National Building Corporation Ltd (NBCC) is the 15th Navratna company among 250 PSUs in the country. This Navratna status gives the company freedom to forge tie-ups in the international market and allows it autonomy on investment decisions. Its business verticals include project management consultancy (PMC), engineering procurement and consultancy (EPC) and real estate. The government has been considering a proposal to hive off real estate owned by sick PSUs such as Bengal Chemicals, National Bicycle Corporation and Richardson & Cruddas to the company and it will be using the direct sale of land or go in for joint ventures to develop this real estate. This is expected to pave the way for long-term opportunities for the company in the real estate segment. The company is also looking at strategic alliances with domestic and international players in West Asia, Europe and Commonwealth of Independent States (CIS) countries to scout for EPC contracts as the acquisition route would be quite time consuming. NBCC has already signed a JV with an Oman based company for EPC contracts in Oman and the UAE. Also, it is looking at similar opportunities in politically stable geographies like Turkey and CIS. NBCC was incorporated as a pure EPC player, wherein it has been executing engineering and construction services for projects such as chimneys, cooling towers and various types of power plant works. However, even though growth has been subdued in the last few years, the government’s priority to boost infrastructure will create opportunities for the construction industry and NBCC is well poised to grab this opportunity. The company also expects to get rural orders from the government to make small houses under the Pradhan Mantri Awas Yojna Scheme. Therefore, it is in talks with a Hungarian company to adopt technology for speedy construction of low cost housing. The present government has come out with various ambitious schemes like Housing for All, AMRUT and Smart Cities Mission aimed at urban development. NBCC will be a key beneficiary of these schemes, as it is already implementing a few smart townships in Kidwai Nagar and New Moti Bagh area of New Delhi. Also, redevelopment of old government colonies is a huge opportunity for the company. The company is also waiting for a formal approval from the government to monetise a 700-acre land of VSNL present across India, with the management hinting that it may look to redevelop the land based on its New Delhi based model. The government has recently issued guidelines for Central public sector enterprise to pay an annual dividend of 30% of profit after tax or 30% of Government of India’s equity, whichever is higher. However, this should not impact NBCC, as it has already paid 47% as dividend in the last financial year. Going forward, NBCC expects to maintain a similar dividend payout ratio. The company has received order inflows of over Rs 5,200 crore in the last six months, taking its total order book to over Rs 7,100 crore, providing strong revenue visibility. Moreover, going forward, NBCC expects order inflows of around Rs 10,000 crore in the current quarter. With a strong order book and project pipeline, the company expects top line and bottom line to grow at a CAGR of 30% and 25% respectively in the next few years. Fund managers and analysts are quite bullish on the scrip and feel that it will get a boost in the coming budget on the back of the huge infra push by the government. The NBCC stock currently quoting at Rs 230 in the Indian bourses is a strong buy with a price target of Rs 265 in the next three months.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.