NCC Limited analyst Q&A

Thank you very much, sir. We will now begin with the question -and-answer session. Anyone who wishes to ask a question may press ‘*’ and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press ‘*’ and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shravan Shah from Dolat Capital. Please go ahead.

Thank you, sir. Sir, a couple of things. So, first, just trying to even if let us say 5% of the revenue guidance that we have reduced from 15% plus to 5%. So, that also if I broadly calculating it means that in the 4th Quarter also we are looking at kind of 1% kind of a degr owth, so if you can clarify that? And in terms of the margin when we are saying 9.25% for full year, so 9 months we have 9%, so in 4th Quarter, are we now again looking at 9.5%-10% kind of a margin and is that margin sustainable going forward?

So, this margin, whatever we gave the guidance now revised to 9.25% as you said, we are expecting the margin should be around 9.5% in t his quarter 4, so that the reason we thought it will be around 9.25%. So, this at the moment it is sustainable.

As far as revenue growth, the first question, what you asked is the degrowth in the 4th Quarter as against what we given the guidance in 4th Quarter about some -1% or 2% will be there in the revenue so that it is close to the 5% growth in the year as a whole.

What I am trying to understand is that are we seeing across the board kind of a slowdown in the execution and that is why we are now significantly lowering the number. So, I understand we also don't give the guidance for FY26 now, but on the directionally front as now, we have reduced the growth for this year , can we see a kind of a 10% kind of a range plus kind of a growth at least in the FY26?

Mr. Shravan Shah, FY26, we have not started, really working out the numbers. W hat happens is, by 31st March, generally we are able to close each of the projects that we are executing, which are quite a few about 150 -160 odd. Then we are in a position to know how much is possible from each of these projects for FY26. And generally, we work out these numbers in the month of April and May. I think once when we announce our annual result s in the month of May, we should be in a position to talk ab out the guidance for FY26. This is not possibly the right time to talk about FY26.

Now, you talked about across the board. Now, we have several projects across various states. It did not happen across all the projects the slow movement, but in some of the schemes, some of the projects only the slowness is experienced, so it is not so for all these things. Whatever new projects we pick up in the current year , what are projects we are going to pick up and in the Financial Year ‘25 -26, the scenario again different, the trend indicates that in the last 3 years, we have continuously shown growth of around 25%. So, in this year, because of the specific, the general elections happen and also some elections in some of the states happened, w e have seen two things now generally given the slow pace for this current year.

Got it. Sir, couple of data points for the balance it what is left if you can set and also in terms of the right now what is the value of the L1 projects and then I will spell out the balance numbers which I need? Hello sir, are you able to hear me?

Yes, we can hear you. The L1 project in the pipeline is roughly about Rs. 9,000-Rs. 10,000 crores.

Got it. And what is the retention value and the exposure in terms of the investment in JV s and associates as on December. So, in September it was Rs. 1,411 odd crores, so what is the value as on December?

There is no change in the investments.

Also, the loans and advances , so that number Rs. 1 ,411 crores stands remains the same as on December also?

Rs. 1,411 crores and loans are Rs. 388 crores , about Rs. 7 crores increase is there in the 3rd Quarter.

And retention value is how much?

It was Rs. 1,757 crores.

Sir. Thank you. I will be in queue. Thank you.

Thank you. The next question comes from the line of Prithvi Raj from Unif i Capital. Please go ahead.

Yes. Sir, I just have a couple of questions. First question in the opening remarks, you have made a point that in some of the project you are seeing a delay in the payment cycle. Could you just explain a bit more on this, which are the kind of projects where you are seeing an issue on the receivable side?

It is general in nature because of these elections at the central level and the state level , when there is change in the political parties, in the systems, and there is bound to be some delay in the release of payment. So, that is happening now we are going through that cycle. Probably, now the government has settled, improvements will be expected.

I think things should pick up now. The elections are very much behind us and there is a new government in place. So, we expect things to pick up now.

And finally on the order flow, you maintain the guidance, but what kind of pipeline are you witnessing? Which are the sectors , which are the geographies , where you are seeing an order flow or project pending that is happening that gives you confidence that you will achieve the guidance number?

Yes, I have shared at the very start, we have a prospective pipeline of project. It is not there in one state, a cross the s tates and across the verticals and I am happy to share with you this prospective pipeline of project the value is about Rs. 2.45 lakh crore. It is in all the verticals, all the seven verticals in which we operate and it is in almost all the states, large states at least.

I will join in the queue.

Thank you. The next question comes from the line of Jainam Jain from ICICI Securities. Please go ahead.

Sir, thank you for the opportunity. Sir, we have guided the order inflow guidance of Rs. 20,000 crores, but in the 9 months FY25, we have only received the contracts worth Rs. 13,600 crores. So, are there any specific contracts in which we are expecting L 1 in the coming quarter which would help us make the order inflow guidance for this year?

Just before this question, someone was asking us about the L1 orders. We said somewhere Rs. 8,000-Rs. 10,000 crores, we are in the L1 position. So, we are expecting those orders to get materialized in the quarter.

That is what makes us confident to achieve the number. This is not one project or two projects. There are multiple projects, so the value would be in that range.

So, sir, what are the projects included in the L1 amount and like we expect all the LOAs to be received in the Q4 FY25?

It is difficult. See, at the end of the day , it is a client’s call. When the client finally decides to award the contract is somethi ng difficult . But as we speak, we are confident, and we are reasonably hopeful that this L1 should get converted into LOAs.

I think all that we do is we share the bracket of the projects. We don't really spell out the list of all the projects because it is difficult, there are cases where the L1s do not really get converted into LOAs. So, as a matter of policy, we only talk about a specific project when LOA is received.

And sir, we have seen a huge increase in debt levels in this year to Rs. 2,415 crores from Rs. 1,000 crores in FY24. So, what will be the reason for that? Also, the reason for spike in working capital days?

Could you repeat your question please? I couldn’t understand, could you please repeat your question? Yes, is there some echo?

Am I audible right now?

Yes. Please tell me. There was some echo earlier, so we couldn't understand your question.

Sir, we have seen a huge increase in debt levels compared to previous year, so what is the reason for that?

Debt level increase. We have already explained you that there is a slowdown in the payment mechanism because of these elections and all that is the reason if you see the d ebt level has increased. At the same time, my unbilled revenue also got increased. So, whatever money we are spending today, it is waiting for the certification from the authorities once that is done and now we expect that the government is settled at all the places , we expect that conversion will happen and it will help us in reducing our debt levels shortly.

Alright. That answers my question. Thank you and all the best.

Thank you. The next question comes from the line of Deepak Poddar from Sapph ire Capital. Please go ahead.

Thank you very much for this opportunity. So, just I wanted to take this debt level point forward. So, you mentioned about reduction in debt levels, so what sort of debt target we would have by FY26 end and overall FY26 as well?

Today, I will not be able to tell you what it can be, because we are waiting for the government to act on that and once the payment positions improve then we will be able to fairly estimate and come back to you.

So, generally in the construction industry, the inflows that collections from the clients happen in the 4th Quarter, particularly in the March month. So, thereby whatever debt level is there at this moment, we expect that comes down. And moreover, we have a lot of amount to receive from the clients what we explained already that there is a slow mechanism of b illing, certification happening in various projects. So, already persuasion is made with various clients across various states, thereby there is a good chance to collect more amount as a result the debt from investment in water is there that comes down, but we can't exactly tell the figure, it may be Rs. 1,500 crores or it may be Rs. 1,000 crores also. So, at this moment, we cannot tell, but there will be some decline in the present level of debt we are expecting.

Rs. 1,350 crores, right. That is the debt level we have?

We have the debt level today at Rs. 2,415 crores.

Rs. 2,415 crores is what our current gross debt levels are?

Yes.

Understood. And the point you mentioned about slowness because of which your FY25, we are underperforming, right? Earlier we were quite confident of 15% kind of a growth and now we have revised down to 5% kind of a growth.

Exactly. That is the purpose where we are restating our expectations.

But things have settled down and you are seeing improvement at the ground in terms of activities and so some comment on that would be helpful, sir?

Touchwood, today, we could see there is an improvement that is can be seen physically on the ground.

And just one last query on the margins. So, 4th Quarter, we are targeting around 9 .5% kind of an EBITDA margin, right as per your guidance that you have given. So, what will drive margin improvement?

In general, because even earlier also we were expecting because the m oment you have the turnover, say at the expected level, the margin will be at the guidance level of 9.5%. This is what we are expecting in the 4th Quarter . It should normalize. If it normalizes, I will be getting a margin of 9.5% which will help me to average it out to around 9.25%.

And also because of leverage, you are expecting much higher revenue in 4th Quarter, right? That will give you some advantage in terms of higher scale of your revenue right?

Great. And just one final thing. FY26, anything you can, some range you can throw some light, what sort of growth range we are looking at that would be helpful?

Neerad already explained to you that we have our budget meeting somewhere in April and definitely, we will come back to you with our guidance at that point of time.

Fair enough. That is very helpful. All the very best to you. Thank you so much.

Thank you. The next question comes from the line of S hravan Shah from Dolat Capital. Please go ahead.

Thank you, sir. Sir, 2-3 data points, inventory and payable as on December is how much?

Inventories is Rs. 1,442 crores which is almost Rs. 27 crores less than September 24. And coming to the payables, it is also Rs. 6,943 crores, retention payable also right?

Understood. Second, sir, now, in the 4th Quarter, in terms of the CAPEX, so Rs. 223 crores, we have done, so we will be doing the balance Rs. 25-Rs. 27 odd crores or it would be lower?

It is for the regular project . As and when we require it we buy it. There are no further capital - intensive project maybe for the next one month, but this gap whatever is there the Rs. 27 crores, it is like any other year in a normal course, whenever there is a requirement that comes from the project that will be taken.

And for JJM projects, sir, how much now we would have executed and what is the left? So, just wanted to understand there also there is a decent slowdown in terms of the execution?

Rs. 8,000 is at the beginning of the year, a nd Rs. 3,400 we have executed, and balance is somewhere around Rs. 4,700.

Got it. And sir, in terms of the employee cost also, last quarter we said there was some increment and everything was there , 8% increment was there, but even this quarter also if I look at the employee cost also, sir Q-o-Q has also it has gone up , so in second quarter it was Rs. 189 odd crores, now Rs. 193 crores, so can you help us?

There are two elements for an increase in the salary cost. The first one is there is an increase in the headcount. Already, we planned about 15%-20% growth for the current year. Accordingly, we appointed the people. So, we appointed the people, but the progress is not taking place. That is number one. Number two is already in July 1st onwards, we have enhanced the salaries about 9%-10% in two parts resulted into the higher percentage of salaries in this quarter.

Got it. Thank you.

Thank you. The next question comes from the line of Parvez Qazi from Nuvama Group. Please go ahead.

Hi, good afternoon. Thanks for taking my question. So, a couple of questions from our side, with regards to JJM project, have we seen any kind of payment slowdown, especially considering that there will central elections this year or are payments regular and in line with, let us say what you had seen in FY23 or FY24?

Mr. Qazi, good afternoon. During the course of attempting to answer several questions, we have tried to make this point that there has been generally an impact on across the scheme, across the states and this project is not an exception . So, we have seen this kind of impact across this scheme, different projects of the government and elections have played a very important role in that.

Sure. So, just to be clear on this point, the kind of payment slowdown obviously has been seen across industry. Is it restricted only to state government projects or the Central Government projects also seeing payment slowdown?

Mr. Qazi, in most of the infrastructure projects barring a few, generally the Central Government and state governments partner with each other. In most of the projects, barring possibly NH AI Road project those kind of schemes. In multitude of the infrastructure projects, both these governments partner with each other and it is difficult to say for us, what really matters is the final payment, whether it is delayed by the state government or Central Government, the impact on us continues to be the same.

Second, on the project that we have in Andhra Pradesh, two things on the existing project or let us say, let us forget about the payment part, but have we seen any activity in terms of new order award in Andhra Pradesh?

We have seen two kinds of activities. The first one is, our clients are trying to close the projects which were awarded in the past. So, that is a clear direction. That is a clear thinking that we get to see. And our client, the state government is also planning to start the process of awarding the contracts for this capital city. So, we continue to see momentum.

Sure. And lastly, any update on the Smart Meter project would be? Thank you.

In the Smart Meter project, as far as the Maharashtra is concerned, earlier in our earlier con - calls, we have told that because of the directions in the government , we slowed down. But we expect that because the government now stabilized and we are getting the clearances also from the government, we expect the projects will take off now. And as far as the Bihar project is concerned, we have already started, and the installation of the meters is going on there. About 3 lakh meters we have already installed.

Thanks and all the best.

Thank you. The next question comes from the line of Dhananjay Mishra from Sunidhi Securities. Please go ahead.

Hello, sir. So, in terms of pipeline, you said Rs. 2.4 lakh crore. So, any big Expressway project we are expecting in this pipeline from the Maharashtra?

Mr. Mishra, it is very difficult, whenever we talk about a very big prospective pipeline of project, there would be projects from different verticals. I a m not really in a position to identify a particular project as I said with you these projects are prospective pipeline of projects. So, there are several projects there. So, I am not really in a position to identify a particular project.

No, I just wanted to know because some big projects are awaited in Maharashtra to be announced in the next 12 months, so whether we have included in those projects in our pipeline, or it is not part of our pipeline?

They would be. Whenever the projects are announced , g enerally it would be part of the prospective pipeline of projects.

And secondly, on JJM project, the payment delay is because of this revised location for FY 24, which was down from close to Rs. 70,000 crores to now Rs. 22,000 crores. And then again it has increased for FY26. So, that is the major reason the Central Government contribution not coming on time, and that is the reason we are facing delay?

I think we have already answered this question that the impact has been across the schemes of the different infra projects across the State Governments . So, practically, we have seen the impact and aftereffects in almost all the verticals. It would not possibly be correct to identify a single project because we don't have a single project. We have a lot of projects, about 150-160 odd projects under execution.

Got it, sir. That is all from my side.

Thank you. The next question comes from the line of Vaibhav Sha h from JM Financial Institutional Securities. Please go ahead.

Collections, you mean to say?

Yes.

Collections are fairly good. There is a regular flow.

We have seen an improvement in a quarter-on-quarter basis?

That we should see now because we just passed only 1.5 month and another 1.5 month is there, we need to see and generally, the government project, they will get funds released during the March month because by the time, their budget will get expired.

Sir, secondly, we are expecting the EBITDA margins to improve on the 4th Quarter to around 9.5% levels, so going forward, while we are not giving guidance, but is there a possibility that there would be an improvement further as well or these are at more sustainable levels, around 9.5%?

We work out on that one . It is not one particular process to work out to tell that one. We have several divisions and across several divisions and across divisions several projects are there. And particularly in the 3rd Quarter, we have received new orders and in 4th Quarter also, we are expecting several orders at present alone 16 for LOAs. So, basing on consolidating the totals and when we carry out the budget process, then only we will be able to arrive EBITDA percentage for the FY26.

And sir, another question was on, if you look at the quarterly interest cost, it is roughly around on an average Rs. 160 odd crores for the 9 months. So, do we expect the run rate to remain similar in Q4 as well?

Yes, in the similar line or a little, but we won't expect any much reduction because i t is the already one, one month, one week over , but we have not seen any good collections from the pending amounts.

And sir, lastly, what would be our AP exposure as of now , the net number that we share every quarter?

So, AP exposure there are two parts, the first part about Capital City projects, we have pending of Rs. 1,150 crores that we expect to receive by end of March. There is a positive momentum happening and they assure us to pay before the March of this current financial year. That is part one. Part 2, we have around Rs. 400-Rs. 450 crores exposure in the running projects out of which we received nearly Rs. 230 crores in the 3rd Quarter itself. So, only balance amount Rs. 200-Rs. 250 crores exposure only is there in the other running projects.

So, currently, as of December, it is Rs. 250 crore and we receive Rs. 200 crores in Q3. So, it was reduced to Rs. 250 crores in December.

Yes, totally Rs. 230 crores we received in Q3, but in the general month are also some Rs. 30-Rs. 40 crores payments we collected.

And sir, last time, you updated on the Vizag deal. So, when do we expect to receive the d ebt amount?

So, as far as the investment is concerned completely that is received, equity is completely received, there is no due on that. And as far as the loan is concerned about Rs. 374 is the loan amount and in the current year, we received about Rs. 15 crores against the interest amount and this Rs. 374 crores also, we are expecting to get realized in the next couple of years.

I will come back in the queue.

Thank you. The next question comes from the line of Dheeraj R am from Ashika Institutional Equities. Please go ahead.

Hi, sir. Thank you for taking my question. Sir, we have recently received the project related to River Interlinking for Ken Betwa. So, how do we see the pipeline of the project in the river interlinking and what kind of opportunities can we expect going forward?

We understand from the various media reports that this interlinking of river is a very important project for the Government of India and the respective state governments. We believe the action has just started. We have a lot of road to cover. We are hopeful that we will continue to see healthy pipeline of projects in the interlinking of rivers as well.

Sir, if you can put a figure to it, what is the maximum of opportunity that we can expect in the project?

Sir, we don't really make any assessment of these kind of opportunities . At the end of the day, this is the call of the government and the respective agencies. What we try to do is to when this NIT what we call, notice for the bid is announced we try to study the final nuances of the project, look at the risk reward equation and then we have to decide, whether to participate or not, depending on the technical complexity of the project, depending on the permissions which might be required, depending on the funding that might be required, then we take a view.

Understood, sir. Last question, sir, have we started the execution for this product?

Have we started the execution for the Ken Betwa project?

No, we have not as of now.

So, we can expect it to start in Q1 FY26?

Sorry, could you please repeat? Your voice is also not very clear. There is a lot of echo.

Sir, can you hear me now?

Yes, please tell me.

Sir, can you expect the execution to start in Q1 FY26?

It depends on the permissions, approval of the drawings and all, we are hopeful.

Thank you.

Thank you.

Thank you. The next question comes from the line of Parth Thakkar from JM Financial. Please go ahead.

Sir, what would be the share of our smart meter orders in a standalone order backlog?

Somewhere around 9%.

And we were expecting to complete our JJM order book of Rs. 4,700 crores by June 2025, are we still on track for that?

It would essentially depend on the permission , repayment, our ability to mobilize. It would depend on a lot of parameters.

So, we cannot put a particular timeline on it, can we?

No, we would hope to meet the guidance, but we have to wait and watch.

And my last question, what would be your CAPEX guidance for this whole year? For the balancing 3 months?

Thanks. That is all from my side. Thank you.

Thank you.

Thank you. Ladies and gentlemen, a reminder, you may press ‘*’ and 1 to ask a question. The next question comes from the line of Prithvi Raj from Unifi Capital. Please go ahead.

I just have one bookkeeping question. If you look at the tax rates for 9 months, it is almost at 25%-26%. Can we assume a similar tax rate even for Q4?

So, the effective tax rate is lesser actually because we have received dividend which is a pass- through mechanism. It is not taxable. The recently effective tax rate is lesser.

He is asking for 4th Quarter.

I didn't get you, even for Q4, is it going to be a similar number or will it be higher?

Similar percentage.

Thanks.

Thank you. The next question comes from the line of Vishal P eriwal from Antique Stock Broking. Please go ahead.

Yes, sir. Thanks for the opportunity. One data point, in terms of smart meter order that we have, we did mention Bihar we have executed 3 lakh odd meters, so what is the total size of it? And similarly, what is the total size of Maharashtra order?

The total order value, I repeat the total order value that we have received for the Bihar project is approximately Rs. 2,300 crore. And for the state of Maharashtra, we have received 2 smart meter projects. The approximate value of these two orders, I repeat the word order value would be Rs. 5,700 crores.

Sir. In terms of number of meters, will it be tantamount to work?

It would run into millions, multiples of millions.

Will it be fair to give some number, Bihar and Maharashtra strategy?

And then, maybe one last thing, I think in terms of execution that we have seen in the pie chart that we have given , maybe just before that , so the JJM work is a part of irrigation, right? Is it fair to understand it is a part of water and railways?

Which one? Could you repeat the name of the project?

Yes, the JJM work that we do, is it a part of water plus railway segment in the execution, the pie that we have given it is a part of irrigation?

Irrigation is separate, water and railways together.

So, the JJM is part of which segment, sir?

You are asking about Jal Jeevan project, correct?

Correct.

Since this projects have come at a time in at a level , we have 3 divisions are exe cuting the Jal Jeevan project, water division, mainly executing that one plus some part of the work taken over basic building division and some part of the work taken over the e lectrical division, three divisions executed in different parts of the stage. And the turnover from these water projects also included in the respective divisional numbers.

Thank you, s ir. We will move to the next participant that is Saket Kapoor from Kapoor Company. Please go ahead.

Namaskar sir, and thank you for the opportunity. Sir, firstly, if you could just reiterate our Q4 execution growth in percentage terms, as you have mentioned that Q4 is generally the largest of the preceding three quarters and last year, we did a revenue closer to Rs. 6,500 crore on a console level. So, when you were giving the growth number for the entire year, if you could just elaborate more on the same, I missed your comments on the same?

Now, the 4th Quarter , the execution would be on consol idated between Rs. 6,000-Rs. 6,400 crores, we are expecting.

So, we are within the bank from Rs. 6,000-Rs. 6,400 crores for the 4th Quarter , so it will be a flattish quarter in that sense when you look at the year-on-year numbers in terms of execution.

And sir about the Bharat Net project also, what is the current status on the same and I think so we were participant in quite of the circus, so any update on the same, sir?

Mr. Kapoor, could you please repeat your question?

Sir, I was looking at our order intake from the Bharat Net Phase-3. Any update on the same? What are we in terms of? Where are we in terms of the order intake from this project?

We have not received any order from them as of now and as a matter of policy, until and unless we get a confirm order from a client, we do not really talk ab out that. Because that is quite speculative in nature, until and unless we receive formal communication from the client which hasn't happened as we speak.

And lastly, sir, for the month of January, in your press release, in the opening month very first date, you mentioned that we did not receive any order. Sir, if you could just articulate?

It is like this. What happened is that there was news on the Money Control about received couple of projects, then there was enquiry like request from the Stock Exchange on what is that project? Why it was not announced? Generally, as a policy in a normal course of business , we give an announcement of the project only at the end of the month. That is the reason we did not announce it. Since they have watched us, so we have to reply to them saying that it has happened on somewhere 7th of January , so we had to reply to them sa ying that as this project is received , awarded to us, but we did not disclose it as a matter of policy, we disclose it at the end of the month. Since we have already told them, we said that we have not received any other project other than this. So, that is how it has come.

Sorry to dwell on it, but when you read the notification, it is mentioned there, correct me there, but for the entire month of January, there was no order intake for the Company that was my point?

It was like because there was no other project other than this which has been received during the month and we give at the end of the month the disclosure on the projects awarded we to avoid confusion, it was told very clearly because we have already disclosed it earlier and it was there on the website and informed the stock exchanges . To avoid confusion, i t was told that. Other than that, nothing has been received.

I am sorry to interrupt, Saket. I would request you to rejoin the queue if you have more questions.

Thank you. The next question comes from the line of Vaibhav Shah from J M Financial Institutional Securities. Please go ahead.

Just a couple of data points. So, you mentioned the working capital number in terms of rupees crore. So, what was it as of December?

As of December, so you wanted this December?

Yes, this December and September as well?

September is 4,987. In December, it was 5,488.

So, secondly, what was retention money? Was it 1,757 if I heard it correctly?

Yes.

And sir, what was the inventory number?

Inventory is 1,442.

Thank you, sir.

Thank you. Ladies and gentlemen, that brings us to the end of the question-and-answer session. I would now like to hand the conference over to Mr. Vaibhav Shah from JM Financial Institutes for the closing comments.

Thank you, sir for giving us the opportunity, any closing remarks from your end.

Thank you very much. We appreciate your time and patience, and should you have any more questions about anything, we encourage you to get in touch with us. Thank you very much. Good night. Bye.

Thank you. Ladies and gentlemen, on behalf of J M Financial Institutional Securities, that concludes this conference. You may now disconnect your lines.