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Construction company NCC Ltd expects its business and turnover to be on track even if orders worth ₹6,100 crore from the Andhra Pradesh Government, of the total order book of ₹41,197 crore, were to be reconsidered.
The Hyderabad-based construction company said, “We started FY20 with an order book of ₹41,197 crore. In the event the orders totalling ₹6,100 crore being cancelled by the Andhra Pradesh Government, the remaining order book will be ₹35,097 crore and we expect to maintain the current year turnover at the same level as that of FY19.”
The Jagan Mohan Reddy-Government in Andhra Pradesh has proposed to review some of the infrastructure contracts that were awarded by the previous Government and has already cancelled contracts of Navayuga Engineering which was executing the Polavaram project and Machilipatnam port project.
Responding to a query and a regulatory alert, NCC recently said, “We have not received any communication from the AP Government with regard of cancellation of contracts. We understand that it is considering to cancel work orders issued prior to April 1, 2019 but not grounded (work not commenced). If this were to happen, work orders totalling ₹6,100 crore issued to our company are likely to be cancelled by the Government.”
According to broking firm Reliance Securities, NCC has excluded its ₹6,100 crore of cancelled orders from AP (out of total of ₹18,600 crore) in its order book and order inflow stood at about ₹6,400 cr in the first quarter of FY20. Hence, its order book as on June 30, stood at ₹33,500 crore.
Further, payment delays, especially in the government projects have aggravated concerns, as it has surged NCC’s working capital cycle, while its gross debt increased by ₹400 crore to ₹2,400 crore.
The slowdown in execution of projects due to the Model Code of Conduct imposed during the election period impacted NCC’s revenues. A high exposure to projects in Andhra Pradesh, a political shift in the State and the general slowdown led by model code marred NCC’s overall Q1 performance.
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