Aim to reduce debt by Rs 200 cr this fiscal: NCC Ltd

Construction and infrastructure company NCC Ltd reported good set of first quarter earnings where its revenue went up 10.4 percent to Rs 1,901 crore year-on-year (YoY) and net profit increased 25.8 percent to Rs 60.90 crore (YoY).

In an interview with CNBC-TV18, YD Murthy, Executive VP of Finance at NCC said that the company plans to reduce its debt by around Rs 200 crore and expects to bring down finance cost by Rs 90 crore in this fiscal.

The company has got fresh orders worth Rs 3,600 crore in this quarter and is confident of achieving its order target for this year, he added.Below is the transcript of YD Murthy’s interview to Prashant Nair and Ekta Batra on CNBC-TV18. Prashant: Numbers have been good. Interest cost, let us begin there which has come off meaningfully in the quarter. Could you talk to us a little bit about that? What is the plan on debt reduction and a bit of guidance on interest cost for the full year because first quarter interest cost is Rs 94 crore and that has come up from about Rs 120-130 crore now. A: First of all, we are very focused on bringing down the finance cost. For this we are working on two fronts. Number one is the debt reduction. Whatever asset monetisation is taking place, bulk of it going towards debt reduction. In fact, our peak debt way back in 2014 was something like Rs 2,800 crore. Now last year we closed at Rs 1,881 crore. First quarter also more or less the same. Now the impact of this debt reduction is being reflected in our finance cost. Last year also in finance cost that is FY16, we were able to save about Rs 67 crore which has gone directly to the bottomline and a similar exercise is likely to happen in the current year also. This will add to the bottomline and the first quarter results are in line with our expectations. We are looking at further debt reduction of at least about Rs 150-200 crore in the current financial year. Ekta: You might have increased the amount of debt that you want to reduce in this financial year because the earlier guidance that we were working with was around Rs 100 crore. Now you think you can push it to Rs 150-200 crore? A: Yes, absolutely. That is possible because asset monetisation money is expected to be received in the current year and also, the other important aspect of finance cost reduction is our waiting improvement last year, based on that we are able to negotiate better rates on the lenders, not only for interest, but also for bank guarantee commission and LC Commission and based on our annual audited numbers of FY16, we have already visited the rating agencies for a further improvement in the rating, a possible rating under that. That is likely to be completed in the next 10-15 days. And if any improvement is there, that will also help us to reduce the finance cost to some extent and also, the internal rating of the banks of the company has also improved. So, all these patterns put together, we are confident that further finance cost reduction is likely to happen in the current year. Prashant: So if there is a Rs 150-200 crore more of debt reduction this year, could you tell us what was the total interest cost last full year? What is it likely to be this year by the end of the year? A: We call it the finance cost comprised of not only the interest but also commission bank guarantee, even interest on mobilization advance. In FY15 it was about Rs 570 crore. And in FY16, end of last year, it has come down to Rs 507 crore. So, that means around Rs 60-65 crore improvement is there. Prashant: What about financial year 2017? What would the number look like? A: Current year we are targeting to bring it down to something like Rs 410-415 crore. And that will directly go to the bottomline. Prashant: So, that is about Rs 90 crore than FY16’s finance cost. A: Yes, correct. Ekta: How is your order inflow target looking for FY17? You were targeting incremental order inflows of around Rs 12,000 crore in FY17. Are you on track to achieve that? A: Absolutely. In the first quarter, we have received nearly Rs 3,600 crore of fresh orders. So, our order accretion target is as per schedule. And we are confident we will be able to achieve that. And more importantly, at the end of the current year, order book for the company should improve to something like Rs 20,000 crore. Prashant: Have you given out an earnings guidance so far for FY17? A: We have not given, but we are looking at a topline growth of at least 10 percent in the current year. Prashant: What about bottomline? A: Bottomline, it could be in the range of Rs 260-280 crore. Ekta: And margins? That is the only thing left out. We were working with around 9.5 percent margins for the entire fiscal. It was just about shy of 9 percent this previous quarter. A: It will improve. For the year as a whole, current year we are looking at earnings before interest, taxes depreciation and amortisation (EBITDA) margins of around 9.25 percent. Last year, it was about 8.8 percent. The previous year, it was around 7.8 percent. So, there is a good improvement at EBITDA level. And the last year, there is a good improvement at net profit level also. And the trend is likely to continue in the current year. Prashant: If you do Rs 250 crore in profit after tax (PAT) net profit this year, what is the growth on top of 2016 reported numbers? A: 2016 we have reported net profit of Rs 220 crore. So, it will be around some 20-25 percent increase compared to the last year. Prashant: If you do Rs 280 crore, it will be a 20 percent increase? A: Yes, correct.