PMC on INR 25,000 crores, and redevelopment is around INR 30,000 crores.

Okay. Is there any descoping of what's done in your existing order backlog?

Pardon?

Scope of work reduced in your order backlog over the last 1 quarter?

No. Actually, we have -- actually the financial year, and we are actually reviewed the order book position and the projects which were not getting materialized or which were put on hold by the client. We have done the pruning of those projects. And around INR 6,000 crore of figure we found which were not going to materialize in near future or coming years. So we have deleted them. That's why our order book stands now at INR 56,000 crores.

INR 55,000 crores.

INR 55,000 crore. Okay. So which projects were those projects?

There was a lot of other projects some was Uttarakhand some was SBMC in Delhi in [indiscernible] Convention Center in Africa, 9 locations. So all these are total works around INR 6,000 crores.

Okay. Okay. That's helpful, sir. And also, what was your order inflow in this year?

This year, we have achieved around INR 4,800 crores.

INR 4,800 crores?

Yes.

[Operator Instructions] The next question is from the line of Rajiv Rupani, Individual Investor.

Yes, I have a follow-up question on Hemisphere Properties. You said that due diligence is on. So are we the only company in the fray for development of Hemisphere Properties land bank?

At the moment, Hemisphere Properties have contracted NBCC, and we are more due diligence study.

Okay. And I have one more question. In the Feb '21 con calls, which I had attended, you had said that we -- some -- you had mentioned about stalled projects of Unitech. So any update on that?

Which project?

Stalled project of Unitech.

No, no, no, nothing.

As there are no further questions, I now hand the conference over to Mr. Anshuman Ashit for closing comments.

Thanks, Sandy. On behalf of ICICI Securities, I would like to thank the management of NBCC for giving us the opportunity to host this call. I would also like to thank all the participants for joining in. In case you have any further questions, feel free to contact Mr. Balkishan Singla, Investor Relations Officer of NBCC. Thank you, and we will now end the call.

Thank you.

Thank you.

Thank you.

Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.