NCC : Transcript of the conference call-Aug 17,2022

Ref. No.: NCCL/ Regulation 30/2022

Date : August 17, 2022

National Stock Exchange of India Ltd	BSE Limited
Exchange Plaza, C-1, Block G	Phiroze Jeejeebhoy Towers
Bandra - Kurla Complex	Dalal Street,
Bandra (E)	Fort
MUMBAI - 400 051.	M U M B A I - 400 001.
Symbol: NCC	Code: 500294

Dear Sir(s),

Sub: Submission of Transcript of the conference call under Regulation 30&46 of the SEBI (LODR) Regulations, 2015

Please find enclosed herewith the transcript of the earnings conference call that took place on August 10, 2022 with analysts discussing the performance & financial results of Q1 of the F.Y. 2022-23. The transcript is also available on the Company's website at https://ncclimited.com/analysts.html.

The Transcript includes list of management attendees and the Q&A's, any assents/dissents and open points.

Please note that no unpublished price sensitive information was shared/discussed in the earnings call.

Kindly take the above information on record.

Thanking you,

Yours faithfully

For NCC LIMITED.

1. V SRINIVASA Digitally signed by M V SRINIVASA MURTHY

MURTHY	+05'30'
	Date: 2022.08.17 17:24:43

M V Srinivasa Murthy

Company Secretary & EVP (Legal)

Encl : As above

NCC Limited

(Formerly Nagarjuna Construction company Limited)

CIL: L72200TG1990PLC011146

NCC House, Madhapur, Hyderabad 500 081 T [phone] F [phone] ncclimited.com

"NCC Limited

Q1 FY 23 Earnings Conference Call"

August 10, 2022

MANAGEMENT:	MR. KRISHNA RAO - EXECUTIVE VICE PRESIDENT,
	FINANCE & ACCOUNTS, NCC LIMITED
	MR. P. V. VIJAY KUMAR - VICE PRESIDENT,
	FINANCE, NCC LIMITED
	MR. NEERAJ SHARMA - HEAD OF STRATEGY &
	INVESTOR RELATIONS, NCC LIMITED
	MR. K. DURGA PRASAD - GENERAL MANAGER,
	FINANCE, NCC LIMITED
MODERATOR:	MR. MOHIT KUMAR - DAM CAPITAL

Moderator:Ladies and gentlemen, good day and welcome to the Q1 FY23 Earnings Call of NCC Limited, hosted by DAM Capital Advisors. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*" then "0" on your touch-tone phone. Please note, that this conference is being recorded.

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NCC Limited

August 10, 2022

I now hand the conference over to Mr. Mohit Kumar from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Mohit Kumar:Thank you, Aman. On behalf of DAM Capital, we welcome you all to the NCC Q1 FY23 earnings call. From management today, we have with us, Shri Krishna Rao, Executive Vice President, Finance & Accounts; Shri P. V. Vijay Kumar, Vice President, Finance; Shri Neeraj Sharma, Head of Strategy & Investor Relations, and Shri K. Durga Prasad, General Manager, Finance.

Without much delay, I'll hand over the call to the management for their opening remarks, which will be followed by Q&A session. Over to you, sir.

P. V. Vijay Kumar: Good afternoon, everyone. Welcome to NCC quarter one FY23 earnings investor call. I thank each one of you for taking time to attend this. I hope I am audible properly. Before we start, I will just spell out a small disclaimer clause and then we shall go into the subject. The statements made here or in the presentations uploaded by the company are to our best of knowledge true and any forward-looking statements are subject to certain factors beyond control of the company officiants and management. And hence, the audience are advised to use their discretion in their own analysis accordingly.

Now, we shall go into taking the performance of the company for this Q&A into account. I will briefly start with opening remarks followed by Q&A. I have my colleagues CFO for Krishna Rao Garu, GM, Durga Prasad Garu, and Neeraj, Head, Strategy & Investor Relations present in the call, who may take your questions eventually. Considering the time limitation, we request the audience to limit to one or two questions per person. Okay.

We'll come into the main subject now. Our economy has shown its dexterity in passing through tough challenges in the last two years. You're all aware of that. As you may recall, NCC after posting degrowth of 13% in FY21, it has recently raised back in FY22 posting 37% growth. In many sectors we see near pre-COVID level of activity. However, while the pandemic is still around, geopolitical tensions are affecting the ambience of our economy. A strong growth momentum pushed the real GDP in Q3 of '21-'22 to 106% of pre-pandemic Q3 output of 2019-'20. Also, GST collections during April 2022 stood at INR1.67 lakh crore, registering a double digit growth of 20% compared to corresponding period last year, and 46.7% higher than the corresponding pre-pandemic level.

India's economy grew 7.5% to 8% in FY22 and is expected to grow 7% to 7.5% in FY23.

Future going forward, it seems government is rightly supporting the infrastructure segment, construction segment as well. In the recent budget, you can see the government giving a lot of thrust on infrastructure spending and weighed it has a good option to drive consumption and growth in the economy. The economic survey also observed that gross fixed capital formation exceeded three pandemic level on the back of ramped up public expenditure on infrastructure. The government has also emphasized on expanding road network and more emphasis on giving boost to PM Gati Shakti plan and PM Aavas Yojana as well.

You may note that NCC sort of comprises of 57% from Buildings division, 18% from Water & Environment division and rest in Roads, Mines and Electrical etc. So, we are well placed to encash these opportunities.

Notwithstanding all this good news, the economy is facing still challenges in terms of high inflation, falling rupee, supply chain disruption, pressures on commodity prices, etc. However, I mentioned that NCC is well placed in terms of its contract execution and we have adequate protection in terms of the contract provisions. Considering all this, NCC is well placed in terms of order book at a level of INR40,616 crore. We have started this quarter by bagging INR4,456 crore of contract in this quarter. The main orders during the quarter bagged is the wastewater treatment plant at Malad, Mumbai, which has INR3,833 crore of EPC company. Of course, it has a O&M component of INR1,854 crore as well.

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NCC Limited

August 10, 2022

I will touch upon briefly the financials for the Q1 FY23 now. We have achieved a top-line of INR2,990 crore with an EBITDA of INR281 crore and PAT of INR120 crore. This means we have recorded a growth rate of 56% in top line, and 132% in bottom line. EBITDA levels remained at 9.51% compared to 10.55% in the previous year. Slight dip in EBITDA margins is on account of increased material cost. However, compared to previous quarter, the EBITDA margins improved by 100 bps mainly on account of mellowed down increase in material costs in the first quarter.

Though the overall financing costs increased from INR103 crore in corresponding quarter last year to INR108 crore during the Q1 FY23, the revenue has increased by 56% and hence the effect below EBITDA is positive. And hence, you can see the PAT margin also increasing. Our overall debt remained at INR1,707 crore as against INR1,936 crore at the end of FY22.

I may indicate here that 3.63% of revenue remained as a financing cost. So, if I can share you share with you the breakup of financing costs, LC charges stood around INR7.05 crore. BG Commission stood around INR23.11 crore. Interest on CC WCDL stood at INR30.82 crore. Interest on term loan, INR4.14 crore, interest on mobilization advance stood at INR27.21 crore and balance, others. I may also share that promoters have brought in INR106 crore towards subscription of warrants issued to them. This indicates the conviction of promoters in the business. With a proposed subscription, the promoters' holding will stand at 21.11% of total holding.

And at the end of the quarter, receivables stood at INR2,395 crore compared to INR2,492 crore in the previous quarter. The reduction is mainly on account of improved collection of receivables. The receivables period has come down from 125 days same quarter previous year to 94 days of the quarter ended FY23. This resulted in efficient turnover of working capital cycle. We have drawn INR1,487 crore of CC WCDL limits from banks. Compared to previous quarter, this is higher by FY22 gross.

As you are aware, RBI have increased the repo rates during the quarter three times. We are able to see an immediate increase in interest rate so far as much of the loan portion is in WCDL form. Interest coverage ratio for the quarter stands at 2.88 times while it was 2.05 times same quarter previous year.

As you are aware, the last quarter, we have successfully completed divestment of NCC Vizag Urban which holds about 98 apex in Vizag, the cash flow out of divestment are expected to accrue this year, about INR150 crore during the year and loan repayment of INR318 in next two years' time.

If I may touch upon briefly the consolidated financials also, we have registered INR3,351 crore of revenue on PAT of INR130 crore, which is 61% and 160% higher compared to the same quarter previous year. At consolidated level basic EPS stands at INR2.13 as against INR0.82 in the corresponding quarter previous year.

Coming to the last part of my briefing, we remain bullish on our economy considering infrastructure spend revenue growth. However, this is challenged by geopolitical tensions, global financial market conditions, international commodity market dynamics etc., which will drive the trajectory of the economy. Still, we have the threat of pandemic around looking to the health emergency declared by U.S. and lockdown implemented by China.

Our Board has mulled over the outlook and has felt it is prudent to watch and wait before we crystallize on the guidance part. Though the immediate guidance is not available at the end of this quarter, maybe, I personally feel, EBITDA levels more or less should continue and PAT is likely to be the improved level as this quarter. And of course, top line possibly it may hover around 15% to 20% range growth. However, we still have to crystallize the numbers at the Board level and then we need to furnish these numbers to you guys.

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NCC Limited

August 10, 2022

With this brief, now, I will hand over to my colleagues and we are open to questions now. We'll take questions. I request one or two questions per participant. Please consider we are here for next 45 minutes here. And I open the forum now to open the questions.

Moderator:Thank you very much, ladies and gentlemen. We will now begin the question-and-answer session. We have the first question from the line of Shravan Shah from Dolat Capital. Please go ahead.

Shravan Shah: First of all, congratulations on a great set of numbers. Sir, my first question, as you mentioned that, still we haven't crystallized in terms of the guidance, but still just trying to understand15% to 20% revenue growth that, do we see that is on the much lower side? And likely we can we can surpass that number? And on the EBITDA margin front on the full-year basis, can we see a 10% number at least?

P. V. Vijay Kumar: See, the exact guidance is not provided by the Board head. But however, looking to the trend 15%, 20% is a safe figure to assume in the top line. The EBITDA stood at 9.5% this quarter and as you have rightly assumed, possibly, it has a basis we may continue at the same levels to 10% or something like that. And with the improved turnover, the PAT margins also are likely to improve. We are at now 5.28%, sorry, 4.01%. This may also hover around 4.5%.

Shravan Shah: Okay. And other question is in terms of the order inflow. So, including the recent one, the July one, so, around I think INR6,100 order is already there. So, for the full-year, last time we have said that around INR14,000 crore, INR15,000 crore kind of inflow are we looking at? So, what's the update on that? And I need a couple of data points, particularly on the balance sheet side. So, what's the standalone gross debt and unbilled revenue and subsidiary order book in the console order book number that we have given?

P. V. Vijay Kumar: Okay. As far as the order book is concerned, now, it is a net figure what we are given to you, INR4,000 crore odd, and of course, I have expanded it briefly in my initial introduction, there is an O&M component of…there is a majority component INR1,854 crore. And this trend is likely to continue. Compared to last year it was much higher than the order book position what we have, orders what we have bagged in the last year.

Now, coming to your other questions, your gross debt position, right?

Shravan Shah:Yes. So, gross debt, unbilled revenue and subsidiary order book. So, that was around 3,058 crore as on March. So, what's the number as on June?

Krishna Rao :Yes. Yes. With regard to the orders of the subsidiary companies, we have executed during the quarter INR265 crore turnover. And now at the end of the quarter, it stands at INR2,778 crore. There may be a possibility of INR1000 crore or so, to get an order to this, by the end of the financial year.

In regards to unbilled revenue, we have at around INR2,895 crore unbilled revenue and unbilled revenue is, the more we execute the number of projects, the unbilled revenue is going to increase further. And more particularly, this is two reasons. One is, that with regard to the UP projects where the billing pattern has been changed. For every village Gram Panchayat, we need to submit a separate bill, that is why it is going to go up. Number one. With regard to the other project cities, a stage-wise billing, thereby, we need to wait for the completion of the stages and protocol. These are with regard to the unbilled revenue.

And coming to the debt moment, debt stands at the beginning of the financial year is INR 1,184 crore and we have taken because 56% more in revenue growth, we have drawn around INR 547 crore working capital and we too have a repaid missionary and other loans to the tune of INR,24 crore. So, net debt stands for the quarter is INR1,707 crore. That is with regard to the standalone. And the consolidated level, there is a reduction in Urban, to the tune of INR33 crore. So, with regard to that consolidated debt at the end of the quarter stands at 1,753 crore. So, the increase in the quarter by INR450 crore.

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