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NBCC IPO Review by KM Global (Apply)

Review By K.M. Global Financial Services Ltd on March 22, 2012

  • Issue Period: Mar 22 - Mar 27
  • Price Band (Rs): 90-106#
  • Issue Size (Rs Cr): 120
  • Mcap (Rs Cr): 1,080-1,272
  • Grading CARE Grade: 4
  • Promoter: GoI
  • Listing: NSE, BSE
  • Grey Market (Rs): 8-9

#Retail investors get a 5% discount


  • Enam Securities Pvt ltd
  • IDBI Capital Market Services ltd


  Pre IPO Post IPO
Promoter Group 100% 90%
Public -- 10%

NBCC is engaged in the business of project management consultancy services for civil construction projects, civil infrastructure for power sector and real estate development. NBCC has executed 43 projects ranging from construction of buildings, road works, commercial complexes, hospital etc across India from Sep '06 to Sep '11. The company is awarded projects in the PMC division through nomination basis whereas power project division and real estate division undertake projects through competitive bidding.

Vishnu Pada Das is the CMD of the company. Prior to joining NBCC, Mr. Das served with NTPC from 1976 to 2006 and has approximately 36 years of experience.

Order Book

As of 31st Jan 2012, unexecuted order book for the PMC and Civil Infrastructure for power sector was Rs 10,614 Cr which is 3.3 times its FY11 revenue gives adequate revenue visibility for the next 2-3 years. Out of the total order book, 28.5% is exposed to the hospitals segment, 30.3% in the infrastructure segment, 26% institutional construction segment, 9.7% for commercial construction and 2.7% for the residential construction.

Business Segments


PMC business segment includes providing management and consultancy services for a range of civil construction projects including residential and commercial complexes, redevelopment of buildings and colonies, hospitals, educational institutions; infrastructure works for security personnel, border fencing as well as infrastructure projects such as roads, water supply systems, storm water systems and water storage solutions.

Civil Infrastructure for power sector

This segment includes providing engineering and construction services for power projects, including design and execution of (i) civil and structural works for power projects (ii) Cooling towers (iii) Chimneys. Some of its clients in this segment include NTPC Limited, BHEL, APGENCO Limited etc.

Real Estate

In this segment NBCC undertakes residential projects such as apartments and townships and commercial projects such as corporate office buildings and shopping malls. As of 31st Jan, 2012 the company has aggregate land reserves of 125 acres located in Delhi, Uttar Pradesh, Patna, Gurgaon, Kolkata, Kochi, Alwar and Lucknow.

  • The company's topline grew at a CAGR of 21% during FY07-11 to Rs 3,126 Cr while bottomline grew at a CAGR of 14% to Rs 140 Cr. In 1HFY12 the company posted total operating income of Rs 1,277 Cr with a PAT of Rs 75 Cr.
  • PMC segment contributed 91% to the total revenues, 7% from the civil infra power sector and the rest from real estate.
  • The company posted an EBITDA margin of 9.3% and PAT margin of 5.9% in 1HFY12. The margins are low because its projects are executed through subcontractors.
  • It's a zero debt company with investments of Rs 127 Cr and cash and bank balance of Rs 1,368 Cr as of 30th Sep '11. It posted an annualized RoE of 23% in 1HFY12.
  • The company has maintained its dividend payout ratio of 20% which is in accordance with the guidelines stipulated by Ministry of Finance for profit making public sector enterprise.

Financial Summary

Rs Cr FY09 FY10 FY11 1HFY12
Operating Income 1,950 2,933 3,127 1,277
Total Income 2,044 3,020 3,231 1,353
EBITDA 247 183 217 119
   Margin 12.7% 6.2% 6.9% 9.3%
PAT 159 116 140 75
   Margin 8.2% 4.0% 4.5% 5.9%
RoE 40% 23% 23% 23%
Operating Cash Flows 111 119 91 95

Conclusion / Investment Strategy

The company's market cap is Rs 1,080-1,272 Cr on a price band of Rs 90-106. It is asking for a valuation of 7.2-8.5 times its 1HFY12 annualized EPS and a P/BV of 1.5-1.8 times its book value of Rs 61. The company has decent revenue visibility, land reserves of 125 acres, a consistent dividend payout ratio of more than 20% and is able to generate positive operating cash flows. As the issue is at a slight premium to other infrastructure and construction companies, we recommend investors to subscribe to the issue at the lower price band.

Reviewer recommends Subscribing to the issue.

Review By K.M. Global Financial Services Ltd on March 22, 2012