IPO Information - NBCC

National Buildings Construction Corporation (NBCC) is a public sector company and primarily provides project management consultancy services for civil construction to various govt. It has also ventured into real estate segment.

Issue Open: March 22, 2012
Issue close: March 27, 2012
Price Band: Rs. 90 - Rs. 106 Per Equity Share
Minimum Bid Size: 60 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000

NBCC is a unique business model which provides project management & consultancy (PMC) services (91% of revenues & 76% of PBT) for residential complex and institutional buildings, hospitals etc. for central & state government agencies. NBCC also has a Real Estate (RE) Development segment (6% of revenues & 18% of PBT). NBCC has an impressive financial track record with 21% revenue CAGR & net profit CAGR of 15% over FY07-11. NBCC is a debt free company with negative working capital cycle which is indicates its superior business fundamentals.

NBCC's order backlog stands at Rs.106bn or 3.4x FY11 revenues. There is a strong growth visibility for the company. NBCC is likely to bag a massive Rs.45 bn worth PMC contract for the redevelopment work of Kidwai nagar (E) in Delhi which will pan across 86 acres entailing a total development of 12mn square feet to be executed over a period of 5 years. This will provide strong growth for NBCC beyond FY13. In FY13 NBCC is likely to complete 2 real estate projects with saleable area of 2.4lac sq ft mainly comprising of a commercial complex in Okhla, Delhi. Company adopts conservative accounting practice & books RE revenues only after completion & sale of the project. Stock analysts are expecting RE revenues to jump 2.5x to Rs 4bn in FY13E.

IPO Grading / Rating:
CARE has assigned an IPO Grade 4 to NBCC IPO. This means as per CARE, company has 'Above Average Fundamentals'.

IPO Valuations
At an upper price band of the IPO price (Rs106) NBCC is available at PE of 7.4X & 5.3X its expected FY12/13 EPS of Rs14 / Rs19.7. Other construction companies are trading at average PE of 10X. Considering NBCC superior free cash generating business model & reasonable growth prospects, stock valuations of NBCC are attractiv. One may buy IPO of NBCC with stock price target around Rs.140 valuing it at PE of 10.