Transcript of the conference call-Nov 09,2021

"NCC Limited

Q2 FY2022 Earnings Conference Call"

November 09, 2021

ANALYST: MR. MOHIT KUMAR - DAM CAPITAL

MANAGEMENT: SHRI Y.D. MURTHY - EXECUTIVE VICE PRESIDENT

(FINANCE) - NCC LIMITED

SHRI KRISHNA RAO - EXECUTIVE VICE PRESIDENT

(FINANCE & ACCOUNTS) - NCC LIMITED

SHRI P V VIJAY KUMAR - VICE PRESIDENT (FINANCE) -

NCC LIMITED

SHRI K. DURGA PRASAD - JOINT GENERAL MANAGER,

FINANCE - NCC LIMITED

Page 1 of 16

NCC Limited

November 09, 2021

Moderator:Ladies and gentlemen, good day and welcome to the NCC Limited Q2 FY2022 earnings conference call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the 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 "*" and then "0" on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Mohit Kumar from DAM Capital. Thank you and over to you Sir!

Mohit Kumar: Thank you Janis. On behalf DAM Capital, I welcome everyone to Q2 FY2022 earnings conference call of NCC Limited. Today we have from the management, Mr. Y.D. Murthy, Executive Vice President (Finance), Mr. Krishna Rao, Executive Vice President (Finance & Accounts), Mr. P V Vijay Kumar, Vice President (Finance), Mr. K. Durga Prasad, Joint General Manager (Finance). Without much ado, I will hand over the call to the management for the opening remarks which will be followed by Q&A session. Over to you Sir!

Y.D. Murthy:Thank you Mohit. Good afternoon and welcome to all the participants. I am Y.D. Murthy Executive Vice President Finance at NCC. We will briefly make some opening remarks and after that we can go for a question and answer session.

Our board has met today in the afternoon and declared the second quarter results. You must have seen all the results. Before we take up the second quarter results and also the future prospects of the company, I would like to briefly make some general comments. After that we will discuss the second quarter results.

As you all know the Indian economy is expected to grow by about 9% to 9.5% in FY2022 having shrunk by about 7.5% in FY2021. We all know why FY2021 was a bad year, not only for our country, but for all the countries as well because of the pandemic everybody suffered but now all the countries are also bouncing back.

Indian economy is likely to redeem the loss of FY2021 in the current financial year by growing at 9.5% or so and as far as the construction industry is concerned, it has shrunk drastically in FY2021. The shrinkage in the construction industry was 12% or so that is when the economy shrunk by about 7.5% the construction industry has shrunk by about 12% in FY2021.

Now we are again looking at a bounce back as the COVID is behind us, things are falling in place, workers are available at the project sites, raw material is available at project sites, there is no disruption of supply chain and things are looking up and also we have reached pre-COVID level execution in all our project sites and the construction industry is definitely going to do well better than the Indian economy in the current financial year though a bulk of number is not available.

As far as NCC is concerned, in the first quarter FY2022, we have reported 57% growth in the topline compared to the first quarter of the previous year and in the second quarter the results are

Page 2 of 16

NCC Limited

November 09, 2021

declared today. We have grown by about 41% as compared to second quarter of last year. So things are definitely looking good for us but in the board meeting and our earlier meetings also with our top management the board felt they will not be able to provide a guidance mainly because third wave of the pandemic is expected still some strain is there in certain pockets of the business so officially there is no guidance but based on the first quarter performance, second quarter performance and the order book that we are having with us which is 39112 Crores, we are confident that the performance of the company for the year as a whole will be in the region of 20% to 25% compared to FY21which can be expected as a reasonable performance compared to, the economy growing at 9.5%

As far as the order book is concerned, things are looking good for us. There is a good traction in award of orders. In the first six months of the current year, we already bagged about 5600 Crores of order and in October have become L1 for some orders where the LOIs from the clients are expected in the month of November and we are looking at order accretion of about 14000 to 15000 Crores in FY2022 out of which about 5600 Crores have already been received in the first half of the current financial year.

As far as the working capital is concerned, we have seen a distinct improvement particularly the Central Government agencies like National Highway Authority, All India Institute of Medical Sciences, Defence Projects, they are all AAA rated companies and payment cycle has improved substantially. Last year, the Finance Ministry has given a direction to various government agencies to see that the payments are released faster and quicker to construction contractors so that the wheels of the economy keep moving and that also helped us immensely in terms of payments and also as you know the Reserve Bank has come out with a soft loan called the COVID loan about 10% of the fund based limits of the company, in the process, we got about a 150 Crores of loan from our consortium banks at a concessional rates that also helped us immensely in terms of maintaining our liquidity position without much difficulty.

There are some pockets of problems in terms of payments particularly in the state government agencies mainly because they are focusing more on welfare measures and healthcare measures and the payments to contractors are happening but some delay is there. Particularly as far as NCC is concerned we have seen delays in the state of Andhra Pradesh and Telangana. We are taking the matter with agencies there and hopefully payment cycle should improve by March 2022.

As far as the order book is concerned, we are sitting on an order book of 39112 Crores. Predominately three verticals, that is buildings, roads, and water projects put together constitute about 75% to 80% of the order book as well as turnover of the company. We have got strong execution capabilities in these three verticals and we have leadership position and the contribution from these verticals is definitely going to be strong in the third and fourth quarter of the current year also.

Likewise we are looking at other opportunities particularly in areas like mining where we bagged substantial orders in the recent past and were able to execute also without much difficulty that is likely to continue and as far as macro environment is concerned, the government of the day is

Page 3 of 16

NCC Limited

November 09, 2021

very keen on implementing the NIP, that is, National Infrastructure Pipeline because they realized that there is a deficit of physical infrastructure across the country and they want to set right the position and since the award is happening in various segments and we are nicely positioned to capture those orders and we are confident that about 14000 Crores to 15000 Crores of fresh order accretion in the current year is possible though officially we have not given any guidance for order accretion for the FY2022.

Out of this already 5600 Crores is received in the first six months of the current year and we are L1 for about 2600 Crores worth of orders and balance orders are also likely to come. We are focusing on Jal Jeevan Mission projects where we had some success in UP, we got orders of about 6500 Crores though there was some delay in execution mainly because of the preparation of the project documents and approval by the government agencies but the speed is likely to pick up and also other states are also planning similar Jal Jeevan projects in their respective states. We will definitely participate there.

We are also looking at affordable housing projects. We have done a number of projects in the state of Andhra Pradesh earlier and other states also we have participating in affordable housing. This is also a good area of future growth for the company and likewise the Central Vista project in New Delhi, the Parliament house and other buildings we have started participating in the bidding process for various building projects there. We are also participating in metro rails, at present about 3500 Crores to 4000 Crores of our order book is coming from the metro rail projects. We are doing two projects in Pune right now and in Mumbai, we are doing one project, Nagpur we are doing two projects, Bengaluru we are doing a project now Likewise as and when opportunities are there we participate in bidding for fresh projects and try our luck there.

Recently, we started bidding for high speed rail projects that is the bullet train projects. We have tied up with the like minded construction companies though it was not successful in recent bidding but we continue to participate in the future bids.. All in all we are confident that order accretion should be pretty strong. We have strong execution capabilities and third and fourth quarter, we are expecting to be far better than the first and second quarter so basing on all these things, we are looking at a top line growth of 22% to 25% in FY2022.

That is what I thought I should bring to the notice of the participants and also the banking system has supported us well. We have got most of the limits for the FY2022 tied up and soon we are planning for execution of the documentation. Bank guarantee position also has improved nicely mainly because of the initiatives taken by the Finance Ministry by reducing the performance guarantee value in proportion to progress of project.

In the process, last 18 months, we were able to get back about 1000 Crores of bank guarantee limits available to us so the availability of the bank guarantee limits also improved nicely so that we can take bigger projects as we go forward. We have got good support from the banking system, through the year and our accounts are always standard and regular with all the banks in the consortium. They are quite happy with our account and their support to us which is a big

Page 4 of 16