NCC Limited analyst Q&A

First question is from Shravan Shah from Dolat Capital.

Congratulations on another robust quarter. Sir, before asking a question, it's a humble request. If you can assign someone else to speak for the opening remarks because your voice is not clear. We have missed so many numbers. So that's the humble request if it can be done. My first question is in terms of the now for the 9 months, we have seen a 38% kind of revenue growth. So when we were looking at 20%. So obviously, the numbers will be on the higher side. So if you can help us for the fourth quarter or maybe full year how much we are looking at? And at the same time, on the order inflow, if you can re-announce or re-state in terms of the Q1 order and that you have received and is it at the stand-alone level or at the consol level?

Okay. As far as this revenue is concerned, in the first 9 months period, we achieved about 35% growth over the previous year. Now for the fourth quarter also, we expect a growth of 25% to 30%. But year as a whole around 32%, 33% growth at this moment are there. As far as order inflow is concerned, already, we have provided details for the 9 months. And for the fourth quarter, we have on hand the L1 order about INR4,000 crores. And just today, we received 1 LOA about INR1,250 crores. So both put together INR4,000 crores, plus INR1,250 crores put together INR5,250 crores. So once we -- these LOAs materialize -- 80% to 90% of the LOAs, we expect to materialize by before March. So thereby, the INR26,000 crores figure we touch, those are the circumstances. And in these orders, there are no any SPV orders -- SPV order on a stand-alone basis. Only 1 order is there, that is INR2,500 crores, we got under the joint venture. 50% related to the NCC, that is INR1,250 crores. And I think no need to create any SPV. As such, there is no any subsidiary company orders we explained in the INR5,000 crores.

Yes. That is in next 20 days, next 20 days, all the divisional-wise senior management people sitting to work out the SPV program, SPV, understanding the elections impact in various states and also understanding the -- what the orders available in the market. So basing on that, we will arrive about -- next year's targeted order book.

Okay. Okay. And on the margin, it will be on the 10% plus kind of a margin that will continue at EBITDA level for the next year also? Or will there a chance for an improvement?

But now for the fourth quarter, we expect to continue these margins. And sometimes 10 base points also increase may happen in this fourth quarter. But for the next year, also, the same margins or some improvement we expect, but not be lower than these margins.

Okay. And the request, if you can repeat all the balance sheet numbers, sir, inventory, trade receivables, trade payable, mobilization advance, retention money, unbilled revenue, investment in the group exposure because we were not able to understand the numbers spoken by you. So that's my request.

Okay. In brief, I will tell you the numbers. Now if you take the property, plant and equipment, the INR1,162 crores; investment property, INR212 crores; investments, INR875 crores. There is no change in the mix or combination of the investments in various companies. And inventory is INR1,460 crores; and trade receivables, INR3,122 crores; retention money, INR1,423 crores; unbilled revenue, INR3,953 crores. Mobilization advance is INR2,907 crores. There is a decline from INR2,755 crores -- no, no, there's decline from the previous quarter figure of INR3,224 crores to INR2,907 crores. So these are the balance sheet numbers. Do you want any other numbers on the balance sheet?

Trade payable, sir. Trade payable.

INR4,442 crores.

Next question is from Deepak Poddar from Sapphire Capital.

So first up, I missed the point on the debt side. So what did you mention? So what's the outlook on the debt for this year as well as the next year?

Yes. As far debt is concerned, now standing as on 31 December '23, that is third quarter ended, is INR1,,473 crores. And second quarter end, you know that same level is there. Now by fourth quarter end, that is this year-end, we expect this figure around, again, INR1,300 crores to INR1,500 crores this year.

How much

INR1,500 crores.

One second, please.

It's a ballpark number. It's an estimate at this point of time.

Yes, yes. So INR1,500 crores is what we expect, right?

Yes. For the next year, you know that some new projects, large-sized projects we've taken up. There -- for those projects, the equity investment, which required to increase by NCCL, we estimated to invest next year is about to INR100 crores or less, not beyond INR100 crores. As per debt is concerned for these 2 SPV part, we have tied up with the -- tying up with the investment bankers or financial institutions, and there won't be any debt outflow from the NCC into these SPV companies. And as far as power project is concerned, further debt tie-up is being made. As a result, there won't be any much significant debt except for INR50 crores to INR100 crores for the next year. So as a result, on account of these big projects, SPVs, there won't be any cash outflow from the NCCL in the coming year in a significant manner, except INR100 crores to INR200 crores. So as a result, we expect the debt still would be there below INR1,000 crores or so, possibilities are below INR1,000 crores bearing any exceptional items for those further.

Okay. So what I understood is FY '25, we are targeting our debt to be less than INR1,000 crores, right?

Yes.

Okay. Okay. Understood. And that is driven by, I mean, lesser investment in SPVs and minimal capex that might be required, right? And the cash flows that you are getting will kind of help in reducing your debt, correct?

Yes.

Fair enough. And for the next year, FY '25, I mean, what can be the growth range we can look at? I mean, is there any kind of range that you can indicate for

This, we will able to tell you after the budget approved by the Board of -- the Board in the next Board meeting.

Okay. So that's in 20 days after the fourth quarter, you're saying?

After fourth -- not after four quarter or along with the fourth quarter.

In the May, when we announce the results, we will...

Next question is from Pranav Furia from Antique Stock Broking.

Thank you for the opportunity and congratulations, sir, on the good set of numbers. My question is from the order book, how much is executable in the next, say, 2 to 3 years?

He is asking out of the total order book, how much in next 2 to 3 years?

Now about for the next year how much we execute, that figure we will get in the couple of days. And if you ask us in general question, 80% to 85% is executable in the next 2 to 3 years - - in 3 years.

Next question is from Parvez Qazi from Nuvama Group.

Congratulations for a great set of numbers. I'm sorry if you've mentioned these numbers earlier. I just wanted the total borrowings and the cash at the stand-alone level?

What figure we've given is on a stand-alone level and without considering the cash balances.

Today, as on date, the borrowings is INR1,473 crores.

After considering the cash balances.

If you take the cash equivalents, it is around INR1,370 crores.

Next question is from Parikshit Kandpal from HDFC Securities.

Sir, my first question is on this equity, you were talking about what are these SPVs you are investing in equity and I couldn't understand that.

No clarity on the equity investment in the SPVs.

Now -- you want more clarity on the investment by NCC into the smart meter SPVs?

So how much is the investment in smart meter SPVs? You said INR100 crores or so I missed that number?

The investment would be INR100 crores to INR150 crores in the smart meter SPVs by NCC. That is also takes place in 2 years' time, need not be at a time.

Okay. So INR100 crores to INR150 crores on NCC stand-alone, we put the investment in the smart metering SPV over.

That's it.

And you said that you will dilute some stake at the premium of INR8. So what is that? Total requirement was how much only?

Total requirement.

You was talking about some premium, right, INR8 premium, you will dilute.

Yes, yes. Now the requirement to -- for the 2 projects relating to the SPVs is basing on the primary estimation is about INR400 crores equity requirement. Out of which 50% NCC proposed to offload and 50%, it wants to invest. Out of 50%, again, some premium also NCC is expecting. So about INR100 crores or so we may get in terms of premium also. So INR300 crores coming from outsiders, another INR100 crores only required to invest by the NCC, which may -- maybe in 2 years or 3 years.

Okay. Got it, sir. And both these SPVs are the smart metering SPVs?

Yes, both are smart meter SPVs. And actually, we got 3 projects, 2 are on the SPVs, and 1 project is executed by NCC directly.

And are these -- EPC value of these contracts part of the order book and projects EPC part?

EPC part is taken in NCC order book.

Okay. It's already Just on the -- second question was on this Dubai real estate, what's the status there? What is the total exposure as of now? And is there any proof of monetizing or receiving that monies in the near future? Sir, what is the total exposure on the Dubai now on the landing sheet for the real estate project? And how do we intend to resolve or get that money? What could be the time period of receiving those monies?

Which project?

Dubai real estate.

Dubai real estate, Harmony.

The Dubai Harmony project, in fact, now the project, we are re-examining it, and we have already appointed some consultants that are taking up with RERA in Dubai. Likely that the project will become live, and there are some investors who are showing some interest. Probably in a couple of months, we'll be getting back the project into our hold. And new investors who are interested, they will be joining us in this project.

The exposure of NCC as on maybe is about INR220 crores on the project.

And what could be the realizable value after you launch? So potentially how much cash flow can this project generate for this?

It is very early to tell about that. But one thing is sure that there is good development in Dubai market also. People were now showing a lot of and a lot of interest.

Basing on the terms what we entered earlier, the share of the dollar per area 2 year supposed to get is much more INR220 crores.

Okay. Because I understand earlier we used to have exposure of about INR600 crores on this project. So you said you sold a part of that project. That's why it's come down to INR220 crores? Okay. I'll take this offline.

And sorry, I think I have to take a few numbers again. One is the total equity investment in smart meter, you mentioned -- one, you mentioned INR100 crores to INR150 crores. And then there is one more where we'll be diluting something and INR300 crores incremental. So can you just clarify like what is the total requirement that we've been doing in FY '25?

Total requirement in FY '25. So the total equity infusion will be made by NCCL is around INR100 crores to INR150 crores in a period of 3 years. And in the first year, that is FY '25, it may be there about INR50 crores to some INR70 crores or INR80 crores.

Okay. And then there's one more thing you mentioned like where will be diluting something and then probably incremental requirement is INR300-odd crores. What exactly is that?

Repeat me, repeat me.

Yes. No, no -- so basically, you mentioned on smart meter INR100 crores to INR150 crores one number. And then you mentioned one more number of INR400 crores to INR500-odd crores.

That is -- total equity requirement is INR400 crores. And also, we -- when you -- when we consider Bihar, another INR120 crores when we decide, say, a different model. So since the Bihar is at this moment under NCCL, only it requires in the form of some working capital infusion them from the NCCL and it is not an equity or not a debt, number one. Number two, for these 2 projects, INR400 crores equity requirement is there. Out of INR400 crores, NCC is proposed to offload 50%, that is INR200 crores to the outsiders. So that also, we expect some premium. So if the premium is received, so that in place of INR200 crores, INR300 crores infusion will be happened from the outsiders, which ultimately reduce the equity increase the requirement of NCCL from INR200 crores to INR100 crores.

Okay. And in the subsidiary one, which you mentioned, when the investors will come, so how the phasing is expected in terms of equity investments?

What is that?

It is already shared, 50%-50%?

No, no. So is it like -- I mean, FY '25, what is the investment in this subsidiary and then '26 or anything number that you have?

FY '25, that subsidiary company's requirement you're asking, or...

Yes, sir. Yes, sir.

Out of INR400 crores, about 50% to 60%, 70% requirement will be there in the first year and balance takes place in the second year.

No. If I explained to you very clearly that out of this INR500 crores, 50% we are trying to offload. Okay, new investors are going to come in. Out of this INR200 crores also, probably we'll be getting some premium on the -- from the investor that will reduce my equity component outflow to INR100 crores. That's what it is explained.

Okay. Yes, sorry. Thanks for that. And can you also explain what is the nature of...

Mr. Periwal, I'm really sorry to interrupt, but maybe request you to rejoin the queue as there are several participants waiting their turn. Thank you. The next question is from Saurav Gujral from ICICI Prudential Asset Management.

Just on the smart metering part, are you open to more of such orders in terms of smart metering? And does the arrangement which you talked about in terms of raising money in the SPV level so that we don't have to lever our balance sheet. Is it an arrangement we are entering into with some or something or taking more orders?

You have asked two questions. First question was about whether we are interested or keen to get more projects, right?

Yes, on the smart metering fund.

We expect a lot of fresh new projects to come off or bidding. So we will really evaluate all these projects whenever they come off for bidding. So we have to really assess the risk, what kind of funding commitment is required, and there is a learning curve. We have already taken 3 projects. So we will decide on case-to-case basis.

on the balance sheet exposure or the equity investment, similar type of arrangement we will be looking at where we have to invest less and just focus on the execution of the EPC part?

Yes, yes. All the options are open, so this project has got very good visibility. So when we -- the equity portion we have already explained in several questions that we have answered. The - - as far as debt is concerned, we are already in advanced stage of discussion with the SBI Caps and SBI. They are willing to take the whole exposure of the book. So debt is not a problem. Equity, we have already explained to you how do we intend to move forward for the equity investment.

And in fact, we have mobilization advance also in this quarter.

Correct.

So that is also flowing in.

Okay. Just second question is on the recent announcements like we had this NHAI claim amount last quarter. Any update by when we are expecting that, along with the update on this Vizag land deal?

Two things you were asking. One is on the NHAI claim. We have already received the money in our SPV and the documentation is in progress. And out of the money received also, partly, we have received some money, yes. And as regards to Vizag Urban, already Mr. Raju has explained. But I would like to reiterate out of INR152 crores investment, INR52 crores they have already received in the current quarter and expect that next 2 instalments, which are due before March '24, at least 1 instalment we'll get before March '24 and the second instalment, we expect somewhere in April.

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

Sir, what is our stand-alone order book as of the third quarter?

Stand-alone order book third quarter is INR50,154 crores. I repeat INR50,154 crores.

Okay. And sir, what could be the value of smart meter orders that you have taken in this backlog?

It is about...

It is INR3,660 crores.

Is it pertains to all the 3 or the 2 of them?

No, no, 2 of them because 1 is being executed in NCC, 2 are being executed in SPV. And wherever we are executing an SPV, we have taken the order back to NCC as equity contract that is valuing about INR3,650 crores.

Okay. Got it. And what about your third order?

Third order will be executed in NCC itself.

So it is there in our current book, right?

Yes. That's right.

Right.

Entire value is there currently? Or the only the EPC part as of now?

Generally O&M, we don't include. And rest of the things, it is there.

Only EPC portion...

The next question is from Saket Kapoor from Kapoor and Company.

Sir, for the O&M part, can you please repeat the numbers, sir? What is the -- of the order book, the O&M constitute?.

For the major?

No, the entire order book -- out of the entire order book.

Out of the entire order book if you are asking, INR8,000 crores, it will be there O&M, sir.

Okay. And sir, for the 9 months, the revenue from operations, what portion is under the O&M? How much of the...

So right now, I think, on hand, I don't have that number, but NCCL will help you out.

No, I will explain, I will explain. -- question, repeat your question?

Yes, sir. Sir, out of the total revenue booked for the 9 months, what is the proportion of O&M in the revenue booked?.

If we you know O&M figure is there in the current 9-month figure, what O&M we are telling you is the O&M orders we have not included in the present order book that relates to the 10 years long O&M amount. So the 10 years lifespan projects have not yet started. As a result, that O&M part is not there in this 9-month period. It only -- this part will come in the course of time. And some other O&Ms would be there. Some projects, 2 years O&M, 3 years O&M. But those shorter span O&M, we used to include in the order itself. So in the present 9 months period, this longer O&M period, turnout is not there.

Okay. So it is not actually for this year itself?

Yes.

Sir, for the Jal Jeevan projects, if you could just give again the numbers, how -- what portion of the order book we have executed? And also in terms of the receivable cycles, how are the receivables for this project in particular? And do you think -- do you find that there will be more addition to be made as the government is trying to add more districts under this or more package, have you -- are you receiving more interest in the project continuity of the same? Or is it done with the ordering?

Do you want me to tell?

Firstly, you give the numbers.

Numbers. Okay. Now the total Jal Jeevan projects awarded to NCCL are about INR16,700 crores. Out of which 43% of the orders were executed by this December end. And another 5%, we expect to complete that is about INR1,700 crores by March end. So the balance orders roughly 50%, that basing on the present schedule takes another 1 year to complete. By December, majority of the part will be completed. And by March, virtual completion takes, place.

Next question is from Nikhil Abhyankar from ICICI Securities.

In continuation to the earlier question, sir, again, in this budget, there has been a substantial allocation to water department. So where do you exactly see the opportunities coming from for JJM going forward? And are we willing to participate in those?

Yes, I fully agree with you that the locations are increasing year-on-year for this -- everything related to the whole value chain of the water, be it water supply, portable water supply or STP or WTP, all these kind of projects are coming up. And we already have a very healthy order book from this vertical. In the last quarter, if you really see, we had announced a couple of orders that we have recently bagged from the state of UP. So we are really active in this space. In fact, it is our considered view that we are one of the very few players who have done all kinds of projects in the water space. So we continue to study the projects whichever are coming up for bidding. And accordingly, we decide to bid.

And sir, receivables are not a problem for these projects?

The JJM project will -- this is not really a problem. The problem is to complete all the projects, provide the right connection, complete the documentation. And as and when these bills are certified, the payment is not really a problem.

Okay. Understood. Sir, you also mentioned about water treatment plants. So will we be sticking only to municipal contracts or government contracts? Or are we also looking to get into industrial water treatment?

See most of the projects that are really coming up or that have really come up for bidding are from the municipal corporations only. The industrial water treatment plants -- yes, I mean, there are only a few projects. But if there are big projects or big size, we will definitely consider.

So something like a desalination, do you have capacities for desalination?

Yes, yes, desalination is something that we are very much interested. We are studying this space. We have tried to participate also for new projects as far as desalination is concerned. The only issue here is mostly our focus is to execute EPC projects. Several projects in desalination space is coming up on booth kind of model. So that is really a challenge. Not the execution of the project..

Understood. Sir, just a final question on smart metering. You will be doing 1 project on the stand-alone books. So from what I understand for smart metering is that once you execute, after that we'll start getting the annuities. So the one which you're executing on stand-alone, how exactly will you start -- how exactly will you book the revenues for this?

Now how -- in the beginning, how we structured the EPC part of work, the content awarded by the SPVs to the NCC's parent company. So the turnover gets booked in the parent company relating to the EPC content. And at the same time, the SPV companies also -- those amounts also get booked, but in the consolidation, that amount get eliminated. And the latter part about the annuities, primarily comprised the interest and other things that only gets booked in the SPV books of accounts. But that is about 40% of the total order value and 60% is about the EPC value.

Okay. 60% is the EPC. Sir -- and we are able to tie-up for the supply of meters over here? We don't have any problems over that?

Right.

We are being actively in touch with a lot of players who have this kind of offering. So as of now, as per the contract that we have signed with the client, we first need to demonstrate the successful connectivity of these meters with their billing system, that is the ERP system of the client. And in between, there is a lot of IT network, a lot of IT architecture, starting with the GSM radio frequency kind of connectivity. So we are considering all the -- studying all those aspects. And maybe in the next couple of months, we should be able to finalize the vendor because it is not really a choice that we have to make. We have to also take the approval from the client. Once the client approves, then we have to start ramping up.

We'll take that as the last question. I would now like to hand the conference back to Mr. Vaibhav Shah for closing comments.

On behalf of JM Financial, I would like to thank everybody for participating in the call. Also, a big thanks to the management for allowing us to host the call. Sir, any closing remarks from your end?

First of all, on behalf of the company, thanks to the JM Financial Services for organizing this investors earnings call. And I also thank all the participants and their well participation in this earnings call. So thank you all. Good night to all.

Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us, ladies and gentlemen.