At a time when thousands of home buyers pin their hopes on state-run NBCC (India) Ltd for completion of their homes, the company has posted another set of weak numbers. The continuing slowdown and stalled projects are further posing a question over the financials of the company in short term.
“Burgeoning opportunities in building construction are leading to significant order book build up for NBCC. However, margin volatility, stoppage of work at Delhi redevelopment projects and lackluster pace of real estate monetisation remain key overhangs,” said an Edelweiss report.
NBCC posted weak numbers for Q1FY20 with revenue declining 16 per cent YoY to Rs 1,890 crore and PAT dropping by 38 per cent. While the firm has an order book of Rs 68,000 crore, which seems impressive, the report said ‘self-revenue-generating projects’ constitute almost 60 per cent of it.
The company has so far been awarded about Rs 30,000-35,000 crore worth projects. But with weak sentiments in the sector, the Edelweiss report remained doubtful if this target will be met.
While the management had previously guided for 20-25 per cent revenue growth in FY20, weak performance in Q1 (16 per cent YoY decline in top line) makes it unlikely that this target will be met. Post the results, the Board refrained from providing a revised guidance for FY20 growth.
In this context, all eyes are on the resumption of Delhi redevelopment projects, which, the report points out, are key to its future financials. However, most of the projects are stuck. The AIIMS redevelopment project is pending for lack of green clearance. NBCC is still awaiting clearance from the Delhi government for cutting trees.
In another case, the work on a railway station redevelopment project has been temporarily suspended as the Railways is rethinking certain terms and conditions of the contract. Final decision on the Nauroji Nagar project is expected on August 21, 2019. Among its Delhi redevelopment projects, NBCC has sold about Rs 4,000 crore worth of commercial space for the Nauroji Nagar project till date.
In case of Sarojini Nagar and Netaji Nagar projects, the management indicated that final designs have been submitted and building plans are expected to be approved shortly.
Overall, the total amount of funds to be generated via real estate monetisation in the overall redevelopment projects is about Rs 32,000 crore; hence, raising the pace of sales here is vital to improving the execution trajectory.
In this context, the company may not be in a position to overburden itself. The Supreme Court last month handed over the Amrapali project to NBCC.It remains to be seen if it can bid again when fresh bids are invited for Jaypee Infratech.
The NBCC management has already said that while they are interested in bidding, there will be no investment made by the company till the bidding process is complete and that it will only act as a project management consultant.