Mar 01, 2012, 11.05 AM IST | Source: Moneycontrol.com

NBCC IPO in March; Co keen to expand overseas

State-owned National Buildings Construction Corp (NBCC) is hopeful its initial public issue will hit the markets before the end of current financial year. Once cleared by market regulator SEBI, this will only be the second public float by the government this fiscal after Power Finance Corp. Government is also selling 5% stake in ONGC via auction.

Vishnu Das, CMD, NBCC
Nachiket Kelkar
Moneycontrol.com

State-owned National Buildings Construction Corp (NBCC) is hopeful its initial public issue will hit the markets before the end of current financial year. Once cleared by market regulator SEBI, this will only be the second public float by the government this fiscal after Power Finance Corp . Government is also selling 5% stake in ONGC via auction.

The government is divesting 10% of its stake via NBCC IPO, and the company will not get any proceeds from the public offer of 1.20 crore shares. 1.20 lakh shares of the issue will be reserved for the company's employees. The price band of the issue will be announced in March.

NBCC is primarily involved in project management consultancy services for civil construction projects (PMC), civil infrastructure for power sector and real estate development.

Both the power sector as well as real estate have seen significant slowdown over the last one year. The power sector growth has been hampered with issues like shortage of coal and delays in land acquisition and there are no clear signs of pickup yet. Real estate sector too has been hit by a demand crunch, especially in cities like Mumbai and Delhi.

But the company is unfazed when quizzed about these problems.

Vishnu Das, NBCC's CMD says 90% of the business comes from PMC and the entire PMC business is related to state and central government projects and so he is not concerned much.

In the PMC segment, the company now aims to focus on projects having an order value of over Rs 100 crore. Apart from 35 ongoing projects in India, NBCC is executing a PMC project in Maldives and is keen to expand further overseas.

"As part of our strategy for future growth and expansion, we intend to take advantage of the significant growth opportunities by diversifying into new locations outside India," NBCC said.

Meanwhile, in real estate development too, most of its projects are related to building housing colonies for government and public sector employees, and commercial projects like government hospitals and educational institutions like IITs and NITs, and so it hasn't been affected much by the slowdown, compared with other real estate developers, Das said.

As of January 15, NBCC had completed 8 real estate projects. It has 4 residential and 3 commercial ongoing projects. It also has 6 forthcoming housing projects, and 6 forthcoming commercial projects. It had land reserves of about 127.918 acre as of Jan 15.

"We intend to secure lands available with central and state government agencies for our real estate development projects. We also intend to continue to selectively enter into joint venture agreements to increase the amount of land or land development rights available to us for development," Das said.

As of September 30, NBCC had an order book of Rs 10,622 crore, of which Rs 10,302 crore worth orders were from the PMC segment and Rs 320 crore orders in the infrastructure space.

For the first six months of this fiscal (Apr-Sept), NBCC had a net profit of about Rs 75 crore on total income from operations of Rs 1,276.6 crore. The company says its profit after tax has increased at a compounded rate of 15.9% over fiscal 2007-2011 and income from operations is up at a CAGR of 21.3%.

However, the growth has come at the cost of PAT margin, which has declined from 7.9% in fiscal 2009 to 4.3% in fiscal 2011.

That apart, NBCC also has direct tax disputes amounting to near Rs 34 crore. There are also 33 legal notices involving NBCC with an aggregate monetary value of Rs 3.19 crore.

Das dismissed these issues stating such cases were very common in real estate business.

IDBI Capital Market Services and Enam Securities are book running lead managers to the NBCC IPO.

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