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Company Name: Nagarjuna Construction

Company Ticker: NJCC IN

Date: 2011-02-04

Event Description: Q3 2011 Earnings Call

Market Cap: 25,902.13

Current PX: 100.95

YTD Change($): -39.75

YTD Change(%): -28.252

Bloomberg Estimates - EPS

Current Quarter: N.A.

Current Year: 10.708

Bloomberg Estimates - Sales



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Q3 2011 Earnings Call

Company Participants Dhirendra Tiwari, Motilal Oswal Securities

Y. D. Murthy, Executive Vice President, Finance

R. S. Raju, Senior Vice President, Finance and Accounts

Other Participants Hardik Shah

Sunil Kumar

Analyst

Pramod Amte

Madan Gopal

Sachin Relekar

Vikas Verma

Kalpesh Gothi

Abhinav Bhandari

Teena Virmani

Ashish Shah

Pankaj Chopra

Sumeet Agrawal

Vibhor Singhal

Shailesh Kanani

Atul Rastogi

Presentation

Operator

Ladies and gentlemen good day, and welcome to the Q3 FY11 Results Conference Call of Nagarjuna Construction

hosted by Motilal Oswal Securities Limited. As a reminder for the duration of this conference, all participants' lines

will be in the listen-only mode. And there will be an opportunity for you to ask questions at the end of today's

presentation. [Operator Instructions]. Please note that this conference is being recorded.

At this time, I would like the conference over to Mr. Dhirendra Tiwari from Motilal Oswal. Thank you and over to you

sir.

Dhirendra Tiwari, Motilal Oswal Securities

Thank you. Good afternoon ladies and gentlemen. Welcome to 3Q FY11 conference call of Nagarjuna Construction

Company. We are glad to have with us today Mr. Y. D. Murthy, Executive Vice President, Finance; and Mr. R. S.

Raju, Senior Vice President, Finance and Accounts to discuss the results.

Now I hand over the floor to Mr. Murthy. Over to you, sir.

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Thank you, Dhirendra. Good evening ladies and gentlemen.

First I will take you through the Q3 performance of the company and after that we can have a question-and-answer

session. And I request to read not more than 25 questions can be taken because of positive time.

As far as the third quarter is concerned the company has achieved a turnover of 1,338 crores as against 1,187 crores, in

the third quarter of the previous year, they were resulting the growth of about 13%.

The EBITDA in the third quarter is 127.6 crores as against 118 in the previous year, and the PAT is 40.43 crores as

against 47.86 crores in the previous year. And the PAT margin is 3.0%, the EBITDA margin is 9.5% for the quarter.

As far as the nine months period is concerned on a standalone basis, the company has reported a turnover of 3,623

crores, as against 3,255 in the nine months of previous year. EBITDA for 356.71 crores, as against 330 crores of

EBITDA in the previous year, and the PAT of 127.79 crores as against 129.99 crores in the previous year.

The PAT margin for the nine months period is 3.52%, the EBITDA margin for the nine months period is 9.8%. On aconsolidated basis the company has reported a top-line of 1,599 crores, that is almost 1,600 crores as against 1,465

crores in the third quarter of the previous year.

The EBITDA margin for the third quarter is 10.9% current year, as compared to 10.5% in the third quarter of the

previous year. The PAT margin is 3.25 for the current quarter and 3.80 for the third quarter of last year.

Nine month period, the turnover booked the 4,516 crores as against 4,097 crores in the nine months of last year. The

EBITDA is 517 crores and the PAT is 171.82 crores. The EBITDA margin is 11.46, the PAT margin is 3.80.

As far as order book is concerned, in the third quarter we have bagged order for 2,741 crores. And in the nine month of

the current year, we bagged order for 6,236 crores, whereby the order book at the end of the third quarter is 17,269

crores.

I will give you the breakup for the order book across various segments. Buildings division has an order book of 6,032

crores, that is 35%; the transportation division has an order book of 897 crores, that is 5%; water and environment

2,228 crores, that is 13%; electrical division 4.7 crores, that is 3%; irrigation 1,792 crores, that is 10%; metal 564

crores, that is 3%; power 1,678 crores, that is 10%; international 2,559, that is 15%. The total order book is 17,268

crores.

Other divisions, in these other divisions comprising of oil and gas, mining and railways 1,071 crores that is 6%, which

is the order book of the company as of the end of the third quarter. As far as a turnovers are concerned, we had a

combined turnover 4,338 crores, including the international subsidiaries. And out of these buildings have contributed

1,211 crores, that is 28%; transportation has contributed 297 crores, that is 7%; water and environment 879 crores, that

is 20%; electrical 380 crores, that is 9%; irrigation 188 crores, that is 4%; metals 250 crores, that is 6%; power 1.64

crores, 3%; international 866 crores, that is 20%.

And the other divisions comprising of oil and gas, mining and railways put together 143 crores, that is 3%. The total

orders executed that is the construction contracts executed in the quarter is 4,338 crores. Our for the first nine monthsof the year, it's 4,338 crores.

Based on the performance of the company, we all know in the first nine months of the current financial year, and

looking to guidance that we have given at the beginning of the year, that is about 7,300 crores of top-line on a

consolidated basis and 5,750 crores of our top-line on a standalone basis, we are of the opinion that the targeted

turnovers may not be achieved. There should be a slippage of turnover up to the extent of about 9 to 10% in the top-line

for the current year as a whole.

The reasons for the slippage I shall give you, adverse weather conditions in the third quarter have affected the turnover

of the company substantially. We had extended monsoon, second quarter monsoon was also quite severe. And this has

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impacted the expected turnover by about 70 crores in the third quarter and 173 crores for the first nine months of the

current year.

Delay in release of payments. This has impacted by the clients. This has impacted the third quarter revenues by about

85 crores and with the nine month revenues by about 327 crores. Delay in clearance of works on the land acquisition by

the clients, in the third quarter it has impacted the turnover by about 40 crores and for the nine months it has impacted

turnover by about 150 crores.

So the shortfall in turnover as far as the third quarter is concerned is about 195 crores on account of this three reasons,

and for the nine month period it is as much as 650 crores. This is more or less explains why there is going to be a

shortfall in the turnover of the company for the year as a whole.

As far as the low profit margins are concerned the interest outgoing have increased substantially on account of two

factors; one is the quantum of debt, that is appearing in the books of the company has gone up. We have got the debt of

about 2,319 crores at the end of the third quarter, that means the debt has gone up by 850 crores during the last nine

months.

And also the interest rates, which were around 78% in the first quarter of the current financial year have shot up beyond

10% in the third quarter, that's why the interest outgoing is also substantially gone up. And coupled with the low profits

are on account of losses in the road projects and also delay in payments by clients, which have impacted the cash

receipt of the company. And all-in-all about 22 crores of profits have been impacted in the third quarter.

As far as international subsidiaries are concerned, Nagarjuna Construction Company LLC has done a turnover of 43

crores in the third quarter that is the Dubai subsidiary, and also NCC International that is Muscat subsidiary 170.56

crores, and the NCC Urban Infrastructure that is our real estate subsidiary, about 31.8 crores of turnover and a net profit

of 0.8 crores.

The international subsidiaries are on course as far as the turnovers are concerned, they are likely to achieve the

budgeted turnover for the year as a whole, but the shortfall is coming primarily from the domestic business.

The debt position of the company has gone up to 2,319 crores, as compared to 1,532 crores at the beginning of the year

And added to this the interest burden, the interest rates at which we are able to procure the data also has gone up

substantially during last nine months. And because of that the interest burden has gone up and that has impacted the net

profit margins. We have reported a net profit margin of only 3.02%, as compared to the 4.03% in the third quarter of

the previous year.

That is as far as the company's performance and our presentation is concerned. Now I request the participants to ask

your questions.

Questions And Answers

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions]. The firstquestion is from Hardik Shah from Religare. Please go ahead.

Hardik Shah

Yeah, good evening, sir.


Good evening.

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Hardik ShahWe have acquired 55% stake in Nelcast. So, what sort of compensation we have paid for? Second question is during

this quarter, our average tax rate, I mean which is roughly at 41%. So, I presume that we have made a excess provision

due to owning to this IT rate. So, what quantum of liability which you are accessing at this moment.


Yeah. As far as the Nelcast is concerned. It is acquired jointly by NCC and Gayatri Projects, our share being 55%.

Hardik Shah

Right.


The balance 24% was owned by Gayatri Projects.

Hardik Shah

Right.


So we have created a consideration of about 270 crores for the company fully. Out of that our share of commitment is

about 150 crores.

Hardik Shah

Okay.


About the tax provision, in this quarter we have made an additional provision of 4 crores towards this tax liability.

Hardik Shah

Okay. Sir, what could be our.. I mean how much we are assessing as our total liability due to this IT raid, I mean any

update on that front?


The proceedings still are going on verification, but we are expecting about around 15 crores of the liability on account

of that tax verification.

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Hardik Shah

Okay, okay. And sir one more question. What composition of our order book on which we have already startedexecutions. So I mean out of our roughly 17,000 crores odd of order book, what component of order book which we

have already commenced work on that?


See normally what happens is once an order is given, it takes us two to three months to start the work on the project,

mobilization, manpower, machinery and all that. We are resuming to nearly one month delay whatever orders we

received in the month of December, they will be launched in the month of February, that's how it is.

Hardik Shah

Right, and sir I mean any, I mean what component of orders, which are running delay? Which are running I meanfacing significant delays due to maybe whatever reason, I mean financial closure, delay in financial closure or maybe

lifting of MoEF, I mean environmental clearance?


Road projects are delayed, so primarily because of land acquisition delays. Not only on a cash contract basis, the

construction contracts that we are still executing in the road sector, but also our BOT projects where our subsidiaries

have given the EPC Contract to the parent company, there also impacted mainly because there was delay in acquiring

land by National Highway Authority of India Limited.

Hardik ShahOkay sir. Now what is the status, I mean how much --


That I will explain.

Hardik Shah

Thank you.


Now... yeah out of 17,000 crores odd order now we have, no order is pending for want of major clearances like your

MoEF clearances or financial closure. Those orders are not there. So what are orders now we have, they have the

clearances except the order what we received in the December or orders are in the committing stage. The orders what

we received in December, as we said they will commence in February or March.

Hardik Shah

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Okay. And sir, as far I mean newspaper articles regarding to that road project which we are, we are L1 as of now that

1,500 odd crores of project, we are hearing that Madhucon Projects has filed litigation against this bidding process or I

mean is there any I mean sort of, which we are hearing right now, so I mean any color on that front?


Yeah. See what has happened is the Madhucon bid was not accepted by NHAI on technical grounds?

Hardik Shah

Right.


So, there was some deficiency in the some power of attorney submitted by them.

Hardik Shah

Right.


Whatever is the reason, their bid was not opening... the price bid was not opened. And without their bid being opened

we have become L1 and they are invited as a group to take the project actually. We have declared that we are the

successful builders though the letter of intent is yet to be given to us.

In the meantime as you rightly said Madhucon has gone to High Court and they made a representation that their bid

was lower than our bid and that bid should be opened and the project should be given to Madhucon because they have

quoted lesser than our quote.

Hardik Shah

Yeah.


So we are now the High Court... see NIT institution they have got certain principals based on procedures. If anybody is

disqualified on technical grounds they do not open the price bid of that particular bidder.

Hardik Shah

Right.


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So that is the stand we are taking. Now the matter has gone to Supreme Court, ultimately whatever the Judicial

Authorities have decide based on that they give a direction to NHAI, and based on that they will be finalizing the

matter.

In our opinion this will be going to go for rebidding. Actually the legal position is if their bid is opened they will get the

project. If their bid is not opened we will get the project. But we understand that most probably it may go for rebidding

that is a low ground situation.

Hardik Shah

No sir, that is there. Just two more questions. Sir, given the fact that what we have done in nine months, how do you

end the order inflow that has been there, how do you see FY12 revenue growth planning out, and in terms of margins

do you see any pressure from current levels?

Y. D. Murthy, Executive Vice President, FinanceYou see the FY12, we normally as I work out it inaugurate business plan that process has started. We submit to the

Board before 31 March, 2011 and get the Board approval and with this plan approved, we give the guidance for the

next financial year to the stock exchanges.

So, I cannot comment how much of the turnover will be done in this FY12. But based on the order book that we have

got and also looking to the various opportunities that are available for the front-line companies like us, we are confident

that top-line growth of 22 to 25% is definitely possible in the next financial year also.

Hardik Shah

Sir on power project, the financial closure and EPC project awards, I mean when do you see those things happening?


Yeah. We already moved with the lenders that we literally consorting for the funding the power project is hardly see

that is Rural Electrification Corporation, they have already sanctioned their share of the debt and the PFC also have

sanctioned. Together RBC and BSE put together 3,200 crores of debt is already sanctioned and the sanctioned at

provinces.

We declared total debt of 5,285 cores, which means there is a gap of about 2,000 crores. Further we have approached to

the State Bank of India and they already gave us inter-ritual sanction and it is going to be converted in to a regular

sanction by the end of this month. And the balance 1,000 cores we are talking to ICICI Bank and they also promised to

give us a sanction by end of February. So, we are targeting financial closures for this project by March 2011.

Hardik Shah

One last question from my side. One is on the road project. Is that included in the order inflows of 2,700 crores?


Absolutely not. See the road project cannot be included in the order book mainly because in order to form an STV

which will become the owner of the project. It was finally consist an agreement with NHAI, it will go for financial

closure. At that time they will file in the EPC. And when the EPC is awarded to the parent company that will find a

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reflection in the road to deliver the parent company. So, that order does not include in our order book at all.

Hardik Shah

And sir, power projects what kind of order inflow can you expect... can we expect in the next few months.


Power project order is likely to be finalized in the next two months and most probably EPC will be done by the NCC,

with the power division of NCC. The order price will be about 4,000 to 4,500 crores.

Hardik Shah

Okay, sir. Sir, thanks a lot for taking questions. Thanks.

Operator

Thank you. [Operator Instructions]. The next question is from Sunil Kumar from Birla Sunlife Insurance. Please go

ahead.

Sunil Kumar

Yeah, hi. Sir, wanted to understand the composition of Rs. 2,700 crore of orders which you received in this quarter?

Y. D. Murthy, Executive Vice President, FinanceMost of them are building projects and also we bagged irrigation project were bagged and some water related projects

were received.


Electrical also.


Electrical, some projects we have received.

Sunil Kumar

Okay. So like you clarified in the previous question that wood order is not included. So similarly power project order

will also be finalized after the financial closure only?


Yeah, yeah. And EPC is awarded to NCC, that will come into the order book of NCC.

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Sunil Kumar

Okay. And it's 2,700 crores of orders, in all the orders you have the financial closure and --


That is incorrect. So, from the power division that is power entrepreneurs, we got another two orders aggregating to

3,000 crores, for which financial closure it will not happen, but they awarded the works to us and notice period also

given to us. But we are waiting for the financial closure. In those two orders, we have not including the order book

position. Once their financial closure is happen, then they will reflect in the order book.

Sunil Kumar

Sorry sir, Rs. 3,000 crore, two orders from this power division?


No. No from power division, outsiders.


From IPP, Independent Power Projects outside of the company.

Sunil Kumar

Okay.


Orders have been received, but they are not included in the order book of the company as of now, mainly because those

particular project companies are yet to achieve financial closure.

Sunil Kumar

Okay, okay.


So what we are trying to say is, we are very carefully observing the position of the orders and only when the orders are

executable, we take it into the order book.

Sunil Kumar

Okay, sure. And when do you expect those orders will finalize?

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This quarter, in fourth quarter, we expect to finalize and then it will come into the order book by March and we areexpecting this.

Sunil Kumar

So, you are saying that in this particular financial year, let's say quarter four, from only power division you are

expecting Rs. 4,500 crore of your own power order plus Rs. 3,000 crore this independent --


Yeah, yeah, absolutely. Yeah, yeah.

Sunil Kumar

Okay. And that will obviously mean that your order inflow will be much above some around Rs. 13,000 crore?


Yes, yes.

Sunil Kumar

Okay. And sir these orders which you've received in the quarter, what kind of margins you are expecting I mean the

recent orders like building, irrigation, water which you mentioned?


These will be margin at the division level like building to our EBITDA margin of 10 to 12%, irrigation we have about

10 to 11% and electrical projects we have about 12%, like that the way the margins are available in all these orders.

Sunil Kumar

Sure, sure. So, you are likely to maintain your 10% kind of margins in this financial year as well as next financial year?


Yeah. There was a slippage in the third quarter as I told you EBITDA has come down at the end of nine months it is

9.8%.

Sunil Kumar

Right.

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But we are confident we will maintain 10% for the year as a whole, as far as this year is concerned.

Sunil Kumar

Okay, okay. Yeah, understandably in the quarter three because of revenue slippage your EBITDA must be down right

now. And on the tax front the Rs. 15 crore liability you will be providing over what period of time?


By April to by March 2011 we will provide.

Sunil KumarOkay, so 4 crore --


Already second and third quarter we have provided and now in the fourth quarter also we will provide.

Sunil Kumar

Sir second quarter how much you had provided additional?


4 crores.

Sunil Kumar

Okay. So four plus four, 8 crore you have already provided.


Yeah.

Sunil Kumar

Okay. Right, sir. Thank you. Thank you so much.

Operator

Thank you. The next question is from Rishi Iyer from Citigroup. Please go ahead.

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See our first aim is to see that we achieve financial closure. At the HU financial closure we require about 35% of equity

to be brought into the table, which means our share of equity requirement for the financial closure at the FPV level will

be about 250 to 300 crores. Out of which, 150 crores we already invested. So the balance 100 crore we invest from ourinternal sources in the next two to three months in HU financial closure. And later on over a period of three years, three

to 3.5 years the balance equity has to come into the project.

That we are having some long-term plans like equity dilution at our holding company that is NCC Infra level and

various other plans are there. And based on that we will be providing the equity as and when required. And you also to

keep in mind that NCC is getting the EPC Contract of the order of about 4,500 crores or so which means nearly 450

crores of profit is also going to be earned by us. Now on the EPC Contract. So whatever profit we generate on the EPC,

we are planning to invest in the equity.

Analyst

Okay. And sir the last question is more on the balance sheet side you mentioned your debt number sir, could we have

your working capital details sir please as of today? The debtors inventory, creditors numbers and stuff like that?


Yeah, it will be. The debt collection period is about 117 days. It has gone a little worst than what it was at the end of

second quarter. We are tightly stressed to improve the debt collection period. The working capital cycle also is getting

to distorted. As far as the inventory is concerned, you are asking about the inventory?

Analyst

Working capital.


Working capital, okay.


I will tell you the details of the... do you want the details of the current assets and current liabilities, or only the working

capital?

Analyst

No sir the whole, all the details sir. Debtors, inventory.


Okay inventory is 895 crores.

Analyst

Okay.

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R. S. Raju, Senior Vice President, Finance and AccountsThen sundry debtors 1,529 cores.

Analyst

1,529 cores, okay.


Cash and bank balance 100 crores. Net loans and advances, 2,553 crores.

Analyst

2,553 cores, okay.


It includes loans that is given to the subsidiary companies.


And it also includes the retention money.


Those 521 crores we have given to the group company.

Analyst

Okay.


Then current liabilities, liabilities on closures together 2,068 crores.

Analyst

2,068 crores.


The net current asset are 3,012 crores.

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Analyst

So sir, when we say that we will put in another additional 150 crores by March end from our internal sources.


Yes.

Analyst

And you have cash of only 100 crores as of now, any plans of how we are going to do that?


See when we have done nine months of our turnover we booked profit of 127 crores plus the depreciation of yearly

50-60 crores. So, internal generation is taking place. So those funds will be invested in the equity of the power project.

Analyst

But sir, that number would have reflected in your cash balance?


Yeah.

Analyst

So that's what I am saying, if you have generated about 100 crores till date and you need 150 crores by the year-end,

right, additional 150 crores to be invested, then where will the money come from?


No, in internally as of this date to we have put into the various division this working capital to gear up their progresses

and some of the clients with huge amounts were held up and we expect some collections in the fourth quarter. So, there

were the collections without collections and also the working capital loan sanction with bank or without any difficulty,

that another 150 crores is manageable.

Analyst

Okay.

Operator

Excuse me. I am sorry to interrupt. Ma'am, please come back.

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Analyst

I'll come back. Yeah, thank you so much.

Operator

Thank you. The next question is from Sujit Jain from Asian Market Securities. Please go ahead.

Analyst

Sir regarding this Nelcast project, are we also looking at Chinese players to supply BTG components?


Yes.

Analyst

One here is that in this current budget maybe that import duties will be imposed on capital goods. In that case, we

would probably miss the opportunity since our financial closure will be over only by March?


The EPC contract we are finalizing in this month itself. As on date, there is no import duty on Chinese equipment. That

is a stand we are also taking, but we will review the situation. If there is any import duties reported in the financial

build-up up for 2011, we will examine that.

Analyst

And, sir the coal linkage, have we taken approval from the ministry and as well as MoEF?


Yeah, yeah. Ministry has already submitted and the letter has gone to Coal India for supplying coal at our new location

at Krishnapatnam, so that is not a problem at all.

MoEF, actually the earlier we have given the clearance with 100% imported coals, now we have more on application

for modifying the MoEF clearance with 70% domestic coal, that is also expected by the time we declare financialclosure.

Analyst

Okay. And the other question is on Dubai project. We said that by December, we will completing six stories. So what is

the development there?


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Our work is going on. We are deliberately doing it as a slow manner because it doesn't make any sense to speed up the

process. So now, we are targeting by March to April 2011, the six floors of tower one will be completed.

Analyst

What are the funding details for that project sir so far?


We originally invested about 60 crores, then recently we pumped about 50 crores for that project. So, our exposure is

about 110 crores. We have taken a loan of about 90 crores from ICICI Bank quarterly, and we have brought customer

advances of maybe 180 crores.

AnalystOkay. And sir, could you give me consolidated debt levels?


One second, we'll give.


Consolidate debt as of 31 December 2010, we had about 4,350 crores.

Analyst

Okay. And apart from Vrindavan and Bangalore project, any other project in road duties have started?


We are expecting COD, that is National Highway Authority of India for OB Infra anytime now and also for Western

UP by March 2011. So by March 2011, these two projects will definitely start generating revenues.

Analyst

Okay. And what kind of connections we've reached in Bangalore elevated project?


We are getting around 17.5 lakhs now. We started with 14 lakhs in April 2010, so there is opportunity as far as the

collections are concerned.

Analyst

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Okay. And how much of equity or loan advances so far we have invested in all our elected projects.


Approximately around 700 crores has been invested. It's over to equity and the loans of all other invested projects,

including NCC Urban.

Analyst

How much of that is equity and how much of that is in terms of loans and advances, roughly?


Around 50% will be by way of equity and the balance is by --

Analyst

And how much would you've invested in road projects so far?


Road projects will yield 370 crores heavily invested.

Analyst

Okay sir. That's it from my side. Thanks.


Okay.

Operator

Thank you. Ladies and gentlemen, participants are requested to limit their questions to two per participant. The next

question is from Pramod Amte from RBS. Please go ahead.

Pramod Amte

Sir, this is with regard to your past power project, where you had a trouble. Since you have gone with a Nelcast, do you

have to take that effect in your balance sheet?


No. See what has happened in Sompeta, we have acquired the land, we are ready to launch the projects and

unfortunately the environment clearance was suspended.

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Now, we have taken as the matter afresh with the Ministry of Environment and Forest and we are holding on to the

land, that land will not go anywhere. So, we'll not take any hit on the books of the company. And with the approval of

the lender, some of the project related expenditures that we have incurred for the Sompeta Power Project, we are nowtransferring it to Nelcast Power Project. So, we are not taking any hit as far as the Sompeta project is concerned.

Pramod Amte

Okay. And sir coming back to this quarter, if I look at on your top-line, you have increased hardly by around 130

crores, whereas your employee costs have gone up by almost around 30 crores, the labor cost.


The third quarter you are talking?

Pramod Amte

Yeah, third quarter versus the second quarter. Your top-line has gone up only by around --


1,300 crores.

Pramod Amte

Yeah.


Top-line increases by 1,300 crores in standalone.

Pramod Amte

Right, right. So, there is nothing significant change in the employee cost?


Yes, yes, yes, yes.

Pramod Amte

Sir, is there a significant charge anything in the labor cost or it's normal looking?


Labor cost was routine. There is no any abnormal things happened in this quarter.

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Pramod Amte

Okay.


Labor cost quarter-on-quarter going in the similar level, but only compared to the previous year, there is slight increase

of 1 to 1.5% in the labor cost.

Pramod Amte

Okay. Sure sir. Thanks.

OperatorThank you. The next question is from Madan Gopal from Sundaram Mutual Fund. Please go ahead.

Madan Gopal

Good evening, sir.


Good evening.

Madan Gopal

Sir, what is the cost of this project Nelcast project now estimated?


Yeah. As I was mentioning earlier, we paid about 270 crores of acquiring the project in full, but they will be under

Gayatri Projects put together, our share being 55%. So, our share of about investment for this project is about 150

crores as of now.

Madan GopalTotal project cost estimated.


7,000 crores.

Madan Gopal

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7,000 crores.


Yeah, yeah.

Madan Gopal

Sir, if 7,000 crores. Okay. When is comes to the EPC side, which are the areas that we can do ourselves internally?


See, one is the balance of the plant. But in this case, we are taking up the BTG also and we are planning to have tripod

agreement with the suppliers of BTG and the project company and EPC contractor, which means the BTG Technologywill also be reflected in our books.

Madan Gopal

In BOP, except for civil construction of the building, main building.


Yeah.

Madan GopalI mean power house buildings, can we do any other stuff like can we do anything related to cash handling or something

like that?


Yeah, YAH, absolutely. We have got our full credit power... nearly the 150 people are working there. So, both

capabilities to execute to all BOP works for power projects comprising of semi, mechanical and electrical work.

Madan Gopal

So only, you will get the equipment from the equipment suppliers and you will do the civil work yourself?


Yeah. Erection of equipment will also be our scope, but the performance or the guarantees for the equipment will be

given by the suppliers.

Madan Gopal

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Are you talking about any of the BOP companies in this regard due to supply equipments?

Madan Gopal

Yeah, yeah, we are talking to Chinese companies. In fact, we have almost finalized it for our Sompeta power project

the equipment supplier. The same supplier will now supply to Nelcast.

Madan Gopal

So, the BOP equipment also Chinese are much competitive compared to the Indians.


Yeah.

Madan Gopal

Okay, okay. Thank you, sir. Thanks for taking my questions.

Operator

Thank you. The next question is form Sachin Relekar from Tata Mutual Fund. Please go ahead.

Sachin Relekar

Sir, you said you paid 270 crore for Nelcast, like how much premium you paid to the Nelcast Energy there?


In approximately 50%.

Sachin Relekar

Okay. And secondly sir you mentioned that now the most of the orders are not pending for any of the clearances, I

mean there are factors which impacted your revenue basically for nine months. Are there still some pending issues like

do you see now execution going forward will be much smoother as compared to what expect for the regulatory issues

which is not in anybody's control there?


In fact, the fourth quarter it should be good. We have targeting the top-line for nearly 2,000 crores. Many of the issues

are behind us, and definitely the weather issue is not a problem now.

Sachin Relekar

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Okay. And sir you mentioned that ITC orders, two orders which you have not declared so far and the financial closure

is pending, I just want to clarify like the financial closure is pending on the client side or you are not closed those?


In the client side.

Sachin Relekar

So, client financial closure is still to be done.


Yeah, yeah, yeah.

Sachin Relekar

Okay, okay. That's all from my side, thank you.

Operator

Thank you. The next question is from Vikas Verma from B&K Securities. Please go ahead.

Vikas Verma

Thanks. My almost all the questions have been answered.


Okay. Thank you.

Operator

Thank you. The next question is from Kalpesh Gothi from Wallfort Financial Services Limited. Please go ahead.

Kalpesh GothiGood morning sir. Sir, international fund, what's your revenue target for the FY11 and FY12?


FY11 international companies both together are expected to view a top-line of about 1,200 crores. And out of which,

really 860 crores we achieved in the first nine months. There on target to achieve wage rate number.

As far as 2012 is concerned, we are yet to finalize the business plan. Only after that we will be able to tell about the

turnover expected from the international company.

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Kalpesh GothiOkay. And what is your order inflow for the division nine month for the international side?


International, there is only about 133 crores of the small orders we got, so for during the last nine months.

Kalpesh Gothi

Okay sir. So, we are going to the international side?


Yeah, yeah. We are actually looking at consolidation and we are actually planing to complete the projects. And in fact,

I am very glad to say that one villa project Abu Dhabi and one waterline or pipeline project in Dubai and one road

project in Muscat have already been completed. We are planing to complete one more road project in Muscat in the

next three to four months.

Kalpesh Gothi

Okay. And sir, we have talked about the tax liability for the IT rate close to 15 crore and we have already booked 8

crore. So, in fourth quarter, we likely to book 7 crore?


Yes, yes.

Kalpesh Gothi

Okay, okay. Thank you, sir.

Operator

Thank you. The next question is from Abhinav Bhandari from Elara Capital. Please go ahead.

Abhinav Bhandari

Hi, sir. Good evening. Could you just give the nine months performance of Dubai, Oman and NCC Urban?


Yeah, surely.

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Now Oman company, in the first nine months reported a turnover of 398 crores, an EBITDA of 10.2% and profit aftertax 1.5%. The Dubai company reported a turnover of 388 crores, EBIT of 8.6% and the PAT of 6.7%.


NCC Urban.


And NCC Urban you want?

Abhinav BhandariYeah.


113 crores it has reported; an EBIT of 36%, PAT of 1.6%.

Abhinav Bhandari

Sir, any update on our Pondicherry project, road project?


Yeah. It is going as per schedule, but we were planning that it will be completed by March 2011. There could be

overrun of just by one month, maybe by April we'll complete.

Abhinav Bhandari

And Himachal Sorang how is the progress, how much of equity have gone in?


You see, we declared financial closure during 2007, the project is on execution. Work is going on as per schedule andwe are likely to declare a commercial operation by December 2011. And the debt is being drawn as per the requirement

of the projects and likewise matching the equity is also going into the project.

Abhinav Bhandari

How much project would have been completed now, percentage?


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See total cost is 600 to 700 crores now, out of which, I think 450 to 475 crores has been completed.

Abhinav Bhandari

And could you just give the investment figures from the balance sheet?


Investment in --


100 crores, roughly 100 crore so far we have invested as a equity.

Abhinav Bhandari

Pardon, can you come back with this?


Over 100 crores has been invested.

Abhinav Bhandari

Since March '10 you are saying?


No, till date.


Till date.

Abhinav Bhandari

There is only 100 crores in our balance sheet, is it standalone?


Yeah, that is our share of equity in the project.

Abhinav Bhandari

Yeah, so this...

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R. S. Raju, Senior Vice President, Finance and AccountsThe tax figure I will tell you, but roughly I told you.

Abhinav Bhandari

No, no. I am saying NCC standalone business, the balance sheet investment figure what it would be like?


Okay. One second. It is 1,051 crores at the end of third quarter.

Abhinav Bhandari

Out of it, I believe 370 is in gross.


Yeah.

Abhinav Bhandari

Power would be how much sir?


Power, the major investment is done into Himachal Sorang, which is approximately 100 crores, then the Nelcast

payment, really 100 crores is there up to December. The balance 50 crores has gone after from that December, and

there are still investment in our real estate projects.

Abhinav Bhandari

Which would be how much roughly?

Y. D. Murthy, Executive Vice President, FinanceThat's roughly about 700 crores.

Abhinav Bhandari

That's it from side sir. Thanks.


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Yeah. Welcome.

Operator

Thank you. The next question is from Anshul Chavan from Graffle. Please go ahead.

Analyst

Good evening, sir.


Good evening.

Analyst

Just wanted to ask, can you throw some light on why being the slow pace of construction, that is implementation of

NHDP projects in general, not only of your company but in general, what's the scenario?


What projects the MABP?

Analyst

NHDP.


What is that stand?

Analyst

National Highway Development Program.

Y. D. Murthy, Executive Vice President, FinanceNHDP. See actually there were some slowdown as far as NHAI is concerned in the award of contracts in the last six to

seven months because of their internal problem. And the NHDP in general suffered mainly because of delays in land

acquisition. We also suffered and the other developers are also suffering. So, that is the only reason I can tell you.

Analyst

Okay. And sir in terms of awarding, I suppose that till Jan, we have already awarded some 4,500 kilometers. By the end

of '10-'11, how much do you expect would be awarded in this program?

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Good afternoon.

Ashish Shah

Sir, I just wanted to dwell a little bit more on the receivables that we are saying that we get daily, you are seeing some

delay. So, who would be these clients if you would like to say and in how much time do you expect to receive the

money?


Over the negation projects in NPA, there has been delay in payment of our bills beyond the six months. Its in our own

trade month, that's all.

Ashish ShahAnd how much of that be sir in contract?


Pardon?

Ashish Shah

If you could quantify the same sir?


Nearly about 130 crores.

Ashish Shah

Okay.


And also some projects in our water environment division during the year some payment delay were there. Our

electrical projects, some delays further in U.P. and elsewhere. Altogether, the debt collection period has gone up to thenearly 117 days. Our aim is to see that we bring it down to below 100 days.

Ashish Shah

Sir, what the visibility on these receivables coming down in the near future? I mean do you expect that some concrete

developments have taken place, because of which in the next one month or so, these receivables could come down or

this could drag on for long time?

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You see, our clients are mostly government agencies. So, much depends on their ability to bring the money to the tableand pay me with contractors. And we will carefully examine the situation that about the client and the ability to pay our

bills, then only to we'll take up the projects. Definitely some clients were not able to bring the funds to the table, more

of the alternative than to stop the work or go slow down as far as that particular project is concerned, and that is what is

happening.

Ashish Shah

And sir, in case of your own road projects, you are saying that some receivables are slow to come by even in gross

projects. So, what is the reason really, because --

Y. D. Murthy, Executive Vice President, FinanceRoad project, we have not said the receivables. What we've said is our delay in land acquisition by NHAI, and because

of that the PEs will suffer, that is the clients have suffered. And on account of that, the EPC contractors also have

suffered.

Ashish Shah

Okay. But there is no issue of delayed receivables from...


No, delayed receivables is not there.

Ashish Shah

It's only delayed execution?


Yeah, yeah. See most of your projects, we declared financial closure, which means the funds are available on cap. As

soon as we complete a quarter, we can submit a running bill. They take care of the payment, but drawing the required

debts from the institution. So, there are not much delays as far as payment is concerned.

Ashish Shah

Right. Okay sir. Thank you.

Operator

Thank you. The next question is from Pankaj Chopra from Shanti AMC. Please go ahead.

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Pankaj Chopra

Yeah. Thank you for taking my question. Sir, my question is more relating to the environment. Can you tell me... canyou tell us how is the situation changing in various states in terms of being more favorable for your execution in

various segments and various states? And what is the cause... it will be in the... I can follow with my second question

after this.


No. The macro environment looks quite good as far as our sector is concerned. There is a recognition not only by

Central Government, but also the State Government to see that the economic progress is sustained. The biggest

bottleneck is physical infrastructure, and so they are taking a lot of measures to see that physical infrastructure is

brought up to international standards. So, that is the one biggest positive as far our business is concerned.

Now, the number of states are taking initiatives. Again it varies from some state-to-state and sector-to-sector. I may not

be able to tell all those things in this conference call. But, for example, AP we believe that it has reached the level ofsaturation as far as the irrigation projects are concerned. Now we are concentrating on neighboring states like Madhya

Pradesh, Orissa and also Bihar, Gujarat and Maharashtra where were we actually are bad from irrigation projects.

Likewise, we look for opportunities wherever they are available, be it in irrigation, be in and whatever the environment

be it in electrical projects, we are ready to go. We are an all India company and we are taking projects on all India

basis.

Pankaj Chopra

Sir, I appreciate your answer and maybe this answer would have been same may be a year ago, because the long-term

story, what everyone talks about in this sense. My question was more specific about the recent timeframe. I believe and

this is the understanding we get by reading, talking to other people in the same business that there has been log jam ofdecision taking in the bureaucracy on various segments and sectors. This was now for various reasons of corruption et

cetera, have you foreseen that and is that... do you think its becoming a hindrance in for your execution?


The issues like corruption and all I will not like speak in this forum.

Pankaj Chopra

No sir and it's not worth. It's delaying decision-making at the bureaucratic level.


Some delays are there, and you should know how to manage the situation and target wise and project wise and credit

wise. That kind of capabilities you should be able to generate into the organization, then only you can progress as a

construction company.

Pankaj Chopra

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So, let me put in another way, sir. So you said that, there was loss of revenue, because you were not able to complete or

there were certain issues because of which there was revenue loss, which is not really your fault.


Yeah, absolutely.

Pankaj Chopra

Yes. Now, so shall we say that the company was not able manage the situation not in the monsoon, monsoon is not

dependent but the other issues like clearances.


It is beyond our control.

Pankaj Chopra

Yes.


Like the land acquisition has delayed by two years is one project.

Pankaj ChopraCorrect.


We don't want to name the project. As a contractor, I am helpless spectator.

Pankaj Chopra

Right.


See land acquisition is state subject. Central government, the district administration, they are involved in acquiring the

land.

Pankaj Chopra

Right.

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Earnings of land acquisition will be provided by National Highway Authority of India. If there is a disconnect betweenNSA on one side and the state government on the other side, the land acquisition process in that particular state gets

delayed. But in the process the contractors have been suffering or the developer is suffering, that is a point I make.

Pankaj Chopra

Yeah. I agree with you, sir. So and my understanding is that, that position is worsening for many contractors and you

don't seem to be giving us the same opinion.


Let us not go into debate on all these issues, let us concentrate on the performance of the company.

Pankaj Chopra

Yes.


I suggest that we move onto the next question.

Pankaj Chopra

Okay. Alright. Thank you very much. I don't have any others.

Operator

Thank you. The next question is from Sumeet Agrawal from MetLife. Please go ahead.

Sumeet Agrawal

Sir, I am done with my question. Thanks a lot sir.

Y. D. Murthy, Executive Vice President, FinanceThank you.

Operator

Thank you. The next question is from Vibhor Singhal from Alchemy Shares. Please go ahead.

Vibhor Singhal

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Good evening, sir. Just a quick question. In the wake of the increase in raw material prices, I mean are we seeing a cost

or basically a drop in our margins or is it something we see pressure on our margins?


Actually the drop in margins in the third quarter have been because the non-achievement of the client turnover.

Vibhor Singhal

Correct sir. But going forward, are we... these are margin pressures or maybe there was also some news that there was

some shortage of labor also in AP?


As far as the order book is concerned so far whatever we have, we are not forcing any heavy pressure on the margins.

But what nowadays we understand from the tender provision is there is a competition in the tender bidding level.

Vibhor Singhal

Okay.


So when competition is there is there, naturally 1 or 2, 3% the normally they Are going to try to reduce while quoting

the tenders.

Vibhor Singhal

Okay. Fair enough. Sir, the... just the last thing, in the order book, I mean how much of the share of the contracts would

be fixed price contract if we have any at all?


Yes. Nearly 80% of the contracts are this escalation norms.

Vibhor SinghalEscalation norms. Okay.


And 20% we all designed here.

Vibhor Singhal

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Sorry sir. I didn't get that.


Yeah.

Vibhor Singhal

So, the 80% is probably the price one the price of escalation loss.


Yes, yes.

Vibhor Singhal

Okay. Fine. Thanks a lot sir. Thank you so much.


Thank you.

Operator

Thank you. The next question is from Shailesh Kanani from Angel Broking. Please go ahead.

Shailesh Kanani

Thanks for taking my question, sir. I have couple of questions, one on the revenue front. Can you give me the breakup

of the third quarter revenue segment wise?


Third quarter revenues?

Shailesh KananiYeah.


Yeah.

Shailesh Kanani

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On a standalone basis.


No, right now we don't have. We've got only nine months breakup.

Shailesh Kanani

Okay. Sir, the reason I am asking this question is I believe second quarter dues from AP government very marginal,

like 25-30 crores and this quarter has gone to 320 crores. And the contribution from the irrigation segment to the 2Q

revenues were also marginal. So, have the book been started at AP aggressively on the irrigation front? Can you throw

some light on that?

R. S. Raju, Senior Vice President, Finance and AccountsWhere from the figure, but 320 crores.


Not 320, that is... the over dues in AP irrigation projects around 131 crores at the end of third quarter. See, it's the

dynamic figure. It keeps changing from quarter-to-quarter. We cannot draw any conclusions.

In fact, we have created most of our bills up to July 2010 and that's why there was a slippage in outstanding bills to be

paid at the end of the second quarter, whereas now third quarter it has mounted again.

Shailesh KananiSo, it's 320 crores, right?


No, no, 130 crores.

Shailesh Kanani

130 crores?


Yeah, yeah.

Shailesh Kanani

Okay, okay. So nearly 100 crores which I was wondering. Okay, sir. Sir, one more question on the order book front.

Sir, have you seen any order cancellations in this quarter?

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No, there are --

Shailesh Kanani

Because if I do simple maths, there will be difference around 250 crores in the order inflow and considering the order

book what we had in last quarter. There are no cancellations as such, right?


No, that we cannot draw. You see, what happens is some small orders we keep receiving, but we are not giving press

release. So, you will not be able to conclude conclusively what is the actual position of order book based on the press

release given by us from time-to-time.

Shailesh Kanani

Okay. So, there no cancellation as such?


There are no cancellations.

Shailesh Kanani

Thanks a lot, sir. That's all I have.

Operator

Thank you. Ladies and gentlemen, we will take one last question from Atul Rastogi from Daiwa Capital. Please go

ahead.

Atul Rastogi

Yeah. Good evening, sir. Thanks for taking my question. One was on your revenue, you said revenue forecast for next

year, considering that your order book now is almost 40, 38% buildings, do you think the pace of execution should

significantly pick up and you could actually beat your focus, especially if you get some of the power points and above?


Absolutely. Building segment is our backbone and it is contributing more than 35% of the order book and more than

48% of the turnover at the end of nine months, and this trend is likely to continue. It is one of our oldest divisions and

luckily because of the general growth in the economy, there is a tremendous demand for quality builders in the building

segment and we are able to capture good business with better margins. So, that is likely to continue for sometime.

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Atul Rastogi

But has your I mean average time for the order book, has it come down, average execution cycle because it has moved,the order book has moved towards buildings, I think?


No. In buildings also, we have the execution schedule, 15 months to maximum 24 months.

Atul Rastogi

Okay.

R. S. Raju, Senior Vice President, Finance and AccountsSo, these whatever orders which I could report in the normal turnover and there won't be any reduction in reporting the

revenues because of they are having more orders from the building segment.

In fact, now we are in the safe zone. Earlier, we have more road projects and there so many high intensives and so

many non-accruals from the government, thereby we couldn't issued as planned. But in case of billing projects and we

are not anticipating any such type of finances, therefore whatever normal they have planned, they are now able to

achieve in the quarter wise or year wise.


You see the book-to-bill ratio remains more or less the same, but we are planning these power orders in the fourth

quarter and once they come, the book-to-ratio will change substantially because those orders will be for a longer period36 months, 39 months like that, that picture will emerge only in April 2011.

Atul Rastogi

Okay. Sir, just one last questions on the power project. Sir, total project costs 7, 000 crores and EPC is around

4000-4,500.


Yeah.

Atul Rastogi

So, the difference is entirely IDC and --


No, some amount is...

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Land cost.


Land cost is there and some items may not be in our scope as EPC and that's why the EPC is looking a little less.

Legally, EPC should be around 5,000 crores. Those figures will... correct numbers we will be able to give maybe by the

end of this month.

Atul Rastogi

Okay. But land has been totally acquired, I thought.


Yeah, land is acquired.

Atul Rastogi

So, that is already in the 250 cores that you've paid?


Yes.

Atul Rastogi

Okay. Okay. That's all from my side.

Operator

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand over the conference back to Mr.

Dhiren Tiwari for closing comments.

Dhirendra Tiwari, Motilal Oswal SecuritiesThank you ladies and gentlemen for attending this call. I would like to thanks Mr. Murthy and Mr. Raju for taking out

time to attend and discuss the result with us. Thank you, sir and have a very great evening.


Thank you. All the best.


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Thank you. Thank you very much.

Operator

Thank you. On behalf of Motilal Oswal Securities Limited, that concludes this conference call. Thank you for joining

us and you may now disconnect your lines. Thank you.

This transcript may not be 100 percent accurate and may contain misspellings and other inaccuracies. This transcript

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