NBCC (India) Limited (534309) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the NBCC (India) Limited Q2 FY '22 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rahul Modi from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you, Janice. Good afternoon, everybody. Thank you for joining us for the Q2 FY '22 Post Results Conference Call of NBCC (India) Limited. On behalf of ICICI Securities, we would like to welcome the NBCC India senior management led by Mr. P. K. Gupta, Chairman and Managing Director. Thank you, sir, for sparing your time. From the management, along with CMD, we have Mrs. B.K. Sokhey, Director of Finance; Mr. Rajendra Chaudhari, Senior Executive Director, Engineering; Mr. Pawan Kumar, Executive Director, Engineering; and Mr. Pradeep Sharma, Chief General Manager, Engineering. I would like to hand over the floor to Mr. Gupta for his initial remarks, post which we can have a Q&A session. Thank you, and over to you, sir.

A very good afternoon to all the shareholders present here and warm welcome to this investor conference for the second quarter results of NBCC. All of you might have seen the results already. So results are fairly encouraging, and I'm happy to announce again that there is an increase in turnover by 30% on a quarter-to-quarter basis. And on a half yearly basis to half yearly basis, it's 55%, though there was a spell of corona in this year also, similar to last year. And profit after tax, there is a major jump. On quarter-to-quarter basis, it is more than 90% increase. And on a half year-to-half year basis, it's 120% increase. So all these results are encouraging, and we have 2 very encouraging major developments. One of them is that we bid the highest port order till now in the history of the company. That is about INR 1,000 crore social housing project in the country of Maldives through Exim Bank on buyer's credit basis. All the formalities of this project has been completed. We have signed the agreement. We also signed the loan agreement. We have given the bank guarantee for the advance, and we are expecting the advance at any moment. We have also floated the tender for this work, and tenders will be opened during the month of December. And very quickly, we will finalize and start the work. The completion period officially is 30 months, but we have cut the completion period [ over ] 2 months, so that we have a grace period of 6 months in our time. So this is a remarkable achievement for the company, and I hope the work will be completed even time. Total business development till now in this year is around INR 4,100 crores. And major business out of that is -- one is this Maldives, which I have already told. And another is NIT Patna costing more than INR 500 crores: then additional work in National Sports University, Imphal for INR 400 crores; construction of FCIL building at Noida, INR 65 crores; and a new sector we have opened, that is hydropower. For Odisha Hydropower Corporation, we have bagged an order of INR 206 crores. So these are the major business development ventures in this year. We have got one medical college work in Knanpur Kalan, Sonepat, Haryana for INR 285 crores. Another sector that we are opening is the independent engineered services for international airports, which are being done through private sector participation. So we have bagged one work of independent engineered services for development of Jaipur International Airport. It's a purely consultancy contract, but cost of our fees will be around INR 12 crores. But there is a good margin and very good future business because a large number of airports in the country, probably around 100, they will be privatized or constructed through PPP. And all of them will require independent engineered services. And we have a good chance of getting business in this area. So this is all about business development. We are already over the second wave of corona, and all our works have started in full swing. Our major flagship project is Amrapali, which is costing around INR 8,000 crores. And we have to give around 46,000 houses to the homebuyers, out of which 8,000 were already constructed and 36,000 houses have to be constructed. These were at different stages. Most of them are the new ones. So the major achievement in this project is that we have been able to sign an agreement with SBICAP for getting INR 650 crore through SWAMIH fund. And the first installment of this fund is already with us. We have been able to pay to the contractors, if there were approved, pending payment that we have been able to pay to the contract. And this SBICAP funding is for 6 projects of Amrapali. For balance, 16 projects, we are tying up with the bank, and 3 banks have already given their positive indication. And Supreme Court, in fact, directed 6 banks to provide funding for Amrapali. So out of the -- we have given their positive indication. And balance, they are also likely to give their positive indication process. And after that, we'll be getting this money. So there was a shortage of funds for some time in Amrapali that we are likely to get over. The funds from home buyers are coming to the extent of around INR 100 crores per month. And just before Diwali, we have been able to hand over some flats to the homebuyer. And that has been a very big relief for them. We organized a ceremony in which the Honorable Court Receiver handed over the flats to the homebuyers. We are awarded the tender for around INR 1,800 crores in this year, and tender worth INR 3,000 crores there in pipelines and will be awarded by end of December. So on that front also, we are progressing mostly. So our future vision is that we want to go in a big way in our international business. So we are, in fact, with the several countries and on course to get to orders internationally. Another very big event during the second quarter was the inauguration of India Pavilion in Dubai Expo at Dubai by our Honorable Commerce Minister. This project has been constructed by NBCC and upgraded by [indiscernible]. And there's been a lot of proud teams at the Dubai Expo. Regarding the future business development work, we have submitted an offer to agricultural department for redevelopment of properties in Delhi, 2 properties there, around 25 acres space. So the redevelopment is planned. They invited the open tender, in fact. So we were the only bidder. We have submitted the bid, and we are likely to get order because since we are the only bidder. And [indiscernible] is going on with our ministry for redevelopment of their printing presses at 4 locations, so at Nashik, Kolkata, Mayapuri in Delhi and [indiscernible], modernization and demonetization of printing press. So this order will be worth around INR 1,200 crores. It is also, we are likely to get the order. Another order in the pipeline is the government project, for which the space has already been handed to Government of India. And that order also, we are expecting shortly. Now I'll hand over the mic to my Director of Finance, who will give further details of the results.

And good afternoon to all the investors and the analysts who are attending this conference call and very warm welcome to all of you. As the CMD has already briefed you about the results part, I would like to inform you, yes, that NBCC is able to achieve the good margin. One of the main reasons is that we have been able to realize our very old outstanding deals, because of which, now the ECL, which is expected credit loss, provision with the company was creating continuously is now getting reversed back. So now the results are -- we are getting the results of those efforts, which have been made for the last 1.5 years. And we are further expecting the good realization from our other clients also. And then on the other part, yes, there are 2 disclosures, which we have made this time. We have carried out the adjustment with regard to our one-off projects at IIT Kharagpur, because of which there is only a marginal dip of INR 1.50 crores in our margin. And that was only done in order to correct our books of the accounts. And there is no impact -- there is no other impact in the books of the account. And one -- we note -- as an account of the -- our projects regarding the 37D has also been given by the management in a very transparent manner, for which the decision will be taken in the coming quarters or by the -- by this year -- annual year-end. So with that, I would like to hand over now for the questions and answers from your side, please.

[Operator Instructions] The first question is from the line of Rohit from Antique Stockbroking.

Sir, my first question is on that -- now that you have concluded your first half, does your guidance of INR 7,000 crore execution remain intact? Do we see that kind of momentum picking up?

Momentum has picked up. But since substantial time was lost in corona and then during rainy season, there was a slowdown, Rohit. But the momentum has picked up. We are expecting a turnover of INR 6,000 crores.

Okay. Stand-alone numbers, you are expecting INR 6,000 crore execution. Sir, in terms of the works awarded, the last, we were given to understand, we had close to INR 18,000 crore of work awarded to the contractors. What is that position looking like? Sir, if you could bifurcate both the cost-plus model and redevelopment project, what is the work totally awarded to the contractors?

Total INR 1,800 crore worth of contracts have been awarded [indiscernible] INR 1,800 crores. [indiscernible] contracts have been awarded?

I'm counting about, sir, also the INR 62,000 crore order backlog. What is the total awarded works to the contractors?

Ongoing work is around INR 18,000 crores. Ongoing work is around INR 18,000 crores.

Okay. Of which -- how much of that is redevelopment and how much is cost plus?

Redevelopment is around INR 5,000 crores, and the rest is [ CMP ].

Okay. And how -- what is this number likely to go up like by the end of this year?

By the end of this year, we are planning to award another INR 5,000 crore worth of work.

Okay. Okay. Sir, in terms of redevelopment projects, what is the monetization looking like? How much is the total monetization process till date you have done? Hello?

Monetization in our Nauroji Nagar property, the monetization has been a little low. And we have been -- till now, we have been able to sell around INR 3,700 crore worth of property in Nauroji Nagar. But this year, the property sold is only INR 62 crores. And in our -- we have one redevelopment project of Gomti Nagar railway station. There, we have been able to sell property worth [ INR 282 crores ].

Okay. Sir, in terms of execution, are we completely normalized? Or are we still creating some sort of a labor availability or some sort of executive challenges?

We are normalized. Now we are normalized.

So the peak labor requirement is like, what, 60,000 laborers. Now that is -- what level will [ you pursue ]?

We need around 60,000 -- 55,000 to 60,000 laborers.

Okay. Sir, then my question comes to the seed money part. You have invested INR 1,100 crores of seed money, which earns you INR 132 crore of interest. There is a good amount of number which wasn't realized. I think the cash wasn't coming through. This was more like an accounting [indiscernible].

We have realized the interest, what, INR 180 crores from that basis. That has already come to our account in installments of INR 60 crores. We have got that money.

Okay. And so how much -- what is the total quantum of outstanding amount which is still like an accounting number [indiscernible]?

We have invested the INR 900 crore worth of seed money in Nauroji Nagar project. And total interest outstanding was INR 230 crores, out of which we already received INR 180 crores. And only INR 50 crore worth of interest is pending [ in that way ].

Okay. Okay. Sure, sir. Sir, finally, if I may have a touch upon the Amrapali project. We are given to understand this is a INR 8,500 crore project, okay?

Around [ basis ].

Yes. So the funding, I'm given to understand, there is an unsold inventory, which will earn you INR 2,600 crores, which should be the same to be done by the [ FCCI ]. What is the progress over there?

I'm told inventory is INR 4,000 crores. And we have -- earlier, that was what was given to MSTC. But later on, Supreme Court, when MSTC could not do it, the work for sale was given to NBCC. We have already started selling that inventory, and we have appointed general partner for this one. [indiscernible] has been appointed as general partner, and they have started their advertisement and other activities. Two properties have already been sold directly by NBCC. So now the sale will pick up. And again, we also have been able to sell one FAR of INR 43 crores in Princely Estate in Noida.

And sir, of this INR 4,000 crore [ undetached ] amount, what is the total realization till date?

No. Sorry, this INR 4,000 crores has to come from the old inventory from homebuyers. Unsold inventory is INR 2,000 crores. Unsold inventory is INR 2,000 crores. Also, that, I think, about INR 100 crore worth of property we have been able to sell. But now with the appointment of general partner, sales has picked up.

Okay. Okay. So INR 4,000 crores plus INR 2,000 crores, 6,000 crores, we have got, maybe what, INR 200 crores, INR 300 crores, what we realized now?

No. We have -- out of this INR 4,000 crore worth of old property, we have received around INR 1,100 crores.

The next question is from the line of Ravi Naredi from Naredi Investment.

Sir, I have due regards to all of you, the management. But since last 8 years, I am the shareholder of the company. And what I am observing, I'm telling you, sir, you have huge order base book by, I think, last 7 to 10 years, when we became -- I became your shareholder. We always listen, we are doing fine, and we will do more projects in coming months or quarter. But it never happened so far. We knew education part is also not on your company part. But sir, can you tell whatever order book we are having of INR 80,000 crores, INR 70,000 crores? How many years it will take to complete the projects?

I'll tell you the reason. Because most of that order book is redevelopment projects, and redevelopment projects are depending upon the sale of the property, which is mainly commercial. And essentially, due to these 2 waves of corona, sale of property -- commercial property has gone down like anything because we work from home. It's somewhat offered by government sector and private sector lending. That is one major reason for low growth of sale of commercial property. And future tendering and future execution of redevelopment projects, that depends upon the sale of commercial inventory. To tide over this problem, now we have decided to sell residential property also in our 7 GPRA projects. We have reprocessed the case for the accrual of the government, that is the senior officers of the government. And because there is a good demand of residential property in this [indiscernible] area, which is touching the [indiscernible] and Gomti Nagar area. Commercial property demand is a little less due to work-from-home culture. So we have decided to sell past residential property by cutting down the number of the government recommendation that is to be going to government employees. So once that approval comes, we are likely to get better sales and increase the speed of execution of [indiscernible].

Yes. Can we know how much -- whatever our project order book, how much in redevelopment and how much in the clear project?

Around INR 32,000 crores versus in redevelopment sector. Around INR 40,000 crores is in redevelopment sector.

And the remaining? The remaining INR 30,000 crore order is there or INR 40,000 crore -- the total, INR 80,000 crores?

INR 40,000 crores, redevelopment sector and around INR 22,000 crores in PMC.

INR 22,000 crores, PMC. Sir, with the result of the quarterly, can you give the investor presentation so we can know more about the company? Why not you bring your conference results to the company culture? My point is that.

We'll upload the investors presentation on the website.

But you must upload before the conf call so we can see the investor presentation and we can ask questions according to the account. Why not you do this? Every company is doing. You are not extraordinary people. So why not you download the investor presentation before conf call?

We'll do it from the next quarter, sir.

[Operator Instructions] The next question is from the line of Parvez Qazi from Edelweiss Securities.

I'm sorry, I joined the call a little late, so pardon me if this question has been already answered. But what would be our consolidated order book? You said INR 62,000 crores is the stand-alone order book. So what will be the consolidated order book? redevelopment projects out of this?

Consolidated order book is INR 72,000 crores.

And how much will be redevelopment projects out of this?

INR 40,000 crores redevelopment projects are being done only by NBCC. Our subsidiaries are not doing redevelopment projects.

So in the current fiscal, which is the first half of FY '22, how many projects would we have awarded to contractors?

Pardon me, can you repeat the question?

So in the first half or in the first 6 months of this fiscal, how many contracts would we have awarded to the contractors at the consolidated level?

Consolidated, it's INR 2,800 crores.

INR 2,800 crores, okay. And we are saying we'll target another INR 5,000 crores award in the second half of the year. And lastly, what would be our guidance at a consolidated level in terms of revenue and EBITDA margin for the current FY '22?

It should be around INR 8,500 crores.

And EBITDA margin?

2% to 3%.

The next question is from the line of Anshuman Ashit from ICICI Securities.

Sir, just continuing on the last question. Could you please give us the revenue and EBITDA margin guidance for FY '23 as well?

Sorry, repeat your question.

The revenue and EBITDA margin guidance for FY '23.

Consolidated net sales, we'll plan for INR 10,000 crores. EBITDA margin will remain broadly 2% to 3% only.

Okay. And sir, in your initial remarks, you had mentioned about the hydropower project in Odisha. So could you please provide some more details about the project and whether there has been any financial closure and all, some more color on the project?

Yes. We have the PSU for state of Odisha, Odisha Hydropower Corporation. For this year, we have got this project. The financial closure is already done, and we have floated that tender for consultancy work for this project. That will be opened shortly. After that, we will close that tender for consulting. Financial closure, we've already done. MOU is already signed.

Okay. And sir, the margin expectation from this project?

It's about 6%.

6%. And sir, will we be interested in other energy sector projects as well like solar EPC and -- apart from hydropower going forward?

No. EPC, we are doing for a thermal -- one project for thermal power. For TSGENCO, we are doing in Yadadri already. That is worth of INR 500 crores.

Okay. But solar projects, we are not thinking about right now?

Solar projects, we are not.

Okay. And sir, in the recently announced Gati Shakti scheme, so are there any opportunities for us in that scheme?

Gati Shakti scheme is basically for transport sector. We are not into transport sector.