NCC Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

NCC faced a challenging third quarter characterized by execution slowdowns and working capital pressure. The company significantly lowered its full-year revenue growth guidance to 5% as elections and delayed government payments hampered progress. While the order book and bidding pipeline remain strong, rising debt levels and margin compression due to under-absorbed fixed costs are key near-term concerns.

Highlights

  • Standalone revenue stood at ₹4,720 crores, a slight decline of 1.1% YoY due to execution headwinds.

  • EBITDA margin contracted to 8.77% (standalone) from 10.1% YoY, primarily due to lower absorption of fixed costs.

  • Order book remains robust at ₹55,548 crores, with a prospective project pipeline of ₹2.45 lakh crore.

  • Net debt spiked significantly to ₹2,343 crores from ₹1,733 crores in Q2 FY25, driven by elongated payment cycles.

  • Management sharply revised FY25 revenue growth guidance downwards to ~5% from the earlier 15%+ target.

  • L1 project pipeline is healthy at approximately ₹9,000 to ₹10,000 crores.

  • Headcount increased by 15-20% during the year in anticipation of growth that has yet to materialize.

  • Andhra Pradesh exposure remains a focus, with ₹1,150 crores expected from Capital City projects by March 2025.

Concerns

  • Elongated billing and payment cycles

Key financials

  1. Revenue (Standalone) ₹4,720 Cr -1.1%YoY
  2. EBITDA Margin (Standalone) 8.8%
  3. PAT Margin (Standalone) 3.9%
  4. Net Debt ₹2,343 Cr +35.2%QoQ
  5. Order Book ₹55,548 Cr -3.4%YoY
  6. Working Capital Days 95 days

What they filed

Q1 FY27: revenue up 12.2%, net profit up 11.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue5,196 5,345 6,131 5,179 4,543 −13%4,868 −9%6,233 +2%5,812 +12%
EBITDA443 441 555 456 393 −11%436 −1%550 −1%545 +20%
Net profit175 206 265 205 167 −5%135 −34%217 −18%229 +12%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Order Book
₹47,968 Cr Total
  • Buildings ₹21,085 Cr 44.0%
  • Transportation ₹10,800 Cr 22.5%
  • Electrical T&D ₹10,633 Cr 22.2%
  • Water ₹5,450 Cr 11.4%

Guidance & targets

Revenue

  • Annual Revenue Growth Revenue · FY25 · Medium confidence 5%

    Previously 15%+ → 5%

    we are revising the revenue growth downwards to around 5%... for the current financial year.

    — Neerad Sharma, Head Strategy & IR

Margin

  • EBITDA Margin Margin · FY25 · Medium confidence 9.25%

    Previously 9.5% → 9.25%

    EBITDA margin around 9.25% for the current financial year.

    — Neerad Sharma, Head Strategy & IR

Other

  • Order Inflow Other · FY25 · High confidence ₹20,000-22,000 crores

    From ₹20,000-22,000 crores today

    Earlier, we had shared with you an order inflow guidance of Rs. 20,000-Rs. 22,000 crore which we decided to retain.

    — Neerad Sharma, Head Strategy & IR

Capex

  • Regular Project Capex Capex · FY25 · High confidence ₹250 crores
    We have incurred a CAPEX of Rs. 253 crores in the current financial year as against the budgeted CAPEX of Rs. 250 crores for regular projects.

    — Sanjay Pusarla, CFO

Risks & concerns

  • Elongated billing and payment cycles

    high

    Slowdown in payment mechanisms due to central and state elections has increased debt levels.

    Management acknowledged

  • Under-absorption of fixed costs

    medium

    Headcount was increased by 15-20% for growth that didn't materialize, dragging down EBITDA margins.

    Management acknowledged

  • Execution slowdown in Maharashtra

    medium

    State elections in Maharashtra impacted ground-level activity and execution pace.

    Analyst acknowledged

Areas of evasion (2)

  • Specific timelines for Smart Metering and JJM project completions were kept vague.
  • FY26 guidance was deferred until May.

Q&A highlights

2 direct
Revenue Degrowth in Q4 Direct
As far as revenue growth... the degrowth in the 4th Quarter as against what we given the guidance in 4th Quarter about some -1% or 2% will be there in the revenue so that it is close to the 5% growth in the year as a whole.

Confirms that the company expects a flattish to negative Q4, a significant departure from the usual seasonal ramp-up in construction.

Asked by Shravan Shah

Spike in Debt and Working Capital Partial
Debt level increase... there is a slowdown in the payment mechanism because of these elections and all that is the reason if you see the debt level has increased. At the same time, my unbilled revenue also got increased.

Highlights the liquidity strain caused by government payment delays and the buildup of unbilled revenue.

Asked by Jainam Jain

Andhra Pradesh Exposure Direct
AP exposure there are two parts, the first part about Capital City projects, we have pending of Rs. 1,150 crores that we expect to receive by end of March.

The recovery of these dues is critical for debt reduction and cash flow in Q4.

Asked by Vaibhav Shah

2 min read 5 chapters

Detailed narrative

Guidance Reset Amidst Execution Headwinds

NCC has significantly lowered its FY25 revenue growth guidance to approximately 5%, down from an earlier target of 15%+. This revision stems from a slow pace of execution caused by general and state elections, alongside elongated billing cycles. Management expects Q4 FY25 consolidated revenue to be between ₹6,000 and ₹6,400 crores, which implies a flattish or slightly negative growth compared to the previous year's Q4.

Working Capital Strain and Debt Spike

Net debt rose to ₹2,343 crores in Q3 FY25, up from ₹1,733 crores in the previous quarter. This spike is attributed to a slowdown in government payment mechanisms and a rise in unbilled revenue, which reached ₹6,151 crores (33% of revenue). The debt-to-equity ratio subsequently increased to 0.33 from 0.25, reflecting the current liquidity pressure on the balance sheet.

Segmental Order Book and Pipeline

The order book stands at ₹55,548 crores, dominated by Buildings (38%) and Transportation (19%). Electrical T&D also holds a significant 19% share at ₹10,633 crores. Despite execution delays, the company maintains a robust prospective pipeline of ₹2.45 lakh crore and an L1 position of ₹9,000-10,000 crores, providing long-term revenue visibility.

Andhra Pradesh and Smart Metering Updates

Management expressed optimism regarding collections from Andhra Pradesh, expecting to receive ₹1,150 crores from Capital City projects by March 2025. In the Smart Metering segment, the Bihar project is underway with 3 lakh meters installed out of a ₹2,300 crore order. Maharashtra smart meter projects, valued at ₹5,700 crores, are expected to take off following government stabilization.

Margin Compression and Cost Overruns

Standalone EBITDA margins fell to 8.77% in Q3, primarily due to the under-absorption of fixed costs. The company increased its headcount by 15-20% and implemented 9-10% salary hikes in July 2024 to prepare for growth that has been delayed. Management is targeting a recovery to 9.5% margins in Q4 to achieve a full-year average of 9.25%.

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