NCC Q2 Results: As margins collapse, net profit drops 41% despite improved revenue

10 Nov 2023 , 03:48 PM

On November 9, the construction company NCC Ltd reported a 41.3% decline in its consolidated net profit for the quarter that ended on September 30. The decline in operating margins, which amounted to approximately 300 basis points, negated the benefits of improved execution during the quarter.

According to an exchange report by NCC Ltd., revenue from operations increased 40% to Rs 4,719.61 crore during the quarter as the company enjoyed the fruits of its record order wins in 2022–2023.

In 2022–2023 NCC saw its highest order inflows ever, totaling over Rs 26,000 crore, because of increased government spending on the National Infrastructure Pipeline (NIP).

NCC had an order book of Rs 50,244 crore at the end of 2022–2023; the company’s topline for the remaining months of 2023–2024 will profit from this.

In Q2 2023–24, NCC maintained its winning order run, securing orders of Rs 12,289 crore, bringing its order book to Rs 61,796 crore as of September 30, 2023.

But the company’s aggressive order-book expansion has resulted in a decline in operating margins, or earnings before interest, taxes, depreciation, and amortization.

In the September 2023 quarter, NCC’s operating margins dropped from 9.98 percent to 6.84 percent, a 313 basis point annual decline.

The government (federal and state) funds more than 80% of the projects in NCC’s order book; the remaining portion comes from the private sector.

NCC reported Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of approximately Rs 409.21 crore and an EBITDA margin of approximately 9.3 percent for the quarter ending June 30, 2023.

Building highways, bridges, flyovers, and commercial and industrial structures is NCC Ltd’s main business. The infrastructure corporation also works on hydrothermal power, housing, irrigation, and power transmission projects. The company is present outside of India in the United Arab Emirates and Oman.

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