NCC Limited (500294) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NCC Limited 4Q and FY '25 Earnings Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Shah from JM Financial Institutional Securities. Thank you, and over to you, sir.

Thank you. On behalf of JM Financial, I welcome everybody to 4Q and FY '25 Earnings Conference Call of NCC Limited. We have from the management today Shri R.S. Raju, Director of Projects; Shri Sanjay Pusarla, Executive Vice President; and Shri Neerad Sharma, Head Strategy and Investor Relations. Now, I hand over the call to the management for opening remarks, post which we can do the Q&A session. Over to you, sir.

Thank you very much, Vaibhav. Very good morning, everyone. This is Neerad. At the very outset, I thank each of you for taking out time to attend this interactive meeting. I have with me my colleagues, Mr. R.S. Raju, Director, Projects; and Mr. Sanjay Pusarla, CFO. Yesterday, we have declared our audited financial results for the fourth quarter and for the financial year 2024-'25. Hope you had an opportunity to download and study the results and the investor presentation uploaded on our website and shared with the stock exchanges. Before I begin this interactive meeting, I will read out a very brief disclaimer. You may read the detailed disclaimer mentioned -- highlighted in our investors presentation. This presentation may contain certain forward-looking statements concerning NCC's future business prospects and business profitability, which are subject to a number of risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. End of the disclaimer. This interaction is broadly divided into 3 parts. In the first part, I will talk about a brief overview of the business environment, our prospects and also an update on the guidance. In the second part, our CFO will give a brief about the financial performance of the company for the fourth quarter and for the financial year '25. In the third and last part, we will attempt to answer all your questions and clarifications. We are happy to share with you the fact that we have achieved the revised guidance shared with you in the last earnings call. We are sitting at the highest ever order book of INR 71,568 crores. And in the financial year FY '25, we have booked orders worth INR 32,888 crores, which is about 50% more than the upper band of our guidance shared with you. The revenue on a stand-alone basis increased by 5%, which is in line with the guidance that we have shared with the Street. The EBITDA margin was 9.1%, which is closely in line with the guidance that we had shared with you. For the FY '26, that is the current financial year, we are seeing a healthy pipeline of future projects. We have a prospective pipeline of about INR 2.55 lakh crores, and we are pleased to share with you a guidance of INR 22,000 crores to INR 25,000 crores for the order inflow. I repeat the order inflow guidance for the FY '26 is INR 22,000 crores to INR 25,000 crores. The revenue growth of 10% and EBITDA margin between 9% to 9.25%. Now I will very briefly touch upon a few of our large divisions. In our Buildings and Transportation division, we continue to see good traction and healthy pipeline of projects. We have an order book of INR 22,440 crores. I repeat, INR 22,440 crores in the Buildings division, which is about 31% of our total order book. In the Transportation division, we have an order book of INR 17,929 crores, which is about 25% of our total order book. The third large division that we have is Electrical T&D. Order book as of end of March is INR 16,666 crores. Let me repeat, INR 16,666 crores as of 31st March, which is about 23% of our order book. The order book in the Irrigation division is INR 4,189 crores; I repeat, INR 4,189 crores, which is about 6% of our order book. In our Water division, we have an order book of INR 4,782 crores, which is 7% of our order book. Similarly, the order book in our Mining division is INR 5,555 crores, which is about 8% of our total order book. Now I will hand over to our CFO with a request to cover the detailed financial performance of the company. Over to you, Mr. Pusarla.

Good morning, everyone. This is Sanjay Pusarla, CFO from NCC Limited. I am pleased to announce the financial results for Q4 of FY '25 and also for the year ending March '25. My announcement will be in the order of order book, revenue profitability, debt movement and some of the important balance sheet items. The order book. Our order book stands at INR 71,568 crores as at the end of March '25. As you are aware, the order book at the beginning of the year stood at INR 60,437 crores and orders received during the 12-month period is INR 32,888 crores, which is the highest orders we have ever received in a financial year. And in Q4, we received orders around INR 19,280 crores. After execution of INR 21,756 crores of work during the 12 months, the order book stands at INR 71,568 crores. Coming to the revenues, standalone. Turnover reported in Q4 is INR 5,376 crores as against turnover of INR 5,446 crores in the previous year. During the 12 months, turnover is INR 19,205 crores as against INR 18,314 crores, which is reported in the previous 12 months. This will record a 5% growth over the previous year. Coming to the standalone. Turnover reported in Q4 is INR 6,131 crores against the turnover of INR 6,485 crores in the previous year. During the 12 months, the turnover is INR 22,199 crores as against INR 20,845 crores, showing a growth of around 7%. Coming to the profitability, stand-alone. We achieved EBITDA margin of 9.21% for Q4 as against 9.36% of the corresponding quarter of the previous year. And for the 12 months of the financial year '25, we achieved EBITDA of 9.09% as against 9% in 12 months of the previous year. PBT, we achieved 6.2% and PAT we achieved 3.94% in the current quarter, that is Q4 as against PBT of 6.29% and PAT of 3.41% of the corresponding period. Coming to the consolidated profitability. We achieved EBITDA of 9.7% and PBT of 5.95% and PAT of 4.28% in the current quarter, that is Q4; as against EBITDA of 8.49%, PBT of 5.97% and PAT of 3.66%. Coming to the debt movement. The debt at the beginning of the year stood at INR 1,005 crores and net debt after cash and cash equivalent standing at INR 517 crores. At the end of quarter 4, it stood at INR 1,484 crores and net debt of INR 710 crores. And at the end of quarter 3, the same debt was INR 2,415 crores and net debt was INR 2,344 crores. That means the net debt from Q3 ending to Q4 is reduced from INR 2,344 crores to INR 710 crores. There is a decrease in debt by INR 931 crores. The debt-to-equity ratio stands at 0.2% at the end of Q4 as against 0.33% at the end of Q3 and 0.15% at the end of March '24. Working capital. Working capital, excluding cash and margin money deposits. At the end of Q4, it stands at INR 4,374 crores, which is 17% of the turnover. In terms of working capital days, it counts for 77 days. Debtors, that is receivables. Outstanding at the end of Q4 has reduced from INR 3,142 crores to INR 3,098 crores, and the number of days also decreased from 74 days to 65 days in the current quarter. And unbilled revenue. It stands at INR 5,937 crores, which is 31% for Q4 as against INR 6,151 crores, which is 33% at Q3 ending. Coming to the mobilization advances. The mobilization advances stood at INR 2,098 crores as against [ INR 1,977 ] crores in Q4, increased by INR 120 crores. It is standing at 11% of the turnover. Of these mobilization advances, 79% are interest-bearing and 21% are interest-free. The average interest rate works out to 9.52% on these mobilization advances, which are interest bearing. Coming to the CapEx. We have incurred a CapEx of INR 305 crores in the current financial year as against the budgeted CapEx of INR 250 crores for the regular projects. So as far as the dividend is concerned, this year, it was decided to declare a dividend of 110%, which will be INR 2.20 per share. Total amount of outflow will be INR 139 crores on this account. And coming to the investor-related ratios, the ROCE stands at 14.61% as against 14.04% at the financial year '24 end. And EPS stands at INR 12.10 as at the end of Q4 against INR 10.10 in the last year. I think with this, I end my presentation. We can invite for the questions.

[Operator Instructions] We take the first question from the line of Shravan Shah from Dolat Capital.

Sir, the first question is on the revenue. So though we have achieved our revised guidance for FY '25, 5% growth, but compared to the original where we were looking at 15% and now we are saying 10% growth in FY '26. Don't you think this is on the lower side given the kind of the order inflow that we have received, which is even higher than what we were looking at in FY '25?

I think you're absolutely right. The last year, we had guided the market for about 15% growth, but we have been able to deliver only 5% growth, right? So when we talk about 10% growth for FY '26, there is a handsome growth, right? Last year, we have grown at 5% in that range, and now we are talking about 10%. So that's a growth. Now I mean, let us -- I mean, I will also try to dig a bit deeper. This is also a reflection on the ability of our clients to mobilize to make the payments on time. This is a statement also on the uncertain environment that we are operating in. Primarily, this is dependent on the timely payments. It is not only about the execution. At the same time, we have to be cognizant of the fact that how much working capital we are committing. So this is also a reflection on the ability of our clients to mobilize, make timely payments. So this is the reason we have shared this guidance with you. Should there be any change going forward, we would be very happy to come to you and update you.

Got it. Second, sir, this order inflow of INR 22,000 crores to INR 25,000 crores that we are looking at in FY '26, if you can clarify. I think last time we were having INR 8,000 crores to INR 10,000 crores as the L1 orders. So how much L1 do we right now have? And if it is, does this include -- the INR 22,000 crores to INR 25,000 crores includes the L1? Or are we looking at the fresh INR 22,000 crores to INR 25,000 crores?

See, your question has 2 parts. Firstly, the -- some of the L1s that we had talked about in the past got converted in firm orders. And this is something that is reflected in our performance of INR 32,888 crores order book. Some of those L1 projects, we hope will get converted in the coming quarters. As of now, we have an L1 project of about INR 7,000 crores to INR 8,000 crores.

Okay. Okay. So INR 22,000 crores to INR 25,000 crores includes the L1 of INR 7,000 crores to INR 8,000 crores.

Yes, yes.

Okay, okay, got it.

What we were [indiscernible] is that, at any point of time, if you see, there will be L1 project and there will be conversion from L1 to the order. It is a cycle, okay? It is not that L1 projects of the previous year will be taken in the last year order book and current year. It is a cycle. It comes to L1. Sometimes it gets matured into an order. Sometimes it doesn't get matured into an order. It is a cycle it happens every time.

Got it. Sir, a couple of data points. Can you share the stand-alone order inflow for FY '25 and returns on money and for CapEx for FY '26?

This order inflow for stand-alone -- for -- against INR 32,888 crores, the order inflow for stand-alone is INR 29,588 crores, okay? And you asked for what else?

Retention money and CapEx for FY '26.

Yes. Retention money as on 31st March '25 is INR 1,870 crores as against INR 1,757 crores of the corresponding previous year -- sorry, INR 1,505 crores of the corresponding previous year. And CapEx for FY '26 is at INR 750 crores.

Yes. And lastly, the loans and advances and investment in subsidiaries and associates?

One second. Investment is INR 1,065 crores as against INR 1,033 crores. And the loans is INR 452 crores as against [ INR 354 crores ].

Next question is from the line of Mohit Kumar from ICICI Securities.

My first question is, again, I'm probing -- I'm going back to the revenue growth guidance. I think it looks a bit low. So does it mean that there are too many slow-moving orders in the book as of now? And is it the fact that the order which you received in the Q4, especially PS and FH2 contract, what is the duration of the execution?

3 years.

3 years. 3 years is the CapEx time. The time to complete the project is 3 years.

And sir, any comment on the slow moving orders in the book, sir?

It is not a question of slow-moving orders for the guidance at 10%. It is dependent -- as Mr. Neerad said earlier, it is dependent on how the government takes this infrastructure segment and how the payments are going to come and how the clients are going to cooperate in the case of execution. And also the projects which have come will have a little gestation period. It's not that immediately it gets converted after the order is received. It will have a little gestation period. Considering all those things -- and we have also seen what happened in the previous year in the Jal Jeevan Mission projects. So considering all these things, we gave the guidance of 10%.

Understood, sir. The second question is, sir, what is the Jal Jeevan Mission order book right now? And are you seeing an improvement in execution and payment?

Payment is a little getting delayed. But otherwise, the order book for Jal Jeevan mission...

About 2/3 of the Jal Jeevan projects were completed. 1/3 of the projects are still pending. You are aware that for the last 7, 8 months, there is a slow progress because of the delay in the payments by the client, that is Jal Jeevan payments by the central government, particularly. Now -- we received some [ spot ] payment in the last 2, 3 months, but still about INR 1,000 crores is yet to receive it.

INR 1,500 crores.

INR 1,500 crores, yet to receive from the Jal Jeevan projects.

And the order book balance as on date is INR 4,300 crores.

Understood. That's very helpful. Sir, my last question, sir. How is the traction in smart meter execution? Have you achieved any financial closure? If not, when do you think to achieve the financial closure? And any guidance on the order execution in F '26 of the orders?

So in financial closure for smart meters in the case of Ray, that is already achieved in the last year itself, and we have started running the load. In the case of Marathwada, the financial closure is yet to happen. We have received a term sheet from the lenders. We are yet to go for the financial closure. And as you are aware that these projects in Maharashtra, they were slow moving in the last year. But now we have got all the clearances to execute them, and we are showing good progress in these projects, expecting a good turnover in the current year.

Next question is from the line of Prithvi Raj from Unifi Capital.

Sir, I just have a couple of questions. The first one is on the Maharashtra projects. Obviously, in the last couple of quarters, we have seen a delay with respect to execution. How is the activity now? Are we seeing any uptick with respect to execution and the payments from the Maharashtra side?

Yes. In the case of Maharashtra projects, we have seen -- we have got even the instructions even from the government also that we can go ahead with the pace of the projects -- increasing the pace of the project execution. And we have been doing it and all the tests, everything have been completed. Now we have got a very good -- green signal from the government also, from the client also to go aggressively on these projects.

Okay. The second one is on the Andhra Pradesh state capital projects. You obviously received a couple of projects in the last few months. Is there any more activity that is happening there? And any more pending orders that you are expecting or everything is done from the state capital side?

From the state capital, you are aware that we have received a good number of orders for the infrastructure development, also for construction of some residential blocks and also the High Court also. So these are the orders which we have received. About INR 9,000 crores, INR 9,500 crores orders are on hand from the capital city. And as we see that the Chief Minister of Andhra Pradesh is announcing every day, some or the other project that he is announcing, but we do not know how much more projects that will be announced in the near future. But as of now, we have projects about INR 9,000 crores, INR 9,500 crores. And the work and execution at the sites is in good progress, as we can see from the social media. And we also feel the same thing from the execution from our teams also that there is a lot of demand from the clients to execute the projects at a very fast pace.

Okay. Final question on the debt number. So what's the target for the end of the year? Do we expect a significant reduction in the debt number?

Yes. Now current year, you have seen our debt is closed at about INR 1,400 crores or so, current year. And next year, about 10% growth shown. At the same time, we need to invest in the smart meter projects, smart meter projects. But we expect that debt stands around that one with an increase of INR 300 crores to INR 400 crores above the INR 1,400 crores.

We take the next question from the line of Sarvesh Gupta from Maximal Capital.

Sir, first question is basically on the transportation and water verticals. So I think especially in transportation, we have seen that orders -- new orders have been a little bit slow to come by in the last 5, 6 quarters. So how are we seeing this space now? And are you seeing any green shoots in terms of new order inflows, especially given the fact that last many quarters, we have not seen anything. And on the water side, I wanted to understand, excluding Jal Jeevan, are you seeing some state government projects, et cetera, which could be meaningful for the order inflows?

Thank you, Mr. Gupta. As you are aware, most of the projects that were awarded in last 4, 5 years in the water space were primarily from this Jal Jeevan mission. And as of last month, I mean, let me give you a little overview of this scheme. The scheme was announced in year 2019. The outlay from the central government was more than INR 360,000 crores, and they attempted to provide portable water connection to all the households. About 80% of the target has already been achieved. So what remains to be provided portable water connection is about 20% of the households. So this is the update on the Jal Jeevan mission. And as you are aware, my colleague has already highlighted that there has been some slow movement in Jal Jeevan mission projects across the companies. I mean, everybody who has been working in this space had faced payment delays, these kind of issues. So this is the update on this space as we speak. But going forward, once the households are given portable water connection, naturally, this will lead to lot of wastewater treatment plants, STP kind of projects. So we are quite hopeful that going forward, these 2 subverticals should see some traction.

And sir, on the transportation road space?

Transportation, we have a healthy order book. We have been able to bag good number of projects in the transportation. If we really talk about the -- about 25% of our total order book is from the transportation division. In terms of value, it is INR 17,929 crores. So it is already about 1/4 of our total order book. And we believe that we will see a good number of projects coming up for bidding in transportation segment.

But at an industry level, I think generally, people have not got much of orders. So I think are your orders more related to the state government side rather than NHAI and MoT?

The awards that we have got are from a variety of the projects in most of the projects. For example, when we talk about the metro projects, the state government and the central government, though both partner with each other. NHAI, unfortunately, we have not been very successful in the NHAI projects in the past.

Okay. Okay. And sir, finally, on the guidance. So I think this question was asked before also. But I think with INR 72,000 crores sort of an order book plus an order inflow of maybe INR 20,000 crores, INR 25,000 crores; from that bucket, if we are executing only around INR 25,000-odd crores, then it becomes like a very small sort of a ratio of order execution versus the order book. So I mean, if you can give us some more color as to what are you seeing from the client side? Are they not sort of -- after giving the orders, they are not sort of proceeding to the next steps, including the central government-related orders? Or are we anticipating in any other procedural delays? Why should the order execution be so low compared to our large order book? Hello? [Technical Difficulty]

The management's line seems to have disconnected. Please wait while we rejoin them. The management line has been reconnected.

The first point that I wanted to share with you was the ability to execute the project. I mean, having the required number of people, machinery, everything to execute the project. So this we do have. The second important part is whenever a project is announced, the client should make us available all the land, which is required to execute, all the permissions, all the drawing approvals. So when this link is missing, there is little that we could do. So unfortunately, this is something that is going to impact our execution. The third important point is our -- the ability of the clients to make payments, certify bills on time, make payments on time. So unless those things are in place, we will not be able to really execute from larger share from our order book. And the fourth important thing that we need to keep in mind is we have been able to bag a lot of projects in the last quarter, that is fourth quarter. So it takes about 3, 4 months' time to mobilize the project, get the land, get all the ROWs in place. So there is a delay in award of a project and the billing cycle really to start. So I think these are the 4 important points that I wish to bring to your attention.

And on the order inflows also, I think we have guided for a lower order inflow compared to what we have received this year. So any color on that, sir?

I think most -- I mean, my colleague has already touched about -- touched upon this capital city project. So we were -- fortunately, most of these capital city projects, if not all, got converted in the Q4 of the last financial year. So we expect to see some movement, some new projects that might come up for bidding in the capital city. So that is the reason or you could say that the project that we should have ideally bagged in FY '26, we have been able to bag in FY '25. So if you really add these 2 numbers, they look very attractive, right?

How much is Andhra, by the way, sir, of your overall order book?

It's somewhere around INR 9,500 crores.

INR 8,900 crores.

We take the next question from the line of Vaibhav Shah from JM Financial Limited.

Yes. Sir, you mentioned the CapEx number at INR 750 crores for FY '27. So is it at stand-alone level?

'26.

So it is for standalone of FY '26?

This is INR 750 crores.

For standalone, or console?

Yes, standalone.

Yes, please.

So sir, why is it so high the number versus the last year's number? So are we including smart meter CapEx as well?

It was somewhere around INR 305 crores. This year, we are expecting the TBM, which will be used for tunneling project in Mumbai. That is expected to come this year, okay? That itself is around INR 300 crores. So rest of the money is expected to be invested in other projects, CapEx.

Okay. And sir, what is the status of the GMLR project?

GMLR project, they have got all the clearances. They have started building the approach roads. They have also started building their facilities for casting yard and also started landing station also for the TBM and they also started for the cut and cover portion of the project, okay? So these are the things which are happening now. It is expected that TBM machines can arrive any time maybe in the next 1 month, 1.5 months. And thereafter, they should assemble them and put them in place at the landing station and start the work. This is the present status.

Okay. And sir, TBM investment will be done from stand-alone books?

Could you repeat your question, Mr. Vaibhav Shah?

Yes, TBM investment of INR 300 crores, that will be done from the stand-alone books?

Yes, it will be done in the stand-alone books. Both the partners are buying 1, 1 TBM and they are deploying those TBMs from the owner side.

So our share is INR 300 crores?

Yes.

Approximately.

Okay. And sir, secondly, what investments are we planning to do in the smart meter project for '26 and '27?

About INR 280 crores is the total investment that need to be made. And we are expecting to do around INR 130 crores by Q2. And balance investments depends on the financial closure, it needs to be done.

So you are planning to bring any -- bring some partner with us? So INR 280 crores would be entirely done by us or we are still looking out for a partner?

At the moment, it is only the investment from NCCL, and we are on the lookout for the partners. We are scouting for them.

Okay. Okay. And sir, what is the outstanding number for the receivables from AP? Last year, it was around INR 400 crores.

No, it was INR 147 crores last time, okay, capital city projects. Out of that INR 147 crores, we received some, and we are -- the outstanding at the moment is INR 110 crores for the capital city projects where there was an issue.

And in running projects?

Running projects, we are getting the money realization on time. And basis there is a realization only, the execution is happening. There is no worry on the running projects.

And what would be the number? Last time, it was around INR 250-odd crores as of December?

I think around INR 220 crores.

Okay. And sir, on the margin side, do we expect improvement in FY '27, while it should be around 9.25% for '26?

It's a too long period to predict today.

Difficult really to talk about FY '27 margin. I mean in the next year, when we finalize the budget for FY '27, we should be in a position to commit a number to you. I think this is a little far away.

Sir, but given the mix of the backlog and the new orders you have received, are we hopeful for an improvement on a Y-o-Y basis or...