Why NBCC is a bunch of Mini Ratnas & FY 15 results discussion.

 

Check out the annual results from here : – http://nbccindia.gov.in/nbccindia/nroot/njsp/Financials.jsp

The Sector Wise results are presented below:

In Cr	Total	PMC	Real Estate	EPC
Capital Emp	1,338	(419)	1,071	120
Revenue	4,632	3,917	508	207
EBITDA	433	287	109	36
EBITDA %	9.3%	7.3%	21%	17.4%

The government has conferred a “Mini Ratna” status to the company, and very truly so. Each segment that the company operates in has some serious moats operating in its favour. Forget the current valuation for a second and just examine the moats that the company has.

PMC:

Of the 52 + ministries in the country NBCC has already executed works for over 20 ministries. The thing about theses works is that they are repetitive, monopolistic and very often large.When a thinking government wants to build a nation they take up as much of the utility construction possible on their balance sheets and leave residential and commercial real estate to the private players. Since India is not really a land of philanthropists ( a lot has to do with the fact that we may be born another 7 times so we need to hoard 🙂  ) all expenditure towards institutions etc have to be incurred by the government only. Another bias that the government has is that it does not prefer to rent space and needs to own the building it operates it. Unwise as that may be it is excellent news for NBCC as it is one of the few Govt bodies that have the ability to execute these orders at such a professional pace. As of the now the company has a WIP of 25,572 in the pipeline which has margins of about 7.3%.  The past clients can be viewed here http://nbccindia.gov.in/nbccindia/nroot/njsp/MajorClients.jsp

Real Estate:

Location, Location, Location.

NBCC has access to 5,00,000 acres of Waqf board properties across the nation, AIR India properties across the nation, Sick Government Industries land, PWID land, DDA land and so many other central properties that aren’t only viable but also inaccessible. Their regular structure is about 10% cost + 1-2% selling fee on the project. Clear. Easy and Formidable. Private contractors and real estate developers can only dream of owning such advantages. In other words, NBCC is blessed.

List of ongoing projects :

http://nbccindia.gov.in/nbccindia/nroot/njsp/BuyProperties.jsp

EPC:

India has < 1% of the world oil reserves and the 4th largest coal reserves.

India’s transmission and distribution losses are a staggering 25%.The number of people in India with 4-6 hours a day of electricity is way over the entire population of europe.Indian electricity prices are amongst the highest in the world.Current Installed capacity : 200GW. Required capacity to keep pace : 600GW, that is 600MW per week for the next 20 years And it needs transmission and distribution lines.

This is just the power situation in India. Add up all the infrastructural needs for the country and you cannot sleep with the excitement of the opportunity. However, where there is opportunity there is completion and a lot of crap that comes along with it. However, there are pockets of opportunities that NBCC gets almost without any bidding. These pockets are huge and will have the order books filled for a while . At a 17.4% EBITDA margin and 1,257r worth of projects being currently executed and 10x of that in possible opportunities the EPC segment can easily be a mini ratna.

Coming to the valuation. the company is now available at a M.Cap of 9,350 cr.  They generated 278 cr PAT las year. The company may write of 60 cr for projects that failed to take off and landed in a litigation next year. Despite that i think the company should be able to net over 350 cr in the next fiscal.

For about 9,000 – 10,000 cr you can buy Oberoi Realty ( Mumbai Market ), Presige ( Bangalore Market ) or DLF for about 20,000cr  which have generated about 317,319 and 470 cr over the last 12 months in the real estate business which consists of market competition, uncertainty and of course promoters integrity or you can pick up a little more of NBCC which comes with the aashirwad of Narendra Modi.

I think i know what you will choose.     🙂

P.S – check out their new website. It is pretty snazzy and informative. http://www.nbccindia.gov.in