NCC Ltd (BOM:500294) (Q1 FY27) Earnings Call Highlights: Record Q1 Revenue and Robust Order ...

Negative Points

• NCC Ltd ( BOM:500294 ) has guided for a conservative FY27 revenue growth of 8%-10%, which is lower than the 12% growth achieved in Q1, reflecting uncertainty in the operating environment.

• Net debt increased to INR2,008 crore at the standalone level and INR3,513 crore on a consolidated basis, driven by fresh debt for smart meter projects and capex requirements.

• The company faces rising prices for commodities linked to petroleum products, aluminum, and copper, including OFC cables for BharatNet projects, which could impact margins.

• Unbilled revenue increased to INR7,414 crore, representing 38% of revenue, which is higher than the previous year's 37% and indicates potential delays in billing milestones.

• The BharatNet project, with a balance order book of INR6,500 crore, is a fixed-price contract, and current high OFC prices could result in lower profits unless prices stabilize.

• The debt-equity ratio increased to 0.31 from 0.24 in the corresponding quarter of the previous year, indicating higher leverage.

• The Vizag urban receivables of INR271 crore are expected to be recovered only by December 2026, and the Mission Bhagiratha receivables of INR180 crore are subject to ongoing court proceedings.

Q & A Highlights

Q: The company has provided guidance for FY27 with revenue growth of 8%-10% and EBITDA margin of 8.5%-9%. However, Q1 has already delivered 12% growth and a 9.4% margin. Does this imply a slowdown in the remaining quarters? A: Sanjay Pusarla, CFO, explained that while Q1 performance was encouraging, the operating environment remains uncertain, particularly regarding client fund allocations and approvals. The guidance was set after a detailed exercise to reflect a realistic outlook for the coming quarters, not necessarily a slowdown in execution capability.

Q: What is the status of the JJM (Jal Jeevan Mission) projects, including the outstanding receivables and the timeline for completion? A: Sanjay Pusarla, CFO, stated that the total order book for JJM projects (surface water and groundwater) stands at INR5,881 crore. The outstanding receivables for UP projects are INR2,771 crore, with INR610 crore collected in Q1 and an additional INR413 crore received in July. Management expects to substantially complete these projects within the current financial year, provided the payment flow continues.

Q: Can you provide a breakup of the order book by client type (state, central, private)? A: Sanjay Pusarla, CFO, provided the breakdown: Central government orders constitute about 14%, state government orders about 19%, PSUs and state government entities about 60%, ADB/AIIB/banks about 5%, and private clients about 4%. He also confirmed that the entire INR81,000 crore order book consists of executable orders, with slow-moving or non-moving orders removed from the count.

Q: The consolidated net debt has increased significantly YoY. What is the reason for this increase? A: Sanjay Pusarla, CFO, attributed the increase primarily to fresh debt drawn for the smart meter projects. Cumulatively, the smart meter debt stands at INR1,461 crore out of the total consolidated debt of INR4,019 crore. Additional debt was also raised for CapEx requirements of about INR160-170 crore.

Q: What is the status of the Ken-Betwa river interlinking project, given the reported protests and land acquisition issues? A: Sanjay Pusarla, CFO, reported that NCC is making reasonably good progress on the project. The total order value is INR3,390 crore, with INR116.35 crore executed so far. The site reported in media is about 20-30 kilometers from NCC's actual site, and the issues are being resolved by local administration with no major impact on execution.

Q: What is the pending order book for the BharatNet project, and how will the increase in optical fiber cable (OFC) prices impact margins? A: Sanjay Pusarla, CFO, stated the balance order book for BharatNet is approximately INR6,500 crore. While it is a fixed-price contract, the company is in discussions with the client and ministry to address the price increase. Neerad Sharma, Head of Strategy & IR, added that the price increase may not result in losses but could lead to lower profits, and the company is hopeful of a resolution in the coming quarters.

Q: What is the expected recovery timeline for the Vizag urban receivables and the AP Capital City receivables? A: Sanjay Pusarla, CFO, confirmed that the entire Vizag urban receivable of INR271 crore is expected to be recovered by December 2026. For the AP Capital City old projects, receivables of about INR142 crore are expected to be realized in the current quarter or very early next quarter.

Q: How is the unbilled revenue expected to trend, given it has been growing faster than revenue? A: Sanjay Pusarla, CFO, explained that out of the INR7,414 crore unbilled revenue, about INR780-800 crore was certified in the first week of July. The increase is due to milestone-based contracts. As BSNL billing for BharatNet starts, the unbilled revenue is expected to convert to certified revenue and smoothen over the next two quarters.

Q: What is the expected IRR and progress on the smart meter projects? A: Sanjay Pusarla, CFO, stated that the company is looking at an IRR of 18% on total capital for the smart meter projects. Approximately 45% of the total 7-8 million meters have been installed so far. The CapEx phase is expected to be completed by March 2027, after which the company will start generating O&M revenue.

Q: What is the status of the receivables from the Telangana government related to Mission Bhagiratha? A: Sanjay Pusarla, CFO, stated that the company has received about INR50 crore against the approximately INR180 crore receivable. The balance is expected to be received at a rate of 15% every month. However, since the matter is sub-judice, the company is monitoring the situation and hopeful of receiving payments as per the schedule.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .