NCC blames interest cost for big fall in profit

Nagarjuna Constructions has given away under pressure due to interest cost. While the company has reported net profit at Rs 23.4 crore in the second quarter, this is comparable to the Rs 63.5 crore posted during the year ago period very poorly. Interest burden this quarter shot up to Rs 71 crore for NCC and PAT margins on a standalone basis has come down to 1%.

YD Murthy, executive vice-president-finance at Nagarjuna Constructions joins CNBC-TV18 to talk on the performance of the company in the past quarter and highlight the way forward. He points to high interest cost as the main reason for the drastic fall in profits this quarter. Below is the edited transcript of the interview. Also watch the accompanying video.  Q: Can you just take us a quick run through your numbers?
A: Yes, top-line on a stand-alone basis, we have done Rs 1,093 crore and on a consolidated basis, it is Rs 1,480 crore. The top-line is in line with our budget, and so, we are confident that we are going to post the targeted top-line of about Rs 7,200 crore on consolidated basis.
As far as the profits are concerned, the stand-alone profit is about Rs 11.4 crore whereas the consolidated profit is about Rs 29.4 crore. The big fall in the profit is mainly because of heavy interest costs. The net profit levels are impacted. Though we are able to maintain a comfortable EBITDA levels about 8.5-10%, top margin on a stand-alone basis has come down to about 1% as compared to 3.8% in the second quarter of last year. Q: Can you just give us a little bit more on the margin picture? Where they have slipped and how much interest costs have gone up by specifically?
A: The interest burden in the second quarter has gone up to about Rs 71 crore, that is very much a big culprit. In fact, the interest burdens for the first half of this year has gone up by about 102% compared to what it was in the first six months of the last year. This is mainly because of two factors: the quantum of debt which has gone up and also the interest rates that are going up.
As far as the second quarter is concerned, the quantum of debt has remained at the same level, there is no increase in debt in the second quarter, but the high interest rates have impacted profit margins.