Management Discussion and Analysis Report

Overview

NBCC is a Schedule A, Public sector undertaking under the aegis of Ministry of Urban Development (MoUD), incorporated in year 1960. It has been recently conferred 'NAVRATNA' status on June 23, 2014 by the Department of Public Enterprises (DPE) and is now ranked in the top 23 CPSEs.

Company is carrying out its business in three segments viz., (i) Project Management Consultancy (PMC), (ii) Engineering, Procurement and Construction (EPC), and (iii) Real Estate Development with a target of 80%, 5% and 15% respectively for the FY 2014-15.

Business Operations

a) Project Management Consultancy(PMC)

In project management sector, NBCC undertakes works from concept to commissioning. The services offered by NBCC consist of management and consultancy services for a wide range of Civil Construction Projects including Residential and Commercial complexes, Re-development of colonies, Educational Institution, Hospitals, Infrastructure works for security personnel's border fencing works, roads, solid waste Management projects all over India which involves brparation of construction programme, man power planning and utilization, contract management, implementation of quality plan, monitoring of works and MIS etc. NBCC also offers post construction services i.e. maintenance of assets. NBCC is certified ISO 9001:2008 from Bureau of Indian Standard in respect of Project Management & Consultancy.

Major clients includes Ministries such as Ministry of Urban Development, Home Affairs, Housing and Poverty Alleviation, Rural Development, Commerce & Industry, Labour & Employment, Information & Broadcasting, Petroleum & Natural Gas, Power, New & Renewable Energy, Defence, External Affairs, Corporate Affairs, Finance, State Government, IITs and NITs amongst others.

b) Civil Construction for Infrastructure Projects(EPC)

NBCC is aiming at high value projects in EPC segment to benefits of economies of scale. Projects having a high order value typically have a smaller percentage of overhead cost and provides higher profit margins. Pre qualification and financial entry barriers for pursuing high value projects, would provide NBCC an edge over the competitors who bid for such projects.

c) Real Estate Development

In real estate, NBCC operates in two areas, one is direct real estate projects wherein the Company buys land from private and government agencies , develops the land and then sells off; and the other where NBCC carries out redevelopment of government colonies via Public Private Partnership (PPP) mode.

The Company has massive plan to tap the real estate market by constructing residential and commercial projects in every state and main cities of the Country. The Company has already procured 155 acres of land at different locations for real estate projects. The Company's objective is to cover not only the Delhi NCR region and metro cities but also tier II cities like Bhubaneswar, Meerut, Faridabad, Kochi, Patna, Gaziabad etc.

So far re development of General Pool Residential Accommodation (GPRA) is concerned, NBCC has already completed GPRA of New Moti Bagh and a large scale re-development work at East Kidwai nagar has been started. Further NBCC has also been appointed as implementing agency for the Re-development of GPRA's at Kasturba Nagar, Tyagraj Nagar, New Netaji Nagar and Printing brsses works all over India.

NBCC is actively participating in various auctions/ sale of land parcels by government agencies/ departments/authorities/ municipal corporations to increase its land bank. NBCC is also looking forward for development of real estate on Government department owned land parcels and privately owned lands on joint venture basis.

NBCC is scouting for works abroad and recently signed an MOU with Al Naba Services LLC, Oman to explore usiness opportunities in GCC Countries.

Outlook

The vision and mission of the Company as stated in MOU executed with the Ministry of Urban Development, Government of India for the FY 2014-15 are:

Vision

To be world class construction business company attaining global standards of sustainability, quality, customer relations and responsiveness.

Mission

A leading company with high brand equity in construction business, offering sustainable, innovative and cost effective construction products and services contributing to National wealth, upholding responsibility for the environment, and promoting well being of all stakeholders including employees, customers, shareholders and society.

Financial Performance

During the year under review company's total income from operations is Rs 4066.96 crores as against Rs. 3232.29 crores in the brvious year showing an increase of 25.82%.

The net profit after tax has also increased to Rs 247.14 crores as compared to Rs 207.50 crores brvious year.

The Board of Directors has recommended a dividend of Rs.5/- per equity share of face value Rs10/- for the FY 2013-14.

Factors Affecting the Performance

High inflation resulting into slowdown in Indian economy can have an impact on order booking of the Company.

Intense competition and entry of non-sectorial Companies in PMC sector is a major challenge before the company.

Non availability of land from the Government, instability in prices of cement and steel, scarcity of labour are the factors which affects the performance of the Company.

Strengths

NBCC is notified as public works organization (PWO) explicitly a construction agency covered under revised rule of 126(2) of GFR as per which Government departments/

PSU and autonomous bodies can award works to NBCC on nomination basis.

Presence in diverse areas viz: PMC in power, water supply, health & environment etc., Real estate & Infrastructure reflects the potential and capabilities of NBCC.

It has PAN India brsence and experience of working abroad in countries like Middle East, Turkey, Maldives, Mauritius & Nepal.

Because of strong and diverse order book it is less susceptible to shocks.

Opportunities

Government initiatives for development of infrastructure projects to boost Indian economy offers further prospects of increase in Company's order book.

Huge scope of business in GCC Countries in association with overseas partners/agencies.

With an emphasis on infrastructure and updates in technology the company is striving to enlarge its operations in real estate development and attracting large value construction projects . There is also a scope for development of affordable housing and commercial in the years ahead.

Risk Management

Proper risk management policy plays a crucial role in ensuring that vulnerabilities are kept in check. The Company has in place a risk management policy to understand, measure and monitor the various risks to which it is exposed and to ensure proper strategic planning and proactive efforts to mitigate the risks.

Internal Control System

Adequate and suitable for its size and nature of business , the internal control procedure of your Company have been designed to ensure competent and advantageous utilization and protection of the vital resources, accuracy in financial reporting and due compliances with statutes , procedures and protocol. The system involves well structured work instructions and combrhensive procedures to ensure proper authorization, maintenance of records and reporting of all transactions. Continuous efforts are being made to upgrade the systems and procedures as well as to improve compliances at all levels. Periodic meetings of the Audit committees are held to re-evaluate the systems and processes.

Human Resources

NBCC treats human resource development as a prime growth driver of business. Company policy entrails looking for qualified, talented and enthusiastic individuals and building up of a rich human resource base. Every conceivable step is taken to ensure that employees upgrade their skills regularly and get better in their work.

Cautionary Statement

All the statements and assertions in this report regarding the projections, estimates, expectations may be forward looking based on the beliefs of the management of your Company. Results may vary due to various factors like change in the general economic and business conditions, inflation,change in Government policies and regulations and other Statues and incidental factors. The Company cannot be held responsible in any way for such statements and it undertakes no obligation to publicly update these to reflect subsequent events or circumstances.