FY14 topline may decline by Rs 400-600cr: NCC

YD Murthy, executive vice president -Finance, NCC blames high interest burden, input cost escalation and high inflationary macro conditions for reporting a standalone loss of Rs 7.27 crore in Q3 after many quarters. The infrastructure company's consolidated net profit declined 61.58 percent to Rs 4.76 crore in Q3 of FY14. However, its revenue jumped 22 percent to Rs 1903.18 crore in the quarter. In an interview to CNBC-TV18's Pragya Bhardwaj, Murthy spoke about the company's Q3 performance as well as his outlook for the Q4. Below is the verbatim transcript of the interview:Q: You have spoken out the concerns because of high interest costs etc. but this time you have reported a loss for the first time after many quarters. Could you highlight the reasons as to what led to this kind of a negative performance on the bottom-line?A: We had reported a loss of Rs 7.27 crore for the third quarter; that is mainly because of high interest burden and also the input cost escalation that we could not absorb fully and also the high inflation conditions that are prevailing in the market. We have done a top-line of Rs 1,524 crore, that is about 24 percent increase compared to the third quarter of previous year, but we have made a loss mainly because of the very high interest burden. For the 9 month period we have done a top-line of Rs 4,303 crore and a net profit of Rs 8.4 crore on a standalone basis.Q: As of Q2 of FY14, your debt figures stood at close to about Rs 2,600 crore odd. It has been consistently inching up because of this working capital loan pile up which the company has to take. Has the situation improved and what is the debt on the books at this point of time?A: About Rs 2,720 crore, so some Rs 70 crore increase in debt was there compared to the previous quarter and also the interest rates are hardening. Because of the RBI action, banks are increasing the rates and also, added to that, the commission on bank guarantees and LCs is also increasing because of our external rating. So all these factors put together, the finance costs have gone up and because of that only the company has reported a loss in the third quarter.Q: At the start of the year you had indicated that you will be able to hold on that double digit margin growth, but ever since Q1 we have seen that consistently inching downwards and this time if my calculation is right, it is closer to that 6 percent odd mark. Is that the run rate that we should expect? Should we scale down the estimates as far as the analysts are concerned? Should they scale down their estimates as far as the margin performance is concerned and what are the factors that led to this operational performance this time?A: At EBITDA level, we are still reasonably okay. In fact if you take the 9 month figures into account, the 9 month EBITDA is around 7.5 percent which is not bad considering the macro environment. The real problem is coming at the net profit level mainly because of high interest cost that we are paying. For the year as a whole, we are confident that we will be able to deliver EBITDA margin of 7.13.Q: My earlier question was just your Q3 performance not so much the 9 month performance. For 9 month, if you have done 7.5 percent could we expect an upside to come in Q4 given that it is stronger quarter for infrastructure companies? What is the kind of upside that we can expect on margins? Could you throw some light on that?A: Q4 we are expecting to have at least 8 percent EBITDA margin and also some improvement in the net profit margin also compared to Q3; definitely we will not make a loss in Q4.Q: You were confident of the revenue growth. For 9 months, the company has done anywhere close to about Rs 4,300 crore odd on a standalone basis. This is significantly falling short of 10-15 percent growth you had guided at the start of the year in terms of revenues. Would you still hold to that guidance for revenue growth for FY14 or would you want to scale it down at this point in time?A: We thought we will reach a top-line of Rs 6,600 crore in the current year and as you rightly said it appears to be a tall order mainly because in 9 months we have done only Rs 4,300 crore which means in Q4 we have to do nearly Rs 2,300 crore of top-line which is definitely going to be difficult. We may end up at Rs 6,000 crore or Rs 6,200 crore for the year as a whole.Q: On the deal with Sembcorp, what is the current status of the deal right now? Is the money going to go to Gayatri Projects at this point of time, what is the status? If that is the construct of the deal then would we see any cash payments coming into NCC at all for that particular project?A: Some payments were expected to come, but the deal is yet to be signed by both the parties. At this point in time I will not be able to tell the contours of the deal. Once everything is in place we will be able to tell you how much money is actually going to come to NCC.

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