Will attain order inflows worth Rs 12,000cr in FY18, says NCC

He further said that 9 percent EBITDA margin guidance for FY18 will be maintained.

NCC is looking to monetise two road assets, said Murthy.

He expects inflows worth Rs 100 crore from real estate subsidiary NCC Urban.

NCC Urban has land bank of 200 acres spread over various places, he added.

He expects finance cost for FY18 to be at Rs 360 crore versus Rs 396 crore in FY17.

Can expect some further reduction in cost of borrowing, he added.

Murthy said that NCC is receiving large amount of orders from the commercial building space. Commercial building order book stands at Rs 22,000 crore, he added.

Below is the verbatim transcript of the interview.

Anuj: You have achieved 60 percent of your order inflow target. Do you see the scope to increase that target?

A: The order inflow has been pretty good in the first quarter. We bagged about Rs 6,000 crore of fresh orders and further order accretion is also expected in the current quarter. Margin guidance, normally we do not increase, but anyway board will take a call when we declare the second quarter results. So as such, we are confident we will not only achieve the targeted order accretion guidance, but we may exceed that also.

Latha: Your target was Rs 12,000 crore or Rs 10,000? I thought you were looking at Rs 10,000-12,000 crore.

A: We said Rs 10,000 crore and maybe we will reach that Rs 12,000 crore as you were mentioning. The macro environment seems to be picking up nicely. Good order accretion is happening in buildings and in metro works and roads also is likely to pick up. Now we are looking at a hybrid model road projects and also, some engineering, procurement and construction (EPC) contracts from National Highways Authorities of India (NHAI) and other agencies.

Latha: Will your margin guidance of 9 percent be maintained?

A: Absolutely.

Latha: If you can tell us whether you have any plans of selling off any of your road projects? After all Infrastructure Investment Trusts (InvIT) has not done too badly for a couple of companies. So either InvITs or outright sale of projects, is that on the cards?

A: No, in our build, operate, transfer (BOT) portfolio, as you might be aware, we have power and road assets and we have succeeded in monetising two power assets and two road assets already. And one road, the concession period is over. The project is handed over to the clients and our equity investment has come back. So right now, we have only two road assets where one is annuity projects on NHAI where we have gone for securitisation of future cash flows. I do not think any further monetisation is possible, but we are looking at monetising some of our real estate assets.

Latha: And when will that be completed? How much money are you looking to raise?

A: In the current year, we are looking at about Rs 100 crore being repaid by our real estate subsidiary, NCC Urban by selling some land parcels and repaying the loans to the parent company.

Anuj: How much is the land valued overall?

A: NCC Urban has a land bank of about 200 acres spread over various places and they are of course, developing their projects, but we have given them a guidance that wherever the land parcels have appreciated, they should look at monetising the land parcels instead of waiting for development and all and start repaying the loan taken from the parent company.

Latha: So, by the end of this year, what might your finance cost drop to?

A: The finance cost, there is a good improvement. In the first quarter also, we have reported about Rs 8 crore of finance cost reduction and the finance cost, last year it was about Rs 396 crore for the year as a whole. Current year, it may come down to about Rs 360 crore. Recently we have moved to A category and based on that, the revised pricing is also going to happen as we go forward.

Latha: So, you will get money at what, 8 percent because of this rating?

A: No, I wish I get that, but that is not the case because we are in construction and our sector has got certain negative connotation. We are getting around 10.4 percent or so, but further reduction is possible.

Anuj: What are you doing differently from some of the other sector companies because we have clearly seen the impact on the numbers and overall order guidance as well? The sector was in a bit of a doldrums, but your company has done well over the last one year or so.

A: Absolutely. What has happened is it is a reflection of the management depth and the management vision for the company and for its stakeholders. In 2014, we had a very tough time along with various other construction companies in the sector. But we could come out successfully mainly because of our proactive policies. And instead of going to corporate debt restructuring (CDR), we have gone for the rights issue, taking on board all our major shareholders like The Blackstone, Chrys Capital and Rakesh Jhunjhunwala, that has yielded very good dividend in the last 1.5-3 years and the company is sailing very smoothly. Absolutely no issues in terms of working capital cycle, in terms of meeting our commitments to various stakeholders and definitely we are at a sweet spot where we can progress well as well as go forward.

Latha: Who did you say are giving you the best of orders, this Rs 10,000 crore order target that you are racing to? The major order givers are?

A: Major orders we are getting in the building segment. We have a strong presence in the building segments as one of the top builders in the country.

Latha: That is what? Residential properties or commercial properties?

A: No, mostly building projects comprising of commercial, industrial then sports infrastructure then hospitals, social infrastructure, colleges, schools, all those things.

Latha: So that is one half and the others are coming from municipalities and metros?

A: Yes, metro projects we are doing. That is also, because sometimes we do the stations which are basically buildings. So metros are also included in the building segment. In fact, building segment, the order size is about Rs 10,000 crore whereas the total order book for the company is around Rs 22,000 crore. So about 46 percent is from buildings itself. And that is doing well for us. That is a good positive. And added to that, our water division is also doing very well. And together that is buildings and water put together, they constitute about 65-70 percent of the order book as well as turnover of the company.

Latha: All these are state government and municipal entities that are giving you orders. No receivables problems from them?

A: We are carefully examining. Right now, we do not have much of problems as such.