Transforming India’s infrastructure with a visionary growth plan

Without a doubt, infrastructure expansion is essential for national development. India is actively leading initiatives to allocate resources and focus on infrastructure development, as evidenced by initiatives taken by central and state authorities.

The supply chain disruptions caused by the pandemic have led India to prioritize “Make in India” and self-sufficiency, resulting in a full focus on infrastructure development within the country.

Both central and state governments are implementing policies to streamline project planning and implementation in key sectors such as power, transport and urban development, including initiatives such as public transport and electric vehicles.

With the government’s renewed focus on infrastructure-intensive sectors such as roads, rail, housing and urban issues, NBCC is positioned to deliver significant growth in the short and medium term.

Unlike other companies in its industry, NBCC benefits from Public Works Organization (PWO) status, which allows it to secure projects through nomination rather than competitive bidding.

In this state, NBCC appoints a company to perform the project and receives payment for services upfront from the government agency before the real estate redevelopment, development or construction project begins. As a result of this payment structure, NBCC has no debt and maintains healthy cash reserves.

The company’s stock has shown impressive growth over the years. Over a longer period of five years, the stock price rose a whopping 1,960%. In just over a year, the stock price has risen more than 250%.

So, let’s take a closer look at the article and explore its business, finances, and future prospects to see if there are investment opportunities for it.

NBCC Corporate Overview

NBCC Established in 1960 as the construction arm of the Government of India, it carried out civil engineering projects for state governments, various central government ministries, and the public and private sectors.

It is headquartered in New Delhi and has operations throughout India. It began its international operations in 1977 and currently has offices in the Maldives, Mauritius, Seychelles and Dubai, and is exploring new prospects in Jeddah, Burundi and Camiba.

The company provides independent engineer services to Jaipur International Airport operations, is diversifying into the healthcare sector under the Ayushman Bharat mission through construction of regional and central medicine depots, defense works, and aviation infrastructure sector through procurement of advanced machinery and equipment (printing). machinery) and Smart City Mission projects.

NBCC’s business divisions

Project Management Consulting

NBCC executes PMC projects across a wide range of construction sectors at fixed agency fees, including civil construction projects such as hospitals, educational institutions, residential complexes, etc. as well as infrastructure projects such as solid waste management schemes, roads, roads, etc. and drainage system.

Another important element of the PMC segment is the company’s unique redevelopment business model based on self-revenue generation, which has grown NBCC into a leader in the construction sector. In this model, the government provides land for redevelopment, finances it by commercializing a portion of the land, and uses the proceeds to fund the redevelopment project.

In fiscal 2023, this segment remained the most revenue-generating segment, accounting for nearly 92% of total revenue.

Engineering Procurement and Construction

NBCC’s EPC services include a variety of packages covering project concept, feasibility study, thorough project report, engineering, bid specifications and basic and detailed engineering, project review, commissioning, testing, and delivering the project to the client in a ready-to-use state. do. .

NBCC has also been involved in a wide range of infrastructure projects including smokestacks, cooling towers, coal processing plants, roads, TV towers, airports, runways and more.

This segment contributed nearly 6% to the total revenue during fiscal 2023.

real estate development

NBCC made its real estate debut in 1988. As a leader in the construction industry, NBCC has played a key role in the execution of many institutional projects as well as residential and commercial projects, whether through purchasing land or entering into joint ventures or consortiums. Other prominent players.

Nearly 2% of 2023 sales came from this segment.

NBCC’s Finance

In FY 2023, NBCC saw significant growth in its revenue, surging 14% to reach ₹8,754.44 crore compared to ₹7,690.61 crore in FY 2022. Analyzed over a four-year period from 2020 to 2023, the company recorded its revenue at a compound annual growth rate (CAGR) of 3%.

At the same time, there has been a notable increase in net profit, with a 17% increase from ₹237.93 crore in fiscal 2022 to ₹278.01 crore in fiscal 2023. Cumulative net profit recorded a CAGR of 40% over the four years from fiscal 2020 to fiscal 2023.

The improvement in financial performance follows the completion of major projects. For example, we have completed projects like AIIMS, Bilaspur, Himachal Pradesh (assessed ₹1249.82 Cr), IIT- Mandi, Himachal Pradesh (assessed ₹580.90 Cr) and Regional Office Complex of NICL, Kolkata (assessed ₹327.62 Cr).

In FY23, NBCC maintained favorable financial metrics with a return on equity (ROE) of 21.69%. return on capital employed (ROCE) is 23.81%.

NBCC’s future plans

solid order book

NBCC has a strong order book of Rs. 5.53 trillion won on a consolidated basis as of December 31, 2023. About 92% of this comes from Project Management Consultancy (PMC) projects, including redevelopment projects.

The company expects to win projects worth Rs. 12,000 billion in the next financial year (FY 2024-25) and has already awarded projects worth Rs. It’s $600 billion in the current fiscal year. The order book provides the company with strong revenue visibility over the next few years.

Revenue and growth goals

NBCC expects to achieve a consolidated revenue of Rs in the current financial year (FY 2023-24). 10,500-11,000 Crores. The company has set a revenue target of Rs for the next financial year (FY 2024-25). It is 1300 billion won on a consolidated basis.

Management has an ambitious goal of achieving consolidated sales of 500 billion won. 25,000 billion by fiscal 2027-28, with a compound annual growth rate (CAGR) of approximately 20% over the next five years.

Redevelopment and Real Estate Opportunities

NBCC sees significant growth opportunities in the redevelopment and real estate sectors. About 40-45% of the target Rs. By fiscal 2027-28, $25,000 billion in revenue is expected to come from redevelopment projects.

The company is actively exploring opportunities with various state governments and PSUs for land redevelopment across India. NBCC also plans to start its own real estate projects on its existing land bank worth Rs. 70 billion.

conclusion

With a strong order book, ambitious growth targets, and significant opportunities in the redevelopment and real estate sectors, NBCC is expected to deliver significant growth in the coming years. The company’s debt-free status, government support, and diversification efforts further strengthen its prospects.

As an investor, what do you think about NBCC’s future? Do you see the company achieving its high revenue targets and emerging as a major player in the Indian infrastructure landscape? Share your perspective on NBCC’s growth trajectory and potential investment considerations.

Written by Nalin Surya

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