NBCC plans tie-ups with sick PSUs to boost real estate business

NBCC is also exploring joint ventures (JVs) with companies in West Asia, Europe and the CIS countries

Mumbai: State-run engineering and construction firm National Buildings Construction Corp. Ltd, or NBCC, is planning to tie up with at least half a dozen sick public sector undertakings as it seeks to accelerate its real estate development business across the country.

NBCC, which secured the coveted navratna status recently, is also exploring joint ventures (JVs) with companies in West Asia, Europe and the CIS (Commonwealth of Independent States) countries. The company, under the ministry of urban development, has already signed a JV deal with a company in Oman and is in advanced discussions with two to three companies in Turkey.

NBCC, which became the 15th navratna company on 23 June among 250 central public undertakings in India, is expected to move a proposal to the central government shortly to forge JVs with sick government companies that have huge land banks, said Anoop Kumar Mittal, chairman-cum-managing director in an interview on Saturday.

“There are several sick public sector undertakings with huge land banks. There are companies in Mumbai, too. We are looking at forging joint ventures with those companies, as acquisition route is time consuming," said Mittal, who has now more financial and operational autonomy with navratna status for his company.

Navratna status gives the company freedom to forge tie-ups in the international market and also allows it autonomy on investment decisions up to 1,000 crore.

Details of the total sick government companies were not immediately available. In 2004, the government had established the Board for Reconstruction of Public Sector Enterprises to advise the government for strengthening, modernisation, reviving and restructuring of such companies. In the last two to three years, the government had closed down a number of sick companies such as Bharat Yantra Nigam Ltd, Bharat Ophthalmic Glass Ltd, STCL Ltd, Bihar Drugs & Organic Chemicals Ltd, Indian Oil Technologies Ltd, Brushware Ltd, Pyrites Phosphastes & Chemicals Ltd, National Instruments Ltd. and Bharat Yantra Nigam Ltd.

However, Mittal did not disclose the details of the companies he is approaching. At present, NBCC has 170 acres of land across 25 locations in India. He did not give the estimated value of the land bank.

The decision to access lands of sick government companies is critical for NBCC, as at least 15% of its revenue comes from real estate.

The firm’s decision to diversify from being purely a construction company into project management consultancy (PMC) and real estate development has changed its fortunes. Currently, PMC contributes to 80% of the total revenues.

Mittal added that NBCC is also looking at opportunities to expand internationally.

“We have already signed a joint venture with Oman-based Al Naba Construction LLC. Now, we would jointly scout for EPC (engineering, procurement and construction) contracts in Oman and the United Arab Emirates. We are looking at Turkey and CIS countries for similar opportunities. We are largely looking at politically-stable geographies," Mittal said.

Mittal said the firm had an order book of 16,000 crore and revenue of 4,008 crore for the last financial year with a profit after tax of 247 crore. “Our idea is to have 20,000 crore revenue and 2,000 crore net profit by 2020," explained Mittal.

Over the last four months, NBCC shares rose 125.6% to 315.40 per share while the Senex gained 18.84% in the same period.