Crime Today News
After three-four years of robust growth, the infrastructure space saw traction slow down over the past year or so.
A combination of multiple elections — parliamentary and assembly — over the past 12-odd months and the government’s undershooting of infrastructure-related budget spending last fiscal have resulted in slower project awards and delayed payments.
However, for FY26, the government has indicated an increase of more than 10 per cent in capital expenditure (₹11.21 lakh crore) from the revised estimates of FY25. Contracts are coming back on stream and stuck payments are being released.
In addition, the grant to create capital assets, at ₹4.3 lakh crore and another ₹4.3 lakh crore in capex spends for public sector enterprises, both for FY26, present considerable opportunities for companies operating in the space.
We had recommended buying the stock of NCC in December 2023, given that it is a key beneficiary of the thrust in capital expenditure expansion.
From our recommended price (₹167), the stock more than doubled to ₹357-levels and from there it halved in the market carnage (₹175) witnessed in the mid- and small-cap spaces over the September 2024-March 2025 period. It has rebounded subsequently to around ₹210 currently.
We reiterate our ‘buy’ recommendation at the current market price from a two-three-year perspective.
At ₹217.85, the stock trades at 13.5 times its likely per share earnings for FY26, making the valuations reasonably attractive.
NCC operates in segments ranging from building and housing, roads, water and environment, to irrigation, electrical works, mining and railways. These projects are executed for various State and Central government entities, apart from a few private groups.
A track record of strong execution, diversified orderbook and a pipeline of lucrative projects to be worked on over the next few years make the prospects for the stock of NCC attractive.
In 9MFY25, the company’s revenues grew 11.9 per cent year on year to ₹16,068 crore, while net profits rose 20.2 per cent to ₹566 crore.
Reliable track record
NCC operates in multiple segments of the infrastructure theme, as mentioned earlier.
Industrial and commercial buildings, IT Parks, shopping malls, colleges, hospitals, metros, highways, water treatment plants, underground drainages, electrification, transmission & distribution lines and sub-stations, dams, reservoirs, tunnels, track laying, signalling and coal excavation are some of its areas of expertise.
Its client list includes BMC, Chennai Metro Rail, Indian Oil, Adani Group, NHAI, RVNL, ESIC, Pune Metro, Namma Metro, Coal India and Airports Authority of India. Departments of over 13 States are part of NCC’s customer base.
A sample of projects it executed includes Nagpur Metro Rail, ESIC Hospital at Gulbarga, AIIMS Guwahati, Agra-Lucknow Expressway, SVAB, ISRO Sriharikota, Water Supply Project in Odisha, Rubber Dam on Falgu river, Airport at Agartala and Nagpur-Mumbai Expressway.
Continuing large projects include smart meter orders and Jal Jeevan Mission contracts.
Order book
As of December 2024, NCC had an order book of ₹55,548 crore to be executed in the next few years. The order book translates to around 2.45 times its trailing 12-month revenues.
Being an EPC (Engineering, Procurement and Construction) player with long track record, the company is able to bid optimally for its projects and has generally been able to maintain decent EBITDA margins.
In FY24/25, margin has come down a bit due to slower project awards and delayed payments especially from government clients. However, over the next few quarters, most of these payments are likely to come through.
This margin is still healthy given the scale at which it operates. It is also increasingly taking on projects that contain escalation clauses to insulate the company from increase in input prices.
The company has constantly been able to tap into emerging areas and develop expertise to win orders. Smart metering is one such area, given the focus that many State electricity boards put into it to reduce revenue leakages and tighten subsidies.
NCC’s current order book is quite diversified with buildings (38 per cent), transportation (19 per cent), electrical transmission & distribution (19 per cent), water & railways (10 per cent), irrigation (9 per cent) and mining (5 per cent) being the main constituents.
Given the diversity of the order book, and the criticality of many projects that it is executing, there is reasonable visibility on earnings and margins for the next few years.
Debt under control
NCC’s debt has risen in the past year, mainly due to the delay in payments and mobilisation advances for most of FY25. While net debt is around ₹2,284 crore as of December 2024, the net debt to equity ratio is still reasonable at 0.3. When payments come through on time, going forward, and project awards get back to double-digit growth phase, debt levels are expected to come down over FY26 and early FY27.
Published on April 19, 2025
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