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

Ladies and gentlemen, good day, and welcome to the NCC Limited Q2 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 from JM Financial Institutional Securities Limited. Thank you, and over to you, sir.

Thank you. On behalf of JM Financial, I welcome everybody to Q2 FY '26 earnings conference call of NCC Limited. We have from the management, 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, followed by Q&A session. Over to you, sir.

Hi. Good morning, everyone. This is Neerad. It gives me great pleasure to welcome you all to our earnings call for the second quarter of the financial year '25-'26. At the very outset, I would like to thank each of you for joining this interactive session and for your continued interest and trust in NCC. I have with me my colleagues, Mr. R.S. Raju, Director, Projects; Mr. Sanjay Pusarla, our CFO. Yesterday, we announced our unaudited financial results for second quarter of the current financial year, which have been uploaded on our website and shared with the stock exchanges. We believe you have had the opportunity to review the financial statements and the investors presentation. Before we begin, I would like to draw your attention to the standard disclaimer, which is also available in the investor presentation. This presentation may contain certain forward-looking statements concerning NCC's future business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from those indicated in such forward-looking statements. This interaction is broadly divided into 3 parts. I will first present a brief overview of the business environment, operational highlights and our outlook for the remaining part of the financial year. In the second part, our CFO will cover the financial performance for the second quarter. In the last part, we will take up your questions and clarifications. Due to the challenging external business environment and elongated payment cycles, we have decided to withdraw the guidance for the financial year '26 and will be able to share any update by March '26. As of 30th September '25, our order book stands at INR 71,957 crores compared to INR 7,087 crores at the end of the previous quarter. During the quarter, we booked new orders worth INR 6,223 crores, which is mainly from Buildings, Water and Irrigation divisions. In the second quarter of the FY '26, the company has reported a turnover of INR 4,585 crores as against INR 5,224 crores in the corresponding quarter of the previous year. The EBITDA margin stood at 8.7% on a consol basis. For the first half of FY '26, the company achieved a cumulative turnover of INR 9,793 crores compared to INR 10,782 crores in the same period last year. The cumulative order inflow for H1 FY '26 stood at INR 9,881 crores. Now I will break down the order book segment-wise as of second quarter. The order book in the Building division stands at INR 22,492 crores, which is about 31% of the total order book. The Transportation division has an order book of INR 17,361 crores, which is about 24% of the order book. The order book in the Electrical division stands at INR 15,013 crores, which is 21% of the total order book. The Water and Railway division holds INR 7,553 crores, which is about 10% of the total order book. The Irrigation division has INR 5,394 crores, which is about 7% of the total order book. The Mining division order book stands at INR 4,137 crores, which is about 6% of the total order book. Now I will hand over to Mr. Sanjay Pusarla with a request to take us through the detailed financial performance of the company. Over to you.

Good morning, ladies and gentlemen. This is Sanjay Pusarla, CFO from NCC Limited. I'm pleased to announce the financial results of Q2 of FY '26 of NCC Limited. My announcement will be in the sequence of order book, revenue, profitability, debt movement and some of the important balance sheet items. To start with order book. Our order book stands at INR 71,957 crores at the end of September '25. You are aware the order book at the beginning of the year is INR 71,568 crores. Orders received in Q2 is INR 6,223 crores. And cumulatively, as Mr. Neerad said, we have received orders, including the orders in the month of October stands at INR 17,420 crores. So the order book of INR 71,957 crores includes stand-alone order book of INR 64,326 crores and INR 7,632 crores of the subsidiaries. Coming to the revenue. Turnover reported in Q2 of FY '26 is INR 3,774 crores as against turnover of INR 4,480 crores in the corresponding quarter of the previous year, which was a decline of 16% at the stand-alone level. When it comes to 6 months, the turnover for Q2 for the H1 of FY '26 is INR 8,204 crores as against INR 9,227 crores, which was a decline of only 11% at the consolidated level. The turnover reported in Q2 FY '26 is INR 4,585 crores as against the turnover of INR 5,224 crores in the corresponding quarter of the previous year, a decline of 12%. When it comes to 6 months for the H1 of FY '26, it is INR 9,793 crores as against INR 10,783 crores shows a decline of 9%. Let's get into the profitability. At the stand-alone level, we achieved EBITDA of 7.45% for Q2 as against 9.03% of the corresponding quarter of the previous year. PBT, we achieved 3.1% and PAT we achieved 2.68% in the current quarter, that is Q2 FY '26 as against PBT of 4.86% and PAT of 3.58% reported in corresponding quarter of the previous year. At consolidated level, we achieved EBITDA of 8.66% and PBT of 4.51% and PAT of 3.37% in the current quarter as against EBITDA of 8.52%, PBT of 4.79% and PAT of 3.12% reported in the corresponding quarter of the previous year. Let's get into the debt movement. The debt at the beginning of the quarter stood at INR 1,852 crores and net debt after cash and cash equivalents is INR 1,497 crores. At the end of quarter 2 FY '26, it stood at INR 2,115 crores and net debt of INR 1,890 crores. And at the end of Q2 FY '25, the same is INR 1,773 crores and net debt of INR 1,624 crores. There is an increase in debt by INR 263 crores. The debt-equity ratio stands at 0.28 at the end of Q2 FY '26 as against 0.25 at the end of Q2 FY '25. And beginning of this year, it was 0.20. So coming to the working capital, excluding cash and margin money deposits. At the end of Q2 FY '26, it stands at INR 5,406 crores, which is 33% of the turnover. In terms of working capital days, it is 110 days. Debtors outstanding at the end of Q2 has decreased from INR 3,296 crores to INR 3,277 crores and the number of days increased from 77 to 78 days in the current quarter. It is 65 days for the corresponding period of the -- corresponding quarter of the previous year. Coming to unbilled revenue. It stands at INR 6,662 crores, which is 41% up for Q2 as against INR 5,937 crores at Q4 of the last year. Retention money stands at INR 1,993 crores for Q2 as against INR 1,870 crores at the beginning of the year. Coming to the mobilization advances. Advances stood at INR 2,961 crores as at the end of September '25 as against INR 2,944 crores as at the end of June, a net increase of about INR 17 crores. Of these mobilized advances, 63% are interest-bearing and the average interest comes to around 9.17% and interest-bearing advances decreased from 79% to 63% during the half year. Cash and cash equivalents, it is INR 224 crores as on 30th September '25 and INR 355 crores as at the end of June '25. Margin money deposits, INR 671 crores at the end of September and same is the number at the end of June '25 also. Coming to the CapEx. We have incurred a CapEx of INR 77 crores in Q2 and cumulatively, we incurred INR 169 crores for the first half of '26 as against the budgeted CapEx of INR 1,050 crores for the regular projects. Earlier -- in the earlier call, we said the INR 750 crores is the CapEx, but the CapEx now revised to INR 1,050 crores. Coming to the investor-related ratios. The ROCE stands at 9.82 as against 14.61 at end of February -- financial year '25 end. Return on net worth is 9.53 as against 14.43. EPS stands at INR 1.61 as at the end of Q2 FY '26 as against INR 2.55 for the corresponding quarter. Inventory stood at INR 1,725 crores as at end of September. The investments are INR 1,191 crores as at the end of September. With this, I conclude my results announcement. Thank you. Over to Neerad.

Yes, Mr. Vaibhav.

Yes, sir. We can start the Q&A.

We can start the question-and-answer session now.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mohit from ICICI Securities.

My question is, what exactly has changed compared to the last quarter that you have dropped the guidance despite having very large order book. Is it that the work has not started for a very significant part of the order book and you're finding it difficult to book revenues?

It is very clear, sir. Even Mr. Neerad has covered in his initial opening remarks. There is unprecedented rains that happened in the Q2. In addition to that, there were elongated payment cycle. These are the 2 main reasons which has caused a drop in the turnover. And nothing else than that. And order book is strong, and we are able to execute, and we are positive in the coming quarters.

The other thing is -- yes, Mr. Mohit, please continue.

So my question is why drop the guidance? Why not give some guidance for the H2 and something like? Is it possible to have 5% growth in the entire fiscal compared to F '25?

This is the decision of the management. So this decision...

No, at the moment, it is very difficult to predict because considering the situation, it is very difficult to predict what is going to happen. That is the reason even Mr. Neerad said at the end of the year, we'll be able to give a concrete picture.

Understood, sir. And are we seeing a recovery now, sir, as you're already in the midst of Q3, middle of Q3. So are you seeing a recovery some sort of which can help us post a better number compared to last year -- last year H2?

We have already shared with you, Mr. Mohit, that we will update you, give us some time. We will update you by end of March, we will have more clarity, and I hope the situation improves, then we should be in a position to talk about this.

Understood, sir. And sir, how is the order inflow environment? Are you seeing the weakness also percolating to the ordering environment in general?

I mean ordering, if you really see the number of orders that we have bagged as today, this continues to be healthy in line with what we had anticipated. And as we speak, we already have as of today, INR 17,420 crore orders. So I mean we -- the order inflow is moving in line with our anticipation.

The next question is from the line of Shravan Shah from Dolat Capital.

I understand that we withdraw the revenue guidance, but still trying to understand further in which segment. So broadly, if I look at the numbers, it seems that the Building and Water segment, we have seen a decent degrowth, where particularly the Building segment, which is in terms of order book, if you look at even for last 3, 4 quarters also, it is in the similar line. So not able to understand is it that there, again, we are facing major issues apart from whatever the recent projects that we have bagged in last 6 to 9 months, there obviously, it seems that the execution has not picked up. But still not able to understand why we are withdrawing the revenue guidance?

Yes. Let me -- I think my colleague, Mr. Pusarla, has already answered this question, but let me try to reiterate. Firstly, what we have seen is in the second quarter, we have had extended and aggressive sort of monsoon. So some of the projects got impacted. The second one is some of the projects that we had anticipated would pick up pace in this quarter has not happened. Some of the permission, some of the ROWs, they have delayed the start of those projects. The third and important reason is we have -- I have already talked about this at the very outset. We have noticed elongated payment cycle. The clients are not able to make the stipulated payments on time. So these are the 3 important factors that has sort of convinced us to revisit the guidance. And we believe that in the fitness of things, it is always better to communicate openly with the market. So this is what we have done.

Okay. Got it. Second, in terms of the margin also, so there previously, we are looking at 9%. So already in 1H, we are 8.3%. So there still one can see the similar 8%, 8.5% in the second half or there is a possibility that we can even have a 9% in the second half EBITDA margin?

Mr. Shah, it is very difficult to say. When we say that we have withdrawn the guidance, we have withdrawn the guidance, right? It is very difficult to anticipate. If it was possible, I mean, we would have shared that number with you. But we will revisit all these things and come back to you by March.

But one thing is that we are very near to whatever lower band we have given. And it depends on how it will move in Q3, okay? If you see that the turnover revenue was low in the first half. And when the turnover is low, obviously, it is understood that absorbing the fixed cost will be low. So depending on the turnover, depending on the situation that improvement that will happen in Q3, we may reach the lower guidance.

So lower guidance is the 9% or what's the lower guidance?

9%.

Okay. And is it even to some extent with some probability this third quarter till now whatever the October and November 7, we are here, still we are seeing the degrowth kind of on the execution front? Or are we -- have we seen the improvement? A broader sense, I understand we have withdrawn the guidance because now it is becoming a very, very difficult. So that's what I'm trying to understand.

No, I think Mr. Neerad has sufficiently answered on this. He has told very clearly that we'll be able to help you out maybe over the year-end.

Okay. Got it. So -- and on the finance cost front and the data points on the loans and -- to subsidiary and associates. So if you can number there? And finance cost, will it remain in the similar the current run rate quarterly?

It has gone down.

Yes. It is 4.3% down in 1H. So the similar INR 150-odd crores quarterly will remain for next 2 quarters?

It is like this. If you see the finance cost, it is 3.25%. So it will be in the similar lines.

Hopefully.

Hopefully, it will be on the similar lines.

Got it. And on the data point on the investment -- total investment in subsidiaries and associates, if you can spell also break it into the loans to subsidiary and associates.

Investments into subsidiaries INR 1,191 crores and loans to the group companies INR 179 crores.

INR 179 crores?

Yes.

Okay. So it seems there is a significant repayment on the loan front would have happened from INR 452-odd crores, which was the number from March to INR 179 crores.

No, this is other body corporate, which is Vizag Urban, which is there. That was not part of this number what I told you. That number was INR 391 crores.

Got it. And lastly, on the JJM payment, so last time we said INR 1,700-odd crore kind of a receivable were there. So have you seen some payment coming in or still the debtors are at INR 1,700-odd crores?

Some traction is happening, but it is very, quite confidential to reveal anything about client information today given the situation. So it is moving, there's some traction is happening.

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

First question is in the last call, you had said that almost INR 28,000 crores of the orders yet to receive the notice to proceed. So out of the current order book, the work has not started on what quantum of the orders?

It is like this. Last time we said INR 28,000 proceed to work that was orders received in the month of March. That is the reason it was told that orders had to be started for execution. So same is the case even the orders which have come in March '25. Generally, what happens, you will have a mobilization period, one. Second thing, you will have a design clearances that are required to be done and also the clearances which are required to start the work at the work front. These are all the things which generally take 5 to 6 months, it will take. So now all those orders, which have come in the month of March '25 will start getting executed maybe in Q3 and Q4.

Okay. The second question is again the continuation of the same. So besides these INR 28,000 crores of orders of the order book, are there any orders where -- if you can quantify where the approvals like NGT or environmental issues or other approvals have not come in from the statutory bodies and we have not been able to execute. So is there any other -- any further pipeline of orders beyond the INR 28,000 crores or that is included in INR 28,000 crores?

No, INR 28,000 crores is not that it was held back because of some clearances or NGT order or other things. Those orders that have come in the month of March at the fag end of the last year. So that was the reason the execution getting happening only maybe in Q3 and Q4. And the second question, you're asking that as at the moment, are there any orders which have been stalled because of these reasons. At the moment, there are no orders which have been hampered because of this.

Okay. Now on the building side, sir, I mean, when we look at the other developers of the players, we have seen very strong build-out in the private sector building orders, especially on the residential side. So I just want to understand how is your thought process on the private building orders on the resi side? Are we bidding there? Are we do we have order books there? And what's the outlook on that segment beyond the government buildings, which we typically do?

Yes. Mr. Kandpal, we are actively looking at the private capital development space as well. And we do have some projects from the private sector as well.

Private residential, I'm talking about, sir. So private residential sector, I'm talking about players like...

A couple of them, a couple of projects we have for the private developers.

Okay. And just lastly, on the JJM outstanding receivables, which was INR 1,700 crores last quarter. So what's the number now? And what would be overdue beyond 6 months here where you would have like -- should have come. So I just want to understand on the debt side, if these numbers would have come in, so what our debt would have been?

It is almost similar to those numbers, okay? There are -- we are waiting for some certifications from them. Once the certifications happen, the money flow also will happen. It's almost on the similar lines.

How much is overdue on this? I wanted to know that if the timely payments that have come in, so...

Generally, this is a running bill contract. So what happens in the construction contract, they keep on paying. And if you go on existing on first in, first out basis, generally, the outstanding will be well within the limits.

I'm saying, sir, how much of this INR 1,700 crores is overdue right now beyond 6 months, I mean, which should have come in. So I understand that last time we had INR 4,000 crores of order backlog from JJM and we were planning to execute this entirely in this year. So against that INR 4,000 crores of pending, how much should have been the working capital or the debtor is outstanding? It was more generalized basis rather than being overdue right now?

Yes. So the order -- let me give you some picture on this Jal Jeevan projects. We have about INR 7,000 crores of order pending to be executed, okay? Then that is a number that includes not only the projects of UP, the projects which are there in other states also, which are under the same mission. So INR 9,000 crores is the -- INR 7,000 crores is the order book that need to be executed. And as far as the receivables are concerned, it is also in the similar range as like what we said at INR 1,700 crores. It is in the similar [Technical Difficulty]. We are also expecting some payments to happen in this month, maybe month end or so or maybe the first week of -- first fortnight of December, we are expecting. Once these things are coming, probably the improvement will be there in all these cases.

My question was, sir, out of this INR 1,700 crores, how much is overdue. I mean client -- because of the delay, the client is not paying. So the receivable collection would have passed from the deadline, which was originally supposed to happen. So how much is the overdue in this INR 1,700 crores?

There is no overdue as such because last time we said INR 1,700 crores, even now also the same level. But we used to keep billing and we are getting money also. The money is getting churned and the outstandings will become latest. It's not the overdue.

Okay. Okay. So let me put it another way. What is the revenue from JJM in this quarter, sir, in Q2?

In Q2?

Yes.

INR 1,000 crores. So it was up to H1, it was INR 1,082 crores. And if you take Q2, it will be around INR 600 crores.

So you have collected INR 600 crores in Q2 from the government?

It is about that money only, near to that.

The next question is from the line of Ashish Shah from HDFC Mutual Fund.

Sir, just wanted to dwell a little bit more upon…

I'm sorry to interrupt in between. Your voice is not audible.

Yes, is it better now? Yes. So sir, what I wanted to probably understand a bit, you said that there is obviously the heavy rain impact and there is elongated payment cycles. Now you just mentioned to the previous participant question that you've done about close to INR 600 crores in JJM in the second quarter. So is that what you're primarily referring to by saying that because of elongated payment cycles, you have not been able to execute? Or are there other areas, other sectors or other projects where also you're not able to execute because of this payment cycle?

I think we need to give a little elaborate reply on this. So like if you see in other states, like in AP, you have got heavy rains, which are even counting even today. In Maharashtra, you have got heavy rains. In Karnataka, you have got heavy rains, which are unprecedented, unexpected rainfall was there in this year. And UP, same thing. So considering all these things, the impact is there. It is not only the UP projects. It is also the projects which are being executed in other states because of these rains, heavy rains. If you see the rains, which were unprecedented and if you see the rains in south, like in Karnataka or in Andhra Pradesh, the rains were so heavy that it was never expected, maybe the heaviest rainfall. And even beyond the season, the rains are happening. So that is the reason why there was a reduction in the execution.

Understood. On the rain part, it is understood, sir. What I'm also saying is in terms of slow payment cycles, it is obvious that Jal Jeevan is moving slower. Besides the Jal Jeevan, is there any specific thing that you want to highlight where the payments are probably slower than expected, hence, you're not able to execute as much as you would have liked?

No, sir. It was only those payments which are related to the water project. But otherwise, we are okay with all other areas.

Okay. So just hypothetically, if -- as you are saying by the end of November or December, if some of the payment issues are getting resolved, there should not be other constraints according to you apart from what we've already discussed, okay?

You are right.

Okay. The other thing, sir, is you said INR 7,000 crores is the total JJM. How much of that is UP?

You see right now, I don't think I have right on my hand, 1 minute. It is INR 3,840 crores.

Okay. And the rest is primarily which other state besides UP?

It is Odisha is there, Jharkhand is there and Karnataka is there.

Understood. The other thing, sir, is in terms of CapEx, we just mentioned that we've increased our CapEx outlook from INR 750 crores earlier to INR 1,050 crores. On what is this account, sir?

We have received one major order in the mining in the month of October, okay? So for that, we have not envisaged before. So that is the reason we have increased the CapEx from INR 750 crores to INR 1,050 crores.

Mr. Shah, it's a large order. It's a large order of INR 6,800-odd crores. So that is the reason we need to incur that CapEx for this specific project. So that is the reason we have decided to increase the CapEx.

Understood. And as I understand, this is like a development order. Am I audible, sir?

Hello. Can you hear me, sir?

I am able to hear you. I think the management is not able to hear you.