Huge opportunity in surplus land of PSUs

Says NBCC CMD; silences critics on order book execution

Undeterred by the revenue decline due to GST adjustment reflected in the latest results of NBCC (India) Ltd, Dr Anoop Kumar Mittal, CMD of the State-owned Navratna enterprise, calls the new taxation measure as one of the levers of growth. He also shrugs off the apprehension that the company’s revenue will remain pressurised due to this in the coming quarters as well.

In an exclusive interview to Realty & More during the declaration of financial results of NBCC, Dr. Mittal said, “Now all our revenue booking will be ex-GST or indirect taxes. So, whenever you compare the results year on year or quarterly basis, those will be ex-GST.” Therefore, he said, “you won’t see this kind of impact on our results.
For the financial year ended March 31, 2018, the NBCC (India) Ltd has reported a consolidated net profit of Rs. 372.14 crore as against previous financial year’s net of Rs. 325.49 crore, representing a growth of 14.33 per cent. The consolidated total income for FY18 stood at Rs. 7,095.91 crore as compared to Rs. 7,575.35 crore in the previous year.

Dr Anoop Kumar Mittal CMD, NBCC

• “With the current Government’s focus on infrastructure growth, we firmly believe that NBCC has a huge opportunity to attain robust growth.”
• “The entire Rs 80,000 crore is executable…Now worth 30,000 crore is in progress and the rest 50,000 crore will start in the next one or one and a half years.”
• “There is no comparison between BHEL and NBCC as they are in different domains…BHEL is in power sector where there were already a lot of private players existing.”
• “NBCC is a project management consultancy and we do PMC for the Government of India and there is no private company existing in PMC…There is no possibility of things like BHEL”.
• “It is very easy to comment or analyse things in a quick manner because people have seen a sudden growth in NBCC in the last two-three years and now they expect everything, which is not possible”.
• “We are a different company, we do different kind of projects, we work for the Government in different sectors, not only housing or real estate. We do roads, infrastructure, hospitals, and healthcare centres. So we are a different company.”
• “We work for the Government as project management consultant, which means we work like their engineer or their department. So, whatever cost is incurred on construction that is passed through”.
• “We have great plans for affordable housing on Government’s vacant land, PSU land and loss-making PSUs’ land. We have already appointed a land management agency”.
• “We are working on this particular subject since last one year and a half as land management agency and we have identified few land masses. Our team of engineers is making DPR and, hopefully, in the next one or two quarters, we will launch one or two projects.”
• “Every year we sign MoU with the Government and there is a projected growth of about 10 per cent…But internally my target is at least 35 per cent growth in topline.”

Visibly happy and satisfied with the company’s performance, Dr. Mittal said, “With the current Government’s focus on infrastructure growth, we firmly believe that NBCC has a huge opportunity to attain robust growth.” The company, he said, was geared up to make a huge leap forward by involving itself in various business activities.
Dr. Mittal also allayed analysts’ concerns that only Rs 30,000 crore out of the NBCC’s huge order book of around Rs 80,000 crore is executable. He told R&M firmly that “The entire Rs 80,000 crore is executable”. The only thing, said Dr. Mittal, was that “Now worth 30,000 crore is in progress and the rest 50,000 crore will start in the next one or one and a half years.”

Elaborating further, the CMD said, “All these projects are very large projects, re-development projects, where lot of approvals are required, existing houses are to be demolished. So, things are to be done in some time. That’s why you are seeing some pressure on revenue vs. the order book. But all this order is executable and you will see in the next one-year span, most of the orders being implemented.”
In our prolonged conversation with him, the NBCC CMD debunked the analyst community’s charge that what happened with BHEL a few years back could happen with NBCC as well. It’s worth recalling here that the BHEL’s order book was Rs 1 lakh crore but it could not do proper execution and so private players made an entry and took away its order book.
To this Dr. Mittal’s reply was, “First, there is no comparison between BHEL and NBCC as they are in different domains” BHEL, he said, is in power sector where there were already a lot of private players existing. On the other hand, he said, “NBCC is a project management consultancy and we do PMC for the Government of India and there is no private company existing in PMC.” All these private players, he said, are contractors or working with different departments even with NBCC. So, he emphasised, “There is no possibility of things like BHEL.”

Secondly, said Dr. Mittal, “It is very easy to comment or analyse things in a quick manner because people have seen a sudden growth in NBCC in the last two-three years and now they expect everything, which is not possible.” Things, he said, take time. Five years back, the company was different. “We have to shape the company, we have to place the structure in the company and that’s why it is taking time”, he explained. But he told R&M that if one sees the delivery, “Whatever project we are delivering to our client that is a different kind of project.”

Acknowledging the fact that despite recession in the sector, NBCC has performed the best, R&M talked about the revival mode at present and how things seemed to be picking up. In this scenario, we asked Dr. Mittal, “If good times come for the sector, how much do you expect the growth in the company and have you made any plans for the bull-run in the sector?”

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His reply was: “We have made plans for five years, vision plan, but that is not dynamic as people say something today and after six months if some houses are sold in Noida, Greater Noida or Mumbai, they suddenly say that sector is in revival mode.” So it’s not like that, he emphasised. “We are a different company, we do different kind of projects, we work for the Government in different sectors, not only housing or real estate. We do roads, infrastructure, hospitals, and healthcare centres. So we are a different company. Our growth or vision plans have been released two months back and a detailed plan we will release very soon”, clarified Dr. Mittal. And he added with a sense of pride, “We have shown the growth of at least 30-35 per cent CAGR in the next five years’ time.”

When asked if he expected some pressure on margins of the company due to rising trend in steel and cement prices, the CMD said, “Probably people have not understood the business model of NBCC.” Clarifying further, Dr Mittal said, “We work for the Government as project management consultant, which means we work like their engineer or their department. So, whatever cost is incurred on construction that is passed through”.

Giving an example, he said, “If steel price is Rs. 50/ kg today and tomorrow it goes to Rs. 70/kg, the extra Rs. 20 will be passed through, which the client has to pay. Similarly, in case of decline in prices, say Rs.30, that saving will also go to the Government. We charge only our existing charges that vary from 8-10 per cent. So, this burden will not come to NBCC; the saving will be a part of NBCC.”

Coming to the affordable housing sector which is the latest buzz in the real estate, we asked Dr. Mittal if NBCC, which is getting Government orders, had any plans to enter this segment. “Yes, of course!” he replied. Elaborating further, Dr. Mittal said, “We are already in housing sector and are also making affordable housing. But as you asked, we have great plans for affordable housing on Government’s vacant land, PSU land and loss-making PSUs’ land. We have already appointed a land management agency and only a few days back, the Government has approved guidelines for using surplus land of loss-making PSUs. So, definitely, we would like to work on that and surely we will be in affordable housing.”
In this regard, R&M referred to the big opportunity in land banks of sick PSUs which the NBCC can utilise for ‘Housing for All’ and other schemes of the Government. “Definitely”, said Dr. Mittal, and explained, “We are working on this particular subject since last one year and a half as land management agency and we have identified few land masses. Our team of engineers is making DPR and, hopefully, in the next one or two quarters, we will launch one or two projects.”

Coming to the end of a lengthy and fruitful conversation, Realty & More asked Dr. Mittal about his targets for the current financial year. To this the CMD replied, “Every year we sign MoU with the Government and there is a projected growth of about 10 per cent.” But internally, he said, “My target is at least 35 per cent growth in topline.”

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This certainly doesn’t seem to be an ambitious target given the all-round good performance reflected in the financial results of NBCC. Besides a healthy 14.33 per cent grown in its annual net, NBCC also did quite well during the quarter ended March 31, 2018. The total consolidated income of the company stood at Rs. 2,598.18 crore as against Rs. 2,671.17 crore of Q4 of the previous year. The net profit for the period stood at Rs. 150.41 crore as compared to Rs. 166.62 crore in the corresponding quarter in the previous year.

The Board of Directors has recommended a final dividend of Rs. 0.56 per equity share on face value of Rs 1.00 per equity share (post-split) for the financial year 2017-18. The Board had earlier on March 8, 2018, declared an interim dividend of Rs 0.55 per equity share on face value of Rs 2.00 per equity share (pre-split).

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