NBCC Ltd - ZENMoney

Company Profile: Established as a Government of India Enterprise/Public Sector Enterprise in the year 1960 to undertake execution of civil engineering projects, National Buildings Construction Corporation Ltd (NBCC) is a Schedule' A' CPSU, conferred with a Mini Ratna (Category - I) status in September, 2013. NBCC works under the aegis of Ministry of Urban Development, Govt. of India. Presently, its operations can be categorized into three main categories i.e. (i) Project Management Consultancy (PMC), (ii) Real Estate Development and (iii) EPC Contract. In the domestic market, the Company's projects are spread in almost all parts of the country. During 1970s, the company forayed into foreign market and carried out operations in Libya, Iraq, Mauritius, Maldives, Yemen and Turkey. Currently, the company has its presence abroad in Maldives and Botswana.

Strengths:

- Company has an order-book of Rs. 12163.16 crores (as of 31st march, 2013).

- Company has low working capital requirements because of advances and Earnest Money & Security deposits from clients.

- NBCC is debt free and has cash & bank balance of Rs. 1537.76 cr and other current assets & current investments of Rs. 133.72 cr.

- NBCC has been notified as Public Works Organization (PWO) explicitly as per which Government Department(s)/PSUs and Autonomous Bodies can award the works to NBCC on nomination basis.

Concerns:

- Company has high dependence on Government Departments/Ministries for new order inflows.

- NBCC works on low margins with its main revenue contributor (civil constructions) having PBIT margins of around 4.5%.

Outlook: NBCC is expected to see an increasing contribution from Real Estate segment (Divided into two categories - Re-development of government projects and Real Estate Development on acquired land. In redevelopment projects, company gets a PMC fees and in this category the company presently has 4 projects in New Delhi and sees the possibility of tapping around 30 such similar projects) of its business going forward. This is visible in the FY13 results, when contribution from real estate sector increased from 185.13 crores (FY12) to Rs. 526.84 crores. Increasing contribution from the real estate sector helped the company to post better profits on a smaller top-line. To boost this NBCC plans to spend Rs. 400 crores in purchasing new land parcels across the country in FY14 (Rs. 200 crores in FY13) to add to the existing reserves of about 145.25 acres in Delhi, Khekra, Gurgaon, Patna, Alwar, Kochi, Kolkata, Faridabad, Ghaziabad, Meerut and Bhubneshwar. All the above mentioned business plans along with a strong balance sheet make this company a safe investment option for investors.

Source : Equity Bulls

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