National Buildings Construction Corp IPO Review (Apply)

Perhaps the last IPO for the fiscal 2011-12 is coming from Government in the form of National Building Construction Corp Ltd. (NBCC). In fact in the last quarter of 2011-12 we have seen MCX IPO that came with a big bang and then two small IPOs i.e. BCB Finance and Olympic Cards. And now this IPO in the form of offer for sale is opening on 22.03.2012 and closes on 27.03.2012.

NBCC is a is a public sector company engaged in the business of project management consultancy services (PMC) for civil construction projects, civil infrastructure for power sector and real estate development. 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.

Their client list includes ESIC, Ministry of Defence, Ministry of Home Affairs (including Security forces like CRPF, CISF, NSG and 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. For this client list consists of 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.

Overall across the spectrum the company has successfully completed 43 projects and currently has 141 Ongoing Projects and 78 Forthcoming Projects.

On the performance front, the company has posted a net profit of Rs. 140.04 crore on a turnover of Rs. 3230.74 for 2010-11 against net profit of Rs. 116.50 crore on a turnover of Rs. 3019.59 crore for previous full year. For first half of current fiscal, it has earned net profit of Rs. 74.97 crore on a turnover of Rs. 1352.91 crore. This translates into an average EPS of Rs. 11.35 on last 30 months performance. Its NAV stands at Rs. 60.74 as on 30.09.2011. As on January 31, 2012, it has a total order book of Rs 10613.6 crore for PMC and Civil infrastructure for Power sector businesses together. Recent budget proposals are in favor of this company.

This PSU is diluting 10% equity stake by offering 1.20 crore share (including 0.12 crore for employees) of Rs. 10 each within a price band of Rs. 90-106. 5% discount is being offered to retail and employee categories. Based on above performance, it comes at a P/E of 9 and at a P/BV of 1.8. Although the sector is facing slowdown at the moment, the issue is worth betting for. Minimum application is to be made for 60 shares and in multiples thereof thereafter.  Under newly devised application forms as discount is to be considered on upfront basis than effective price comes to Rs. 100.70 and on rounding off it might be at Rs. 101 and at this price those retail investors applying above 900 shares can opt for 60 additional shares with minor adjustments in application money and those applying at higher level can opt for 120 additional shares.

IDBI Capital and Enam Securities are the BRLMs and Bigshare Services Pvt. Ltd. Is the registrar to the offer.

As far as BRLM's performance disclosure is concerned, IDBI Capital has disclosed details of 9 mandates since April 2009 and out of these 3 IPOs gave negative returns on debut day. Enam Securities has disclosed about 10 issues out of which 3 IPOs gave negative return on debut day.

The shares offered via this issue will be listed on BSE and NSE. Issue is assigned 'IPO Grade 4' by CARE indicating above average fundamentals of the company.