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1 TM National Buildings Construction Corporation Limited IPO Analysis 21 st March, 2012 Sector Construction (Real Estate) Recommendation - Buy Bidding Details Price Band Rs 90- Rs 106 per equity share Face value Rs 10 per equity share Bid Size 60 shares Issue Opens March 22, 2012 Issue Closes March 27, 2012 Retail Applications Details No. of Shares 3286 shares or 31 lots Application Money Rs Issue Size Rs Cr (at the upper side of price band). Issue Allocation Category % of Issue Shares Equity shares offer - 1,20,00,000 -(Employee Reservation) - 1,20,000 Net Issue to Public 100% 1,18,80,000 QIB's 50% 59,40,000 Non Institutional 15% 17,82,000 Retail 35% 41,58,000 Shareholding Pattern (%) Pre-Issue Post-Issue Promoters % Public - 10% Shares Outstanding Pre-Issue Post-Issue 12,00,00,000 12,00,00,000 Issue Type - 100% Book Built Issue IPO Grade - IPO Grade 4 to NBCC IPO, indicating Above Average fundamentals. Book Running Lead Managers IDBI Capital Market Services Limited Enam Securities Private Limited Registrar - Big share Services Private Limited Listing BSE, NSE Investment Rationale National Buildings Construction Corporation Limited (NBCC Ltd), a public sector company, is coming with an IPO of Rs cr at the upper price band. In this issue the president of India, who acts as a promoter of company through the Ministry of Urban Development, is carrying out the disinvestment of 1,20,00,000 Equity Shares, and thus diluting its 10 % stake in the company. The main objects involve benefits of listing and disinvestment by Govt. The issue has been assigned an IPO grade of 4/5 from CARE. The company has significant experience in the business of project management consultancy services for civil construction projects, civil infrastructure for power sector and real estate development. The company has track record of strong financial management. Besides the company has been granted a schedule A PSU status by the govt. At the higher side of price band issue is available at 6.76 x its FY 11. Investment Strategy Intends To Benefit Economies Of Scale By Focusing On High Value Projects In PMC And Civil Infrastructure The company intends to focus on undertaking projects having a high order value above Rs. 1,000 million in value. These projects include redevelopment projects whereby old buildings, complexes and colonies are redeveloped. As these projects typically have smaller percentage of overhead cost, profit margins will be substantially higher. Expanding real estate development business The company intends to expand the presence through a diverse range of projects in commercial and residential segments. The company has begun to secure lands available with Government agencies and entering into joint venture agreements to increase the amount of land with it. Focusing on Long term revenue streams The company intends to take advantage of opportunities in the infrastructure space by Bidding for BOT / BOLT / BOOM projects under PPP mode. An additional advantage of BOT / BOLT / BOOM projects is that they offer long-term revenue streams. Expansion of PMC business overseas The company has significant experience in executing PMC projects across India. In addition, the company has also executed a few projects outside India. Currently they have one ongoing overseas PMC project at Maldives. Continue to focus on quality and timely project delivery The company has acquired a reputation for undertaking quality projects in PMC, civil infrastructure for power sector and real estate development segments and completing them on time. Now they intend to continue to focus on quality and timely project execution thereby maximizing customer satisfaction in all business segments. Page 1 of 1

2 Business Analysis Established brand name and reputation The company has been granted the Schedule A PSU status. The company has established client relationships with different State and Central Government ministries, department and agencies and various public sector undertakings. The company has received several awards and accreditations from time to time. It has also been awarded ISO 9001:2008 from the Bureau of Indian Standards in respect of our Project management and consultancy divisions. Operations in diverse sectors with strong Order Book position The company has leveraged its PMC expertise in diverse segments of the civil construction such as residential and commercial complexes, institutions, hospitals and other buildings, sewage treatment plants, roads; and civil infrastructure for power sector such as cooling towers, chimneys and other civil and structural works. As on 31st March, 2012 Ongoing Projects PMC Projects Forthcoming Projects No. of projects As on 31st March, 2012 Civil Infrastructure for power projects Ongoing Projects No. of projects 14 Contract Value (Rs in mill.) 7, Outstanding Contract Value / Order Book (Rs in mill.) 2, Financial strength Currently, the company is debt free Company. It has strong track record of prudent financial management over the past five years and steady cash flows from existing operations. Its income from operations was Rs 19, million, Rs 29, million, Rs 31, million and Rs 12, million in Fiscal 2009, 2010 and 2011, and half year period ended September 30, 2011 respectively. With cash resources of Rs. 13, million as at September 30, 2011 and no debt, the company benefits from a liquidity position that provides with significant flexibility. Qualified and experienced management The company s senior management team and Key management personnel possess extensive management skills, operational experience and knowledge. Management teams have an average experience of about 20 years in the industry in which we operate. Significant experience and track record The company has significant experience in the three business segments and has established a track record of managing a diverse range of projects. With over 50 years of experience, they have undertaken diverse construction related projects and have constructed residential and commercial complexes, institutions, hospitals and other buildings, sewage treatment plants, roads; cooling towers, chimneys and balance of plants for power plants. Risk Concerns The Company depends on sub-contractors for timely and successful completion of projects. So, the projects may be delayed on account of the performance of sub-contractors. The company is in the process of terminating the joint venture arrangement with Jamal Trading Company Pvt Ltd and has served a termination notice on JTC in this connection. Any liability in connection with the joint venture company or any dispute with the joint venture partner may expose to litigation risk. Page 2 of 8

3 About the Company Incorporated in 1960, National Buildings Construction Corporation Limited (NBCC Ltd) is a public sector company engaged in the business of project management consultancy services for civil construction projects ("PMC"), civil infrastructure for power sector and real estate development. NBCC is headquartered in New Delhi and in addition they have 10 regional / zonal offices across India. Company's PMC projects segment includes residential and commercial complexes, redevelopment of buildings and colonies, hospitals, educational institutions, infrastructure works for security personnel, border fencing as well as infrastructure projects such as roads, water supply systems, storm water systems and water storage solutions. Some of their clients are ESIC, Ministry of Defense, Ministry of Home Affairs (including Security forces like CRPF, CISF, NSG, BSF), Ministry of External Affairs, MoUD, Ministry of Commerce and Industry, Ministry of Corporate Affairs, Ministry of Finance, Haryana Urban Infrastructure Development Board, IIT Roorkee, IIT Kharagpur, IIT Patna, SVNIT etc. NBCC Ltd's civil Infrastructure for power sector segment includes providing engineering and construction services for power projects, including design and execution of civil and structural works for power projects, Cooling towers and Chimneys. Some of their clients in this segment include NTPC Limited, BHEL, APGENCO Ltd, Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd, MAHAGENCO Ltd and Karnataka Power Corporation Ltd. Their real estate segment includes residential projects and commercial projects. NBCC Ltd has successfully completed 8 real estate development projects. They have in hand 4 residential Ongoing Projects, 6 residential Forthcoming Projects and 3 commercial Ongoing Projects and 6 Forthcoming Projects. Key Achievements include: On October 14, 2008, the Government granted Schedule A PSU status. Awarded ISO 9001:2008 from the Bureau of Indian Standards in respect of consultancy and project management division. Received Excellent rating from MoUD for each of the Fiscal years from 2004 to 2010 and Ministry of Heavy Industries & Public Enterprises has awarded with an Excellence Award. In 2011, awarded an Appreciation Shield for quality and timely completion of NSEZ Noida Project by the Ministry of Commerce & Industry and the Development Commissioner, NSEZ. Page 3 of 8

4 Income Statement Income Statement (Rs Cr.) Full Year Ending 31-Mar Mar Mar-11 Net Revenue 2, , ,982.5 Net Revenue Growth NA 41.2% 4.3% Total Expenditure 1, , ,869.5 As a % age of Net Revenue % 96.2% EBITDA EBITDA Margins 8% 3.4% 3.8% Depreciation & Amortization Total operating Exp. 1, , ,872.7 EBIT EBIT Margins 7% 3.3% 3.7% Other Income As a % age of Net Revenue 4.7% 3.0% 3.5% Interest EBT EBT Margins % 7.1% Provision for tax PAT PAT Growth NA -26.8% 21.0% PAT Margins 7.86% 4.07% 4.73% No. of shares outstanding (cr) EPS (Basic) (Rs) Page 4 of 8

5 Balance Sheet Balance Sheet 12M 12M 12M As on 31-Mar Mar Mar-11 SOURCES OF FUNDS: Share Capital Share Warrants & Outstanding Total Reserves Shareholder's Funds Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Net Block Net Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Other Current Assets Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off 0.03 Deferred Tax Assets / Liabilities Total Assets Page 5 of 8

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