Infrastructure firm NCC on Thursday reported a huge jump in its consolidated net profit at Rs 51.98 crore for the quarter ended March 31, 2015. However, the company may not be able to repeat its stellar performance in the current year, says Y D Murthy, executive vice president- finance, NCC.Below is the transcript of YD Murthy’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: Another strong quarter for you. What led to this kind of growth and what is the outlook for the current financial year?
A: Actually we have gone for the rights issue and that has stabilised our working capital cycle quite nicely in the last six months and we are back to concentrating on growth and because the competitive has come down to some extent in the construction industry, we were able to bad substantial orders with better margins. Now, that is being reflected in our top-line as well as in our bottom-line. We have done about Rs 8,300 crore in our top-line for the year as a whole compared to Rs 6,200 crore in the previous year. The bulk of this turnover has come from the power vertical where we are executing engineering procurement and construction (EPC) contract for NCC power at Krishnapatnam in Nellore district of Andhra Pradesh.
Anuj: That is an interesting point you made about competitive intensity coming down and that aiding margins. You had 8.2 percent versus 5.5 percent and that is a bit of a positive surprise. Do you think the margins can settle at eight percent, higher than that over the next two or three quarters?
A: Yes, absolutely. In fact the other important positive for us is there is a margin expansion that has happened, both at earnings before interest, taxes, depreciation and amortization (EBITDA) level and profit level. At EBITDA level, March 2014, our net profit margin was 6.6 percent whereas for FY15, it is 7.8 percent, almost 1.2 percent increase compared to the previous year. But the improvement in the EBITDA margins is expected to continue and current financial year, FY16, we are targeting EBITDA margins of eight percent and above.
Ekta: Can you tell us what the order inflow has been in terms of fresh orders in Q4, in the entire FY15 and how much are you expecting in FY16 or how much of a visibility you have?
A: We have bagged about Rs 7,381 crore of fresh orders in FY15 year as a whole. Out of that fourth quarter is about Rs 2,000 crore. The order book is around Rs 19,320 crore at the end of the FY15. And mainly there is slightly dip in the order book mainly because of the strong execution that has happened, particularly in the power vertical. But that is not a cause for concern and we are confident in the current year also substantial order accretion is going to be there. We are yet to finalise our business plan. Our board is again meeting before the end of this month for finalising the business plan and also the order booking for the year as a whole. The clear picture will emerge after the board meeting.
Ekta: If you could just elaborate in terms of competitive intensity coming down. What do you mean by that? Why is competitive intensity coming down?
A: In fact if you go back to two to three years, there was a lot of aggressive bidding that was taking place, particularly the road sector for build-operate-transfer (BOT) road projects and also some of the other sectors for EPC contracts. And now many companies are having difficulties and so their ability to bid for projects have come down to some extent, number one. And number two and more importantly, some of these government agencies they are putting a condition that if the bidding companies in CDR – corporate debt restructuring, they will not be eligible for bidding. So, that is giving opportunities for companies like us, some of the front-line companies without any problems, we are able to take up the order and the orders are coming with better margins.
Anuj: An update on a couple of issues. One on your BOT road projects that you have put on block and on your real estate monetisation. How are things fairing n that front?
A: We re planning to monetise two BOT road assets that is Western UP Tollway and Bangalore Elevated Tollway, we are discussing with the potential investors. Western UP is looking good. Maybe we will be able to close the deal in the next six months time.
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