Will sustain 10-15% growth in FY14: NCC's Murthy

Monetisation of power and road assets boosted construction firm NCC’s March quarter performance. Recently, the company with diversified interest in power, building and electrical divisions, sold entire stake in Himachal Sorang Power project which is developing a 100 megawatt merchant power project in Kinnur district.

The Hyderabad-based firm reported over three-fold year-on-year jump in profit for the quarter gone-by on timely execution of projects. Read This: Will monetise assets to reduce debt: NCC's Murthy In an interview with CNBC-TV18, YD Murthy, executive vice president-finance, NCC said, the firm is confident of sustaining 10-15 percent topline growth in FY14 as the firm in the process of optimising operational efficiencies. Like industry peers, NCC will also push hard to improve its orderbook size in FY14. The firm’s order book as on March 31 stands at Rs 18,555 crore. The firm has fine tuned business strategy to ease liquidity condition. In capital intensive infra projects, companies are finding it extremely difficult to grapple with delayed payments from customers. However, Murthy affirms that NCC’s debtor days have improved to 73 days which will improve cash flows. Below is the edited transcript of Murthy's interview to CNBC-TV18.

Q: The surprise largely has come in on the operating margin front, which has expanded to 9 percent. Can you take us through how you managed that improvement in margins?
A: Q4 has been pretty good for us. We were able to improve our working capital cycle and also the operating margins mainly because of falling inflation and falling commodity prices and improvement in our performance.
Added to that are three distinct positive developments that have taken place in Q4. One is, the debt in the books of the company has come down by about Rs 297 crore and now we are in our comfort zone as far as the debt is concerned. It is around Rs 2,225 crore now.
The second one and the more important one is the improvement in the working capital cycle. The working capital days have come down substantially and the debt collection period, which was 89 days at the end of Q3 has come down to a very impressive 73 days at the end of Q4. This is likely to release substantial working capital into the system and that is going to help us to improve our performance based on the release of the working capital.
We have put special efforts to see that the clients take care of our payments in time and we have formed a special team and director level interaction was also there.
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Third one is the improvement at the net profit level. We have reported a net profit increase of about 74 percent for the year as a whole and about 154 percent in Q4 and the earnings per share (EPS) also has gone up from Rs 1.4 to Rs 2.5 for the year as a whole. These three are good positive developments as far as our company is concerned. Going forward, things should improve for us.
 
Q: At this point, what can you guide to in terms of revenue growth you expect to see in FY14 and what would that imply in terms of an order inflow guidance that you are sitting in?
A: Our board is meeting today to finalize the business plan of the company for the current year. So I cannot give you any number right now.
Based on the order book and based on the opportunities available, we are confident that we will be able to grow at 10-15 percent topline in the current year.
The order book of the company at the end of the year was at Rs 18,500 crore and current year order accretion is definitely going to improve. Q: There was an extremely large sized order as well that got cancelled because of environmental clearance issue, do you expect that to fructify in FY14?
A: The Supreme Court (SC) has cancelled the environment clearance given to this particular project where they have declared financial closure, they have given us the notice to proceed and suddenly the project has come to a standstill. So we have proactively removed that order of nearly Rs 850 crore from our order book. That is one reason that the order book was looking a little come down compared to what it was earlier but we wanted to see that the order book is active and executable.
 
Q: When do you see execution pick up because if you look at your revenue line, that still remains quite flat, do you see execution picking up pace on the topline over the next few quarters now that you have salvaged margins or stabilised margins?
A: Yes. Current year i.e. March 2013, our topline growth was 9 percent which is a bit disappointing for us also. In March 2012, we had a topline growth of only 3 percent. We believe that the growth rates are bottoming out. The worst is behind us and from now onwards pick up is going to be there. Maybe in current year we can come out with a better topline growth than last year.