Target Rs 30k cr orderbook, improved margins for FY16: NBCC

Sonia: It was a very good quarter for you, Q4 your profits went up 30 percent, your income went up about 30 percent or so but the best thing perhaps was the fact that your margin performance has improved substantially and now sitting at 9 percent versus 6 percent earlier. Just take us through what the growth rates for NBCC could like in FY16 and also how much the profitability can improve?

A: This year we did around Rs 4600 turnover with the profit before tax (PBT) Rs 393 which about 15 percent growth in topline and similar amount or more growth in bottomline. In this 2015-16 we are looking for some growth of say 25 percent in topline and I feel bottomline should also give same kind of growth in this financial year.

If I talk about next five years CAGR, I am quite hopeful that we will maintain this 25 percent growth year-to-year. So, we can assume 25 percent CAGR in next five years.

Latha: The margins?

A: Margins definitely will improve because we have some fixed cost. If you are increasing your topline definitely your bottomline will increase in much higher proportion than the topline.

Second thing is now we are focusing on large value projects particularly on redevelopment sector. Finally, we could formally sign agreement with Rajasthan government and we have made a joint venture company. We have started preparing the detailed project report (DPR) for two or three projects. Similarly, Odisha government and then there are some other projects in pipeline.Latha: Can you tell us what is the order book? We got that recent release where you said that you have got Rs 2000 crore of orders in May 2015 alone. I assume that the West Bengal Alipore order is included in that?

A: The close of FY15, our order book was Rs 20,000 crore in comparison to last year closer of financial year Rs 15,000 crore. So, we added Rs 5000 crore in 2015 with turnover of Rs 4,600. Last two months we have added Rs 4,000 crore order book and I feel similar kind of growth you will see in future also.

Latha: You can add another 30 percent to your order book this year also, is that your expectation, 30 or 25 percent?

A: My conservative target at the end of FY16, our order book should be Rs 30,000 crore after doing turnover of Rs 6000 crore in this financial year.

Sonia: Can you break it up for us and tell us in the project management consultancy (PMC) business which is 80 percent of your revenues what will your order book look like by the end of FY16 and given that you have done better than what you guided for in your margins in this PMC business what could the margin performance be by the end of this fiscal?

A: Almost of 80 percent growth in order book will be from PMC sector. We are booking all our redevelopment projects in PMC sector only because we get fixed agency charges, marketing charges. So, most of the order book will be from PMC side. As I said earlier that our margins will definitely improve because we have certain amount of fixed charges. If you are increasing your turnover definitely your margins will improve in a substantial way.

Latha: My colleague asked you that question because the PMC business saw EBIT margins dipping a bit, 1 percentage point in the Q4, that was an aberration?

A: No it is not like that. It happens in construction sometimes. When you are doing project management, some payments are outstanding and you are not getting charges on full amount. However, it is very obvious that if you are getting fixed PMC charges and your PMC business is increasing, your margins will increase.

Latha: Just one arithmetic question, you said your order book will be Rs 30,000 crore and you will execute Rs 6000 crore. So, net-net at the end of FY16 you will have Rs 24,000 crore?

A: No Rs 30,000 crore.

Latha: Net of implementing you will have Rs 30,000 crore of orders still left?

A: That is right.

Sonia: Can you tell us what is the status check as far as the redevelopment of some of the old government properties are concerned? Anything that we can expect in terms of the commencement, etc in this fiscal itself?

A: Very good news, government has already moved cabinet approval note for three colonies which I was talking since last one year. I hope in next three to four months cabinet will approve those colonies work. It will be around Rs 14,000-15,000 crore construction. By end of September-October we will hear some positive news, cabinet approval after that we will start preparing the DPR work.

Latha: You have factored that in your Rs 30,000 crore order book?

A: Not at all.

Latha: So there can be an upside to Rs 30,000 crore?

A: Definitely because you see in last two months, if we have added Rs 4000 crore; it is not from redevelopment side. It is all miscelanous PMC jobs like West Bengal you said and all things are flowing in. Redevelopment will be in addition to that.

Sonia: One more word on the board approval to off load 10 percent stake through the FPO route, how much will this help the company raise and by when do you expect the final approval to come through from the government’s end.

A: There are two aspects; the board has approved 10 percent fund raising for NBCC. That was primarily if we get large amount of redevelopment projects, we need some cushion money and some seed money. So, we should have that, that was board view.

As far as disinvestment by government is concerned I don’t think in near future they are going to that because I have not heard anything. Government is busy in some other things but I don’t think it is going to happen very soon.