Tuesday, April 19, 2016

Building confidence: NBCC touching new high in the realty segment

NBCC CMD Dr. Anoop Kumar Mittal
TOUCHING new high in the construction industry, NBCC has recently taken over Kolkata-based Hindustan Steelworks Constructions Ltd (HSCL), a loss-making PSU struggling to repay massive debt to the government and banks.
NBCC board has approved and requested for restructuring which means NBCC will not take burden of any loan and interest part of the company except may be few crores rupees, reveals NBCC CMD Dr. Anoop Kumar Mittal.
HSCL, which reported a net loss...
of Rs 8 crore in FY15 on a turnover of Rs 1,520 crore, owes Rs 1,475 crore to the government, thanks to the latter funding the PSU’s 2001-03 voluntary retirement scheme. In addition, it owes R518 crore to banks.
Under the takeover plan, the government will grant Rs 200 crore to HSCL for the repayment of its bank loans, while NBCC, a Navratna PSU, will stand as guarantor for the remaining Rs 318 crore. The Prime Minister’s Office (PMO) has already given its go-ahead for the takeover late last month given the potential benefits of synergy between the two firms, both in construction and infrastructure business. Subsequently, the boards of the two companies also approved the plan.
If the entire burden gets shifted to the NBCC, which registered 15% growth in turnover to R4,633 crore in FY15 and profit after tax of R278 crore, the Navaratna firm will have to take a hit in the short term. Despite the lull in the construction sector, NBCC has sustained its good show this year also with a turnover of R1,426 crore and net profit of R60 crore in the October-December quarter. Its order book till January, 2016 stood at R17,170 crore. NBCC’s shares settled at Rs 949.45 apiece in the BSE on Friday, up 0.25% over the previous closing.
While NBCC is under the administrative control of the urban development ministry, HSCL is a unit under the steel ministry.
HSCL was set up in 1964 as a construction company. Later, it diversified into various other infrastructure areas and became a major player in implementation of integrated steel plants. Of the R1,520 crore turnover it clocked last fiscal, around Rs 300 crore came from the steel vertical, where NBCC has nil presence. In the current fiscal, HSCL’s turnover is likely to come down to Rs 1,425 crore.
Given its huge dent burden, HSCL has been seeking a financial restructuring for the last few years. The repayment of the interest on the government loan to the tune of over Rs 100 crore every year has been causing havoc to the company’s bottom-line during the last few years and kept it in the red. HSCL’s current staff strength is just 150. While HSCL’s takeover by NBCC would help HSCL employees, the Mamata Banerjee-led West Bengal government could resist it as the headquarters of the company would be shifted to the national capital.
Earlier, NBCC secured orders of Rs 17,516.53 crore in 2015-16 including Rs 2,149-crore from the Indian Trade Promotion Organisation (ITPO) for redevelopment of exhibition venue at Pragati Maidan and Rs 5,828 crore redevelopment project from AIIMS.
NBCC will construct the Capital’s first 100-storey building in Karkardooma, East Delhi, during the next two to three years.
DDA awarded 75 acres of land in Karkardooma to NBCC for joint development, the state-owned developer is now in the process of laying down its plan for the “East Delhi Hub” project that will be based on the Transit Oriented Development (TOD) norms and “smart city” principles.
“There is a proposal to construct one iconic tower having more than 100 storeys, among other buildings,” said a source privy to the development.
To be built at a cost of Rs 2,500 crore, the project will provide housing to 3,000-4,000 families and will also have commercial and recreational areas.
“NBCC has secured a total business of Rs 226.96 crore in March, 2016 under the Project Management Consultancy (PMC) segment and the total work secured during 2015-16 amounts to Rs 17,516.53 crore,” it said in a regulatory filing to the Bombay Stock Exchange.
For the quarter ended December 2015, NBCC reported a consolidated net profit of Rs 57.28 crore, up 13.54 per cent, against Rs 50.45 crore in the corresponding quarter last year.
NBCC is one of the few PSUs engaged in the business of project management consultancy services for civil construction projects (PMC), civil infrastructure for power sector and real estate development.
NBCC has been executing many landmark projects as a PMC which contributes to about 85 percent of its annual revenue. The segment being the Company’s core strength, the areas covered under its umbrella include roads, hospitals and medical colleges, institutions, offices, airports, bridges, industrial and environmental structures etc.
The Real Estate segment of the PSU which came into being in 1988, mainly executing commercial real estate projects has undergone a sea change operation wise.
NBCC’s success in implementation of the government’s New Moti Bagh Re-development Project, has earned it a huge dividend in the form of awarding of another Rs.5000 crore project in similar lines, named - East Kidwai Nagar Re-development (New Delhi) to the Company which is under implementation at present.
Apart from redevelopment, the other category of the real estate also holds a great promise for the future of the PSU as it has about 30 residential and commercial real estate projects presently going on at various locations of the country and more are coming up with huge investments.
NBCC ventured into Overseas Operations in the year 1977, executing projects of diverse nature in countries like Libya, Iraq, Yemen, Nepal, Maldives, Mauritius, Turkey, Botswana. Presently, the PSU has its presence in Maldives, Turkey and Botswana implementing various projects and earning consistent revenue. Of late, NBCC has opened an office in Oman and also signed an MoU with Al Naba Services LLC in Oman in order to jointly explore and secure infrastructure projects in Sultanate of Oman & neighbouring countries.

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