NCC Q2 Results: Net profit falls 41% despite higher execution as margins collapse

NCC's aggressive style of adding to its order book has led to a fall in its Earnings Before Interest, Taxes, Depreciation, and Amortization margins or operating margins.

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Construction firm NCC Ltd on November 9 posted a 41.3 percent fall in its consolidated net profit at Rs 77.34 crore for the quarter ended September 30, as a collapse of nearly 300 basis points in operating margins eroded benefits of higher execution during the quarter.

Revenue from operations jumped 40 percent to Rs 4,719.61 crore during the quarter as the company reaped the benefits of its record order wins witnessed in 2022-23, according to an exchange filing by NCC Ltd.

NCC received its best-ever order inflows of about Rs 26,000 crore in 2022-23 on the back of higher outlay by the government under the National Infrastructure Pipeline (NIP).

NCC had ended 2022-23 with an order book of Rs 50,244 crore, the benefits of which will be seen in the company's topline for the remainder of 2023-24.

NCC continued its streak of winning orders in Q2 2023-24, as the company bagged orders worth Rs 12,289 crore taking its total order book to Rs 61,796 crore as of September 30, 2023.

However, the company's aggressive style of adding to its order book has led to a fall in its Earnings Before Interest, Taxes, Depreciation, and Amortization margins or operating margins.

NCC's operating margins fell to 6.84 percent during the quarter that ended September 2023, from 9.98 percent, a 313 basis points fall on year.

More than 80 percent of NCC's order book is from government-funded projects (both Centre and state) while the rest is from the private sector.

During the quarter ended June 30, 2023, NCC reported Earnings Before Interest, Taxes, Depreciation, and Amortization of around Rs 409.21 crore and EBITDA margin of around 9.3 percent.

NCC Ltd is primarily engaged in construction of the industrial and commercial buildings, roads, bridges and flyovers. The infrastructure company also takes up housing, power transmission, irrigation and hydrothermal power projects. Outside India, the company has presence in Oman and the United Arab Emirates.