NCC Limited (NCC.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NCC Limited Q1 FY '26 Earnings Conference 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. Thank you, and over to you, sir.

On behalf of JM Financial, I welcome everybody to 1Q FY '26 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, Finance and Accounts; and Shri. Neerad Sharma, Head Strategy and Investor Relations. Now I hand over the call to the management for their opening remarks, and then we can have the Q&A session. Over to you, sir.

Thank you very much, Vaibhav. Good morning, everyone. This is Neerad. At the very outset, I thank each of you for taking time to attend this interactive meeting. I have with me my colleagues, Mr. R.S. Raju, Director of Projects; and Mr. Sanjay Pusarla, CFO. Yesterday, we have declared our audited -- unaudited financial results for the first quarter of the financial year FY '26. Hope you had an opportunity to download and study the results and investors presentation uploaded on our website and shared with the stock exchanges. Before I begin this interactive meeting, I will read a brief disclaimer. You may read the detailed disclaimer in our investors presentation. The 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. This interaction is broadly divided into 3 parts. In the first part, I will briefly talk about the business environment and the prospects for our company. In the second part, CFO will give a brief about the financial performance of the company for the first quarter of the financial year. In the third part, we will attempt to answer all your questions and clarifications. As you are aware, we're sitting at a strong order book of INR 70,087 crore. And in the first quarter of FY '26, we have booked orders worth INR 3,658 crore. If we take into account all the projects back till today, this value is INR 6,719 crore, which is about 31% of the lower band of the guidance shared with the Street. In the first quarter of FY '26, the company has reported a turnover of INR 4,430 crore as against INR 4,747 crore in the corresponding quarter of the previous year. EBITDA margin is 9% on a stand-alone basis, which is in line with our guidance for the current financial year. For FY '26, we are seeing a healthy prospective pipeline of projects of about INR 2.5 lakh crore. In our buildings and transportation division, we continue to see good traction and healthy pipeline of projects. We have an order book of INR 23,577 crore, which is about 34% of our total order book in buildings and INR 17,957 crore, which is about 26% of our total order book in the transportation division. In our electrical T&D division, the order book is INR 15,737 crore as of end of June, which is about 22% of our order book. The order book in the irrigation division is INR 3,863 crore as of end June, which is 6% of our order book. Our water division has an order book of INR 4,215 crore, which is about 6% of our total order book. The order book of the mining division is INR 4,733 crore as of end of June, which is 7% of our order book. Now I will hand over to CFO with a request to cover the detailed financial performance of the company.

Good morning, ladies and gentlemen. This is Sanjay Pusarla, CFO of NCC Limited. I am pleased to announce the financial results of Q1 of FY '26 of NCC Limited. My announcement will cover order book, revenue, profitability, debt movement and some of the important balance sheet items in the same order. So coming to the order book. Our order book, you know that it stands at INR 71,568 crores at the beginning of the year, and we secured orders of INR 3,658 crores in the first quarter. After eliminating the execution, we are standing at an order book of INR 70,087 crores as of the end of June. Coming to the revenue. First, I'll cover on the stand-alone. Turnover reported in Q1 FY '26 is INR 4,430 crores against a turnover of INR 4,747 crores in the corresponding quarter of the previous year, which is almost like 7% lower than what we reported in the same quarter of the last year. At consolidated, the turnover reported is INR 5,208 crores as against turnover of INR 5,558 crores in the corresponding quarter of the previous year, which is about 6% lower. Coming to profitability. At stand-alone level, we achieved EBITDA of 9.02% for Q1 as against 9.33% of the corresponding quarter of the previous year, which is in line with the indications given to the market. PBT is 5.44% and PAT is at 4.29% in the current quarter that is ending June '26 as against PBT of 5.63% and PAT of 4.3% of the corresponding quarter of the last year. At consolidated level, we achieved an EBITDA of 8.81% and PBT of 5.15% and PAT of 3.69% in the current quarter, as against EBITDA of 8.65%, PBT of 5.39% and PAT of 3.78% reported in the last year. Coming to the debt movement. The debt at the beginning of the year stands at INR 1,484 crores and net debt after cash and cash equivalent is INR 695 crores. At the end of Q1 '26, it is standing at INR 1,852 crores and net debt of INR 1,497 crores. And at the end of Q1 '25 -- FY '25, that is the corresponding period of the last year, the same is at INR 1,820 crores and net debt is INR 1,680 crores. There is an increase in debt by INR 368 crores compared to March. The debt-to-equity ratio stands at 0.21 at the end of the quarter 1 of FY '26, as against 0.26 at the end of quarter 1 of FY '25. The same is at 0.20 at the end of March '25. Coming to the working capital. So working capital, I will be covering excluding cash and margin money deposits. So at the end of Q1 FY '26, it stands at INR 5,314 crores, which is 30% of the turnover. And in terms of number of days, it is 102 days. So coming to the debtors, receivables position. Debtors outstanding at the end of Q1 has increased from INR 3,098 crores to INR 3,296 crores. And the number of days has also increased from 65 to 77 days in the current quarter. And 85 days -- it was 85 days for the corresponding quarter of the previous year. Coming to the unbilled revenue. Unbilled revenue stands at INR 6,442 crores, which is 37% of the revenue, as against INR 5,937 crores, which is 31% at Q4, that is March '25. Retention money stands at INR 2,008 crores, which is 11% for Q1, as against INR 1,870 crores, which is 10% at Q4, at the end of March '25. Coming to the mobilized advances. Mobilized advances stands at INR 2,944 crores as at the end of June '25, as against INR 2,098 crores as of March '25, increased by INR 846 crores. Of these mobilized advances, interest-bearing advances are 62% and average interest comes to around 9.24%. Interest-bearing advances decreased from 79% to 62% during this quarter. Coming to the cash and cash equivalents. Cash and cash equivalents are INR 355 crores as at the end of June 2025, against INR 789 crores at the end of March '25. Same is the case with margin money deposits, INR 671 crores as at the end of June '25 and INR 639 crores at March '25. Coming to the CapEx. We have budgeted a CapEx of INR 750 crores for the regular projects, against which we have spent INR 92 crores in the quarter 1 of FY '26. So investor-related ratios. ROCE stands at 12.62%, as against 14.61% at the end of -- at February -- sorry, at March '25. Return on net worth against PBT is 13.14% as against 14.23%. EPC stands at INR 3.03 as at the end of quarter 1 of FY '26, as against INR 3.2 in Q1 of FY '25. With this, I conclude the presentation on the financial numbers. Thank you, all. Mr. Vaibhav, we can take questions now.

[Operator Instructions] The First question is from the line of Shravan Shah from Dolat Capital.

Sir, first on the -- our guidance front. So this quarter, 7%, 7.1% revenue degrowth, and we were looking at 10% growth for FY '26. So the -- for balance 3 quarters, the ask rate is 15.5% odd. So what's the revised guidance? And in terms of margin also, will it be a kind of a lower end of 9% or still we can have a 9%, 9.25%?

Yes. Coming to the guidance. So I think you are aware that whatever orders we have received, we have received at the end of March, major orders, okay? And in generally, what happens when the new orders are received, you need to mobilize the site, you need to have the work front availability. The designs and trying stage, clearances, everything will be there. They are all in place now. Probably by end of September or September onwards, the new works will also start producing the results now. They will have the revenue. We expect to maintain the guidance in the coming quarters. Probably in the quarter 3 and quarter 4, we will be looking at numbers -- achieving these numbers.

Okay. Great. And then margin also -- will it be 9% or 9.25% is also possible?

9% is definitely we are expecting that we'll be reaching that 9%. We'll be maintaining sustaining that level. And there is a possibility once the growth is there in the revenue, there is a possibility of adding some more basis points.

Okay. And just a clarification, though in terms of order inflow, we are INR 22,000 crores, INR 25,000-odd crore. And till now, we have received INR 6,719-odd crores. So the L1 status, if you can help us currently how much value of projects are L1? And including this L1, are we looking at total INR 22,000 crores to INR 25,000-odd crore kind of order inflow for this year?

Yes. Vaibhav ji, the L1 value would be between INR 5,000 crore to INR 6,000 crore. And as we speak, we reiterate that we are quite convinced that we should be able to achieve the guidance that we have shared with the Street. And the number that you quoted, INR 6,700-odd crores number, which is already about 30% of the lower band of the guidance that we have shared with the Street. So we are reasonably confident of achieving that target.

Okay. Got it. And lastly, in terms of the finance cost, last time we said it would be 3% to 4% can be higher. So that number is likely to remain the same?

It's likely to remain same. And probably, we are also having discussions with the bankers are also exploring some alternative means of finance also, alternative products. It may be a little bit of lower side when compared to the previous year. Yes.

Lastly, sir, 2, 3 data points on balance sheet, trade payable, inventory, loans and sir, total investment in subsidiaries and associate, and also if you can break it up in loans and investment?

One second. Investments is INR 1,052 crores. Inventories is INR 1,476 crores. These 2 numbers. And coming to the payables...

1,400 -- sorry. Inventory...

472.

Okay. 472, okay, 1-4-7-2. Yes. Trade payable, sir?

Trade payables is INR 6,062 crores.

INR 6,062 crores?

Yes.

The next question is from the line of Mohit Kumar from ICICI Securities.

Sir, my questions are related on institution. The first question is smart meter. We believe the smart meter has picked up in general in Maharashtra and UP. For us, are you seeing the pick up in institution? And has the institution normalized now?

Yes. In the case of smart meters for both Maharashtra projects, we have got the go-live and the pace is picked up and is expected to be doing well in the quarter 2 and quarter 3.

Mr. Mohit, we have made reasonably good progress on the installation of these smart meters. We have already installed close to 3 orders close to 15 lakh meters.

Second question is on the Ken-Betwa, river interlinking project. How is the execution going right now? And are you seeing more order inflow, more inquiry from the company side for the balance of the year?

Mr. Mohit, firstly, this Ken-Betwa project, this project is required to be executed in 6 years' time. So for a project like this, there are a lot of processes involved, design, permissions in place. So the project is currently at this stage. But we are hopeful that more projects should come for bidding for interlinking of rivers, but we have to wait and watch.

Are you seeing more tenders, sir, at this point of time, more [indiscernible] over as of now?

We expect to see because if we were to go by the different media reports, there are different interlinking of river projects are being talked about in a few states. So we have to just wait and watch how these developments finally pan out.

Yes, sir. My last question, sir, on the order book. Are there slow-moving order books which has inched up compared to, let's say, last fiscal?

We cannot -- I mean, most of the projects that we have currently in our order book, Mr. Mohit, are moving at a good pace. And whenever we take a view that these projects are not moving, they are not expected to make progress, generally, we try to remove those projects from our order book. This is an exercise that we have done in the past. So as we speak, I mean, we have taken a view that these projects should make reasonably good progress in quarters to come.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Yes. Sir, my first question is out of the total order book of INR 17,000 crores, what quantum of the order book the work hasn't -- has not started until now?

It was almost like whatever projects we have got in the month of March. All those projects are in the initial phase of designing and getting clearances and also having the work available -- for work build availability. So those are the projects which are taking up now. And there are no projects which have been stalled in the order book.

So if you can quantify? I mean...

So Parikshit, I would like to answer that a little different. The -- in the FY '25, we have bagged projects about close to INR 33,000 crore. The projects that we have bagged in the month of March, they are expected to take some few more months to really get started. So whenever we bag a project, there are a lot of -- there is a process involved, the taking over the site, mobilization, completing the documentation, having all the ROWs in place. So it will take some time for the projects that we have recently bagged. Otherwise, all the projects that we have in our book are making good progress.

So what will be the order inflow in March, sir?

It would be about a little less than INR 20,000 crores.

So INR 20,000 crores was bagged in March. So that is where -- the work will start by second half of this financial year.

Right. You're right. Depending on the site, depending on the -- I mean, different sites will have different conditions. But by and large, we could say that.

Okay. Got it. Second question is on the JJM. So what's the progress on JJM? And what are the debtors currently outstanding and revenue for Q1 and order book?

So as far as JJM are concerned, the total order book is about INR 16,000 crores. Out of that, we have already executed about INR 12,000 crores. INR 4,000 crores is the balance order book that needs to be executed. And this year also, we are expecting to execute a major portion of that. And coming to the receivables, it was somewhere around -- one second, I'll just give you the receivables number.

Okay. And just another question on this Versova, NCC Urban has won a redevelopment project of 0.4 million square feet. So this is under the listed entity, right? And if yes, then what is the plan for real estate now beyond the current land parcel? How are you looking at this business?

Could you please repeat your question?

Sir, NCC Urban has won a redevelopment mandate for 0.4 million square feet in Versova in Mumbai. So I just wanted to check, is this the part of the listed entity? And if yes, then what are the plans for the real estate development in the listed entity beyond the current land banks?

For the -- our real estate business, we have a subsidiary company called NCC Urban. And this company has bagged that project, the project that you are talking about.

Right. Yes, that I understand, sir. But I was asking, are we looking at more projects like this for development within NCC. So that was my question, sir. How are you looking at the real estate development now from here on?

It was not at the NCC level. It was at the urban level only, and they are looking for these kind of projects also in the near future.

And this will be part of the listed entity, right?

This is a subsidiary company of the listed entity. The parent company listed entity is NCC Limited. Our subsidiary company's name is NCC Urban. That company is not listed. It's an unlisted entity, but it's a subsidiary company of the parent company, listed company, NCC Limited.

Okay. That I understand, sir. But I'm saying the revenues and the profit will accrue to the listed entity NCC, the parent holdco company, right?

In the consol, it will come.

Yes. Yes. So as a business -- so I was asking as a strategy, how is the parent now -- if the business is done under subsidiary, the capital requirement and everything as we have been supporting our entities in the past. So I wanted to know how are we looking at this business and outside our existing land parcels? How are you looking at the real estate opportunity from mid- to long-term? So what is our strategy there? Hello. Hello. Can you hear me?

Yes. Yes. If you could repeat your question, Mr. Parikshit? You are asking about the long-term strategy [ indiscernible ]. See, this unlisted subsidiary company of NCC, they are always in lookout for all kinds of opportunities, including redevelopment projects. As and when they are able to identify a good project, they will evaluate and then decide the next course of action.

Okay. Sure, sir. And just last that JJM, the receivables.

That was around INR 300 crores is the receivables, INR 286 crores precisely, yes, SWSM projects. Yes.

The next question is from the line of [ Nishit Jain from S&J Investments. ]

I would like to know regarding your projects in MMR region. So if I'm not wrong, some 2 BMC projects company is executing with -- in JV with J Kumar, right?

Yes, yes, yes. You're talking about GMLR project, Mr. Jain?

Yes. One is GMLR and I guess the other one is Versova-Dahisar coastal road also, right?

Yes, the VDCR, right.

That's right.

So have we received this -- the clearances and is the on-ground work started in this?

So as far as the GMLR tunnel project is concerned, we have received all the clearances. Only we are just waiting for the tree cutting permissions, which is expected very shortly. Once it comes, then the project progress will also happen. And whatever equipment that is required for this project is also reaching India, which is actually an imported equipment, which is coming from outside. It is reaching now. And as far as VDCR is concerned, we are just waiting for some clearances to come. Once that comes, that project also will take off. And as far as GMLR is concerned, we already started all the approach roads and everything, and also the casting yard also for the purpose of tunnel lining.

Okay. In this follow-up, so for this Versova-Dahisar project, so is -- for that, is the -- is there will be a requirement of casting yard? And if yes, is it finalized?

No. No. It is not for Versova, this Dahisar coastal road. It is for the tunnel project, GMLR tunnel project.

So for they -- Versova, they said, you won't require any casting yard. Is it like that?

No, no. There, we don't require anything.

Okay. And second thing is on the Virar-Alibaug MSRDC project. I think now they are going to do it on BOT model. So company will be participating in this BOT model tenders?

Which project you were mentioning about?

Virar-Alibaug multi-model, which they have canceled and now they will issue in BOT model, I think so.

We will evaluate. We'll evaluate. But our focus always is on EPC kind of projects. But whenever these projects comes up for bidding, we will evaluate and then decide. It is really premature to really commit whether we will participate or not. It would depend on the project, the various terms and conditions, and our decision would depend on that.

The only idea was, does the company participate in the BOT model that is...

Generally -- I think I have already answered that question. Generally, our focus currently is on the EPC kind of projects.

The next question is from the line of Prithvi Raj from Unifi Capital.

I just have a couple of questions on balance sheet. We saw increase in the working capital and debt numbers on a sequential basis. Could you please explain this? Are we facing any delays with respect to payments? Or has the situation improved? Could you throw some color on this?

Generally, the debt position at the end of the first quarter will be a little higher when compared to your March, okay? So the reason being in the end of the year, as we more concentrate on the government projects, the government project, generally, they tend to release all the payments because of the expiry of their budgets and other things. So you have your debt position will be low at the end of year-end. At the end of the first quarter, the debt position, I think, were comparatively better than what we were there in the last year. And we are not expecting any delay in the receivables, except for the few projects where the central funds are expected to be released sooner.

Okay. And on the Maharashtra, I think last year, you had a certain delay with respect to execution. Has the things improved after the elections? Now is Maharashtra execution and payments seems to be normal?

Yes, definitely. Because after the elections, we even started getting all the clearances. We got the go-live for all the smart meter projects, and we started executing the projects and the payments are also flowing in now.

How should we look at the debt number by the end of the year? Do you have any number saying by March '26, you would like to reach certain level?

Mr. Prithvi Raj, we do not really give any guidance for the debt number. I think we have shared 3 set of guidance numbers for the current financial year FY '26, which you already know. So we do -- really don't share any specific number for the debt.

So one final question on the execution front. I mean in addition to high base last year, has there been anything else that impacted the execution specifically in this quarter, early monsoon, something of that sort?

So this quarter, the execution impact is not on that account. Actually, the execution impacted in certain category of projects like SWSM projects. As you know that the -- there were delays in the release of payment from these government. So that is the reason there was a dip in the turnover. Otherwise, there is no other impact. And we expect these things will also set in right in the quarter 2 and expect that we'll be meeting the market expectations as the guidance given by us.

The next question is from the line of Vaibhav Shah from JM Financial.

How much have we invested in the smart meter projects as equity?

As of now, it is INR 70 crores.

And what would be the total investment in the time period?

It is like INR 430 crores is the total equity that is required over a period of 1.5 year. And this year, it is expected that we may have to invest another INR 150 crores to INR 200 crores.

Incrementally?

Yes.

Okay. And any thoughts on bringing some partner? We were earlier looking for a partner to share the equity burden. So any thoughts on that?

Still, we have not shelved that proposal. We are still active on that. And we are also looking for someone who will come to us at our terms. If someone is coming up, then definitely, we will look for that opportunity.

But otherwise, we are open to put the entire equity?

Obviously.

Okay. Sir, secondly, on the Vizag deal. So there was an outstanding loan of INR 375 crores. So what is our plan to recover that? And how much have we recovered in this year so far?