NCC Limited (500294) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to NCC Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Shah. Thank you, and over to you, sir.

Thank you, Tarun. On behalf of JM Financial, I welcome everybody to 1Q FY '27 Earnings Conference Call of NCC Limited. We have from the management today Shri R.S. Raju, Director of Projects; Shri Sanjay Pusarla, Executive Vice President, Finance and Accounts; and Shri Neerad Sharma, Head Strategy and Investor Relations. Now I hand over the call to the management for their opening remarks, post which we can begin with the Q&A session. Over to you, sir.

Thank you very much, Vaibhav. Good morning, everyone. This is Neerad. It gives me great pleasure to welcome you all to NCC's earnings call for the first quarter of the financial year '26-'27. At the very outset, I would like to thank each of you for joining this interactive session and for your continued interest and trust in NCC. I have with me my colleagues, Mr. R.S. Raju, Director, Projects; and our CFO, Mr. Sanjay Pusarla. Yesterday, we have announced our unaudited financial results for the first quarter of FY '27, which has been uploaded on our website and shared with the stock exchanges. We trust you have had the opportunity to review the financial statements and the investor presentation. Before we begin, I would like to draw your attention to a brief disclaimer with a request to study a detailed version from our investors presentation. This presentation may contain certain forward-looking statements concerning NCC's future business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from those indicated in such forward-looking statements. This interaction is broadly divided into 3 parts. In the first part, I will present a brief overview of the business environment, operational highlights and our outlook for the FY '27. In the second part, our CFO will cover the detailed financial performance for the first quarter of FY '27. In the third and last part, we will take up your questions. During the last quarter, the operating environment remained broadly stable and execution across our project portfolio gathered pace. Project progress across the sector continues to be influenced by fund allocation, client approvals, land availability, utility shifting and billing milestones. And our teams have remained focused on mitigating this through disciplined project execution and close engagement with our clients. Our underlying business fundamentals remain robust, supported by a diversified order book across 7 business divisions and established and proven project management framework. As of 30th June '26, our order book stands at INR 81,214 crore. During the quarter, we have booked new orders worth INR 3,889 crore, mainly from our Buildings and Water and Railways division. This order book provides us a book-to-bill of about 3.5x, giving healthy multiyear revenue visibility. If we take into account the projects bagged in the month of July, the total order inflow stands at INR 4,542 crore. In the first quarter of FY '27, the company has reported a turnover of INR 5,842 crore on a consol basis as against INR 5,208 crores in the corresponding quarter of the previous year, registering a growth of 12%. On a stand-alone basis, the number is same, about 12% growth over the last quarter of the previous year. The EBITDA margin for the quarter stands at 9.4% on a consol basis as against 8.8% in the corresponding quarter of the previous year. I am pleased to share our guidance for FY '27 with you. The order inflow for this financial year is a band, INR 22,000 crores to INR 25,000 crores. I repeat, INR 22,000 crores to INR 25,000 crores, revenue growth of 8% to 10% and EBITDA margin in the range of 8.5% to 9%. The broad components of this order book as of end of first quarter is, the Building division stands at INR 22,357 crores, which is about 28% of the total order book. The Transportation division has an order book of INR 16,344 crores, which is about 20% of our order book. The Electrical T&D stands at INR 13,312 crores, which is about 16% of the order book. The Mining division stands at INR 13,400 crores, representing 16% of the total order book. The Water and Railway divisions holds INR 10,994 crores, which is about 14% of the order book. The Irrigation division has INR 4,806 crores, which is about 6% of the order book. Now I hand over to my colleague, Mr. Sanjay Pusarla, with a request to share the detailed financial performance of the company for the last quarter.

Thank you, Neerad. This is Sanjay Pusarla, CFO from NCC Limited. Good morning, ladies and gentlemen. I'm pleased to announce the financial results for Q1 FY '27 of NCC Limited. Before I start the presentation, it is my pleasure to announce that the turnover in Q1 of FY '27 which is INR 4,912 crores is the highest Q1 turnover reported in the history of NCC. And as far as the consolidated turnover is concerned, we have reported INR 5,842 crores, this is also the highest turnover of NCC history. The earlier turnover, highest turnover was in stand-alone INR 4,747 crores, which was reported in Q1 of FY '25 at consol INR 5,558 crores in Q1 of FY '25. Now I'll take you through my presentation. My announcement will be in the order of order book, revenue, profitability, debt movement and some of the important balance sheet items. Coming to the order book. Our order book stands at INR 81,214 crores as at the end of June 30, 2026. You are aware the order book at the beginning of the year stands at INR 83,004 crores and orders received during this quarter is INR 3,889 crores. The order book contains stand-alone of INR 71,312 crores and from the subsidiaries INR 9,902 crores. Coming to the revenue at the stand-alone level. We have reported turnover of INR 4,952 crores in Q1 FY '27 against a turnover of INR 4,430 crores in corresponding quarter of the previous year, thereby an increase of 12% reported. Consolidated turnover, turnover reported in Q1 FY '27 is INR 5,842 crores as against a turnover of INR 5,208 crores in the correspond quarter of the previous year, thereby an increase of 12%. Coming to the profitability. At standalone level, we achieved EBITDA of 9.01% which is INR 442.45 crores as against 9.02% which is INR 394.82 crores for the corresponding quarter of the previous year. The PBT we achieved, 5.12% before exceptional items, this is INR 232.51 crores and PAT of 3.8% which is INR 187.31 crores in the current quarter as against PBT of 5.43% which is INR 240.69 crores and PAT of 4.29% which is INR 189.99 crores to the corresponding quarter of the previous year at consolidated level. We achieved EBITDA of INR 545.12 crores, which is 9.38% and PBT of INR 311.64 crores, which is 5.33%. This is before exceptional items. And PAT of INR 216.40 crores, which is 3.7% in the current quarter as against EBITDA of 8.81%, which is INR 456.12 crores, PBT of 5.15% which is INR 268.36 crores and PAT of 3.69% which is 192.14% (sic) [ INR 192.14 crore ] in the corresponding quarter of the previous year. We will move to the debt. At the stand-alone level, the debt at the beginning of the quarter stood at INR 2,251 crores and net debt after cash and cash equivalents, INR 1,667 crores. At the end of Q1 FY '27, the debt stands at INR 2,410 crores and net debt of INR 2,008 crores. And at the end of quarter 1 FY '26, that is the previous year's corresponding quarter, it is INR 1,852 crores and net debt of INR 1,497 crores. This shows an increase in debt by INR 159 crores in Q1 FY '27. The debt-to-equity ratio stands at 0.31 at the end of Q1 FY '27 as against 0.30 at the end of March '26. And corresponding quarter of the previous year, it was 0.24. At the consolidated level, the debt that stands at the beginning of the quarter is INR 3,457 crores and net debt after cash and cash equivalents is INR 2,815 crores. At the end of Q1 FY '27, it stands at INR 4,020 crores and net debt at INR 3,513 crores. And the same at the end of the first quarter of the previous year, INR 1,986 crores is the debt and net debt is INR 1,574 crores. Coming to the working capital, excluding cash and margin money deposits. At the end of Q1 '27, we stand at INR 5,334 crores, which is 27% of the turnover. In terms of working capital days, it is 95 days. At the beginning of this year, we were standing at INR 4,887 crores, which is 28%, and working capital days was 97 days. Let's get into the trade receivables. Outstanding at the end of Q1 has decreased from INR 3,336 crores to INR 3,055 crores. And the number of days also decreased from 73 days to 68 days in the current quarter. 77 days is the number in the corresponding quarter of the previous year. Unbilled revenue. This has increased from INR 6,068 crores -- INR 6,675 crores, which is 38% of revenue, to INR 7,414 crores, this is also 38% -- represents 38% of the revenue on annualized basis in Q1 FY '27. And INR 6,442 crores in the corresponding period of the previous year, which is 37%. Retention money. This stands at INR 2,396 crores at the end of this quarter as against INR 2,256 crores at the beginning of this quarter. Coming to the mobilization advances. These advances stands at INR 3,163 crores as on 30 June, 2026, as against INR 3,386 crores as on March '26. Of these mobilization advances, 60% are interest-bearing and the average interest rate comes to 9.1%. Interest-bearing advances decreased from 64% to 60% in this quarter. Cash and cash equivalents. We are at INR 402 crores at the end of June '26 as against INR 585 crores at the end of March '26. Margin money deposits and others, we were at INR 633 crores at the end of Q1 as against INR 631 crores at the end of March. So coming to the CapEx. We have incurred a CapEx of INR 170 crores in Q1 against the budgeted CapEx of INR 500 crores. And EPS stands at INR 2.98 at the end of Q1 FY '27 as against INR 3.03 at the end of Q1 FY '26, that is corresponding quarter of the previous year. Inventory, we are standing at INR 1,815 crores as against INR 1,787 crores at the end of March. Investment, we are at INR 867 crores, the same is the number at the end of March. Loans to group companies, we were at INR 290 crores as at the end of June as against INR 295 crores at the end of March. Coming to the Vizag Urban status. Vizag Urban status as at the end of June '26 is INR 271 crores as against INR 291 crores at the end of March '26. With this, I conclude my presentation on the financial numbers. I give it back to Mr. Neerad. Thank you.

We can start the question-and-answer session then.

[Operator Instructions] The first question comes from the line of Shravan Shah from Dolat Capital.

So a couple of questions. So first, I just wanted to understand directionally, so this quarter, let's say, we have done a 12% on the execution front and margin also kind of 9%, but we are looking at 8% to 10% earlier and margin also 8.5% to 9%. So does that mean that we are looking at a slightly lower growth and then margin also maybe slightly lower in the remaining 3 quarters?

Good morning, Mr. Shah. The healthy numbers speak, Mr. Shah. The first quarter has been good, sort of encouraging. But the environment continues to be a bit uncertain. It is difficult for us to assess for certainty that how the fund allocation and how things really pan out in the next coming quarters. So that is the reason we have done a detailed exercise and shared what we thought is possible for the next few quarters. So that is the reason this guidance, we have decided to share with the market participants like you.

Okay. So -- but internally, are we kind of seeing there is a possibility that this number, particularly on the growth front, given the order book that we have or maybe you can give us some color in terms of the entire INR 81,000 crores kind of order book is under execution or maybe how much still is yet to kind of pick up in execution. So to get a sense that what's the probability that this number, particularly on the growth front, revenue front can inch up to maybe a 15% plus kind of a number?

Yes. Let me answer this question a little differently, Mr. Shah. There are 2 critical elements to our performance. The first critical element is our ability to execute the projects. So there is not an iota of change in our capability, our ability to execute the projects. So this is something that is very much in place. The second critical element is the ability of the clients to provide the funds, make the funds available on time, give all the approvals, make all the ROWs possible. So the performance in any quarter of any financial year finally depends on this. So this is how things are expected to pan out. And in the next quarter also, as things progress, we would be very happy to come and share with you.

Okay. Great. Just a couple of things. First, I have seen in the annual report, there is one subsidiary, NCC Quantum Technologies Private Limited, where there is a INR 256 crores equity investment is there, which was INR 70 crores in FY '25. Can you help us what is this and what the subsidiary is likely to do?

Quantum Technology is the holding company for the smart meters. You are aware that we are executing 2 smart meter projects under 2 SPVs, is Ray and one is for Marathwada. Quantum Technology is the holding company for these smart meters.

Okay. Got it. And lastly, in terms of the trade payable is how much as on June? And the CapEx draw, INR 500 crores for this year, that number guidance remains the same?

Yes. Guidance remains same for the CapEx, INR 500 crores, whatever we have given. And for the trade payables, it was INR 7,071 crores as of the end of June '26.

The next question comes from the line of Ankita Shah from Elara Capital. The next question comes from the line of Aditya Sahu from HDFC Securities Limited.

I had a few queries. Firstly, on the JJM front, if you could help with the -- what -- how much would be the collection that we would have received in Q1? And what is the outstanding as of now?

The outstanding for the JJM as for June '26 is INR 1,043 crores, for the UP water projects. So in the case of ordinary execution. You are asking about collection in first quarter, right?

Quarter, yes, sir. Yes, sir.

In the first quarter we have collected about INR 110 crores. This is corresponding to the UP projects. If you ask me overall JJM projects, the overall JJM projects including the surface water and the groundwater the total is INR 2,771 crores is the UBR amount. The collected during the first quarter against this is INR 610 crores in the first quarter.

INR 610 crores. Understood. And, sir, what sort of receivable days are you looking at in terms of JJM projects over there?

We started getting this money. And in the month of July also, we have got a good money of about INR 413 crores from the JJM. We are expecting that this flow of money, release of payment should continue. And with that expectation, we are expecting to complete substantially the JJM projects in the current year.

Okay. So by the current year, we are expecting to close the JJM projects...

Substantially, we will close provided the money flow also continues like this.

Okay. One the -- just so on the -- two more questions on JJM that I had was, what would be the pending order book for the JJM and the balance sheet exposure? So if you can provide those 2 numbers for JJM part.

We have given you already the amount receivable, that is INR 2,771 crores. And as far as the order book is concerned, we have complete orders like for surface water and groundwater INR 5,881 crores as of the end of June '26.

Understood, sir. And overall, if I have to look at the overall bid pipeline, what would that be for us as of now?

Sorry, I couldn't get you. Can you repeat the question, please?

The bid pipeline, I was looking for what sort of bid pipeline, how is...

Neerad?

Yes. In the first quarter, we have shared this number, Mr. Sahu. The prospective pipeline of projects is about INR 2.5 lakh crore as of first quarter. We don't revise this number quarter-to-quarter, but this is the prospective bid pipeline we have.

Okay. Understood, sir. And just I think I'm just trying to understand on the commodity prices because I think commodity prices have increased. So any impact, if you would have seen, towards the payments and the execution? Like what is your view, I mean, on that front because of the increase in the commodity prices?

As far as the commodity prices are concerned, like regular commodities, steel, cement, we are not seeing any price increase. But the commodities which are related to the, linked to the petroleum products and aluminum and copper, we are looking at little price increase. And also the OFC cable, which we are using in our BharatNet projects. There also, we are seeing there is a price increase. But in the first quarter, whatever impact is -- whatever material we have used, that is in the turnover what is there in our hand. And the second quarter, we are expecting the prices to stabilize. If the prices are stabilizing, I hope that impact will not be there. Not much of impact will be there.

Understood, sir. So the price increase...

Sorry to interrupt, sir. May I request you to please rejoin the queue for any follow-up questions?

This is connected to that only. Just one question. So the price increase that you are seeing, how much are you able to pass on? That's all from my end.

So we have almost like 81% of the contracts have the price escalation. So whatever price increase is coming, it gets partially compensated with the price variation clauses that are existing in our contracts.

The next question comes from the line of Parvez Qazi from Nuvama Group.

Two questions from my side. First, in the smart meter projects, what is the pending equity from our side?

There is no pending equity from our side. Whatever money need to be invested in the smart meter project, that has been completed. We have invested about INR 460 crores as of the end of March. No further equity requirement is there at the moment.

Sure, sir. And second question, I mean, obviously over the last 2 quarters we have seen improvement in execution, also an improvement in payment cycle. So as things stand today, you would believe that today the payment cycle from state government projects is far better compared to, let's say, what it was at same time maybe last year. Would that be a fair assessment? And I'm not talking only about the JJM projects, but overall, I mean, what is your view on payment cycle now?

Firstly, Mr. Qazi, good morning. This is Neerad. We are executing projects in several states, not one and two. So it would -- it keeps changing from state to state. But I think it is not helpful to go into each of the -- each states individually. So by and large, we could say that things seem to be improving. But we have a lot of states, the state governments will have a lot of different kind of projects, which are managed by different arms of the government. So it is not that you could just one size fits all. In the same state, there could be some problem in some projects in the same -- the other projects in the same state might be getting paid fast. So this is a very nuanced kind of situation. And we keep monitoring on almost on daily basis and accordingly make progress.

The next question comes from the line of Vishal Periwal from PL Capital.

I have two questions. First, in terms of order book breakup, can you provide this into state, private and center? And second is in order book that we have, are there any slow-moving order? Or I mean, have you received mobilization advance for all of them? Any color that you can provide will be helpful.

Generally, in our order book, what we do is that if there is a any slow-moving order or maybe a nonmoving order, we don't consider them. We generally remove it from that, okay? And what is the other question?

The breakup of the state government, central government and private sectors.

I'll just give it. Yes. The central government orders constitute about 14% and state government orders constitute about 19%. PSUs and state government entities, this -- they were about 60% and ADB, AIIB and banks, it is about 5%. And from the private clients, we started taking orders, which constitute about 4%.

Okay. Okay. And maybe one -- just a follow-up. I think you mentioned slow-moving orders, we generally remove it. But I think a couple of quarters back, there were certain orders, say, JJM and maybe like in Maharashtra. So is that fair to understand? I mean there is no such order which is part of the order book and probably everything we are executing. Maybe it appears to be...

The entire INR 81,000 crores of orders are up and running now. All are executable orders, yes.

The next question comes from the line of Vaibhav Shah from JM Financial.

Sir, you mentioned that the order book for JJM is roughly INR 1,500 crores. So of that, would be of longer-term nature. So there will be an O&M component as well?

It doesn't have any O&M component. It doesn't constitute any O&M component. What I told you is that in the order book, INR 3,524 crores is only the groundwater. If you take the surface water, it is INR 2,358 crores. The total order book as of the end of June is INR 5,881 crores.

Sir, if the payments are on time, so this entire backlog can be executed in next 12 months?

Substantially, it can be completed.

Okay. Okay. Sir, secondly, on the Vizag side, how much receivables are we expecting to recover in this year of the INR 271 crores?

It is by December '26.

The entire amount?

Yes, supposed to come by entire amount by December '26.

Okay. Sir, how do you see the debt number moving by March '27 from INR 2,400 crores?

Maybe it is flat. Or it may come down also depending on the collections what we are expecting from the JJM.

So you mean flat on a Y-o-Y basis?

Sorry?

So flat number on a Y-o-Y basis by March '27. So it was INR 2,215 crores last year. So similar number in FY '27 as well, March '27?

Yes, more or less it will be the same number.

It would depend on the collections that we get to see. It would be a function of that.

Okay. Okay. And sir, lastly, what would be the AP Capital City receivables right now?

One second.

I remember it was around INR 150-odd crores last year.

In the AP Capital -- old projects, the Capital City old projects, okay, which was there at the end of March '26 is about INR 142 crores. So we are expecting that the entire money to be realized in this quarter or maybe early next quarter.

The next question comes from the line of Abhishek Maheshwari from SkyRidge Fund Managers.

Sir, just one. Wanted to talk about your unbilled revenues. The amount has kept ballooning year-over-year and it's growing faster than your revenue rate. So is it that the flow of unbilled revenue to revenues is lower than what you would ideally like it to be?

Because this unbilled revenue also out of the INR 7,414 crores, about INR 780 crores to INR 800 crores that has been certified in first week of July. So that has come down to that extent. And given the contracts nowadays, the contracts are based on the milestones. That is the reason there is a little bit of increase in the unbilled revenue. But we are expecting that the unbilled revenue should get smoothened over the next quarters because the BSNL billing also will start where we are executing for BharatNet, the billing also will start. It will get converted from unbilled revenue to revenue. This is what we are expecting. Over the next 2 quarters, it should smoothen.

So just a follow-up. So next 2 quarters, the revenues might be a little lumpy in terms of growth. It will not be consistent because a lot of unbilled revenues you have. As and when milestones keep getting hit, the revenues will keep getting recognized. Am I correct in assuming that?

No, no, because unbilled revenue is already treated as revenue. Whenever the unbilled revenue converts into certification, what will happen, unbilled revenue will come down, your certified revenue will go up. So it will not change the revenue numbers.

It will change the datas.

Yes.

The next question comes from the line of Krish Bhatia from Anand Rathi.

So my first question was on the Ken-Betwa project. There have been protest around land acquisition compensation and rehabilitation and there were reports of work at the Daudhan Dam site being disrupted. So given that NCC is executing that package, could you update us on the current execution status? And have these issues affected site availability, execution? Or do you see any risk to project time line?

Yes, Mr. Bhatia, good morning. Firstly, this is the first interlinking of river project that has been taken up in India. This is the very first project. And we are fortunate to bag this project. And I'm happy to report that we are making reasonably good progress on this report. Yes, we have seen all these media reports, and we understand that the local administration is in touch with the agitators and the issues are slowly getting resolved.

Okay. So contractually, site handover execution gets delayed because of land acquisition or rehabilitation issues. And would you be...

We are making good progress -- yes, Mr. Bhatia, as I shared with you, we are making reasonably good progress. And this site that has been widely reported in the media is about 20, 30 kilometers from our actual site. So there is no great impact as such. And this is an issue between the local administration and the agitating population, and we hope the issue is slowly getting resolved.

The next question comes from the line of Parikshit Kandpal from HDFC Securities.

Sir, my first question is on the debt numbers. So your -- if I see Y-o-Y, your debt was INR 1,500 crores stand-alone net debt, and consolidated net debt was INR 1,600 crores. And now in Q1, it has gone up to INR 2,000 crores and INR 3,500 crores. So a substantial jump in consolidated debt. So what is -- can you please explain that what is the increase there, the increase?

The increase is mainly on account of fresh debt we have taken in the smart meters. About INR 400 crores, INR 370 crores, we have taken debt on smart meters. So the reason for increase is only that. And also we are taking some equipment at the holdco level, the CapEx requirements are there. So about INR 160 crores, INR 170 crores for CapEx requirement also we have used some of the loans.

So the increase Y-o-Y is about INR 1,900 crores. So that is the reason I was asking. [Indiscernible] has gone up on -- closer to INR 3,500 crores.

INR 1,900 crores when you compare it with June '25?

Yes, yes, June '25. So from...

Yes. If you ask me from June '25, if you ask me the loan which we have drawn for our smart meter projects is about INR 1,350 crores.

INR 1,350 crores standalone?