NCC

The company, earlier recognized as Nagarjuna Construction Company and now rechristened as NCC, has shown a poor performance for Q1FY14. The  company reported a 70% (YoY) and drop of 50% (QoQ) net profit at a meager Rs.6 crore. There was a 10% (YoY) drop in net sales at Rs.1617 crore. The company managed to bring down its total operating costs down by 10% (YoY) mainly on four counts – raw material, sub-contracting charges, employee expenses and other expenses. That helped the company post an EBITDA of Rs.73 crore, down 19% (YoY). But then came the giant portion of interest outgo at Rs.141 crore, same as in previous Q1 and 11% lower QoQ. This cost basically ate away whatever little it managed to save on costs and more.

The company’s debt currently stands at Rs.2300-2400 crore levels. It had chalked out plans to reduce debt through monetization, sale of assets. That has not yet gone as per plans and thus debt continues to remain high. There is talk of the company selling stake to Singapore based Sembcorp and news is that it could buy a majority stake in NCC Power Projects for around Rs.1500 crore. NCC Power Projects is a JV between NCC, holding 55% stake and Gayatri Projects, holding 45% stake. It is developing a 1,320MW coal-based thermal power project in Andhra's Nellore District. NCC had issued a clarification, it did not deny the news but stated that the talks were in the initial stages thus too early to comment. This means that deal could happen and if that happens, major woes of this company could get resolved. This stake sale news will be the big trigger for the stock in the coming days. As at end of current Q1, promoter’s stake was at 20.26% of which 69.90% is pledged. Institutional holding is much more than double the promoter’s stake at 46.41% of which Blackstone holds 9.9% and Warhol holds 9.89%. Rakesh Jhunjhunwala, at end of Q1FY14 holds 9.59% stake.