February 05, 2015
Mumbai
NCC Limited
 
Ratings upgraded to 'CRISIL B+/Stable/CRISIL A4': Placed on Notice of Withdrawal 
 
Total Bank Loan Facilities Rated Rs.90,000 Million (Reduced from Rs.93,000 Million)
Long Term Rating CRISIL B+/Stable (Upgraded from 'CRISIL D'; Placed on 'Notice of Withdrawal')
Short Term Rating CRISIL A4 (Upgraded from 'CRISIL D'; Placed on 'Notice of Withdrawal')
(Refer to Annexure 1 for Facility-wise details)
 
Rs. 1.2 Billion Non Convertible Debentures Withdrawn
Rs.0.5 Billion Non-Convertible Debentures
(Reduced from Rs.1.5 Billion)		 CRISIL B+/ Stable (Upgraded from 'CRISIL D')
Rs. 1.25 Billion Commercial Paper Withdrawn

CRISIL has upgraded its ratings on the bank facilities and Rs.0.5-billion non-convertible debenture (NCD) programme of NCC Ltd (NCC; part of the NCC group) to 'CRISIL B+/Stable/CRISIL A4' from 'CRISIL D/CRISIL D'.
 
CRISIL has withdrawn its ratings on NCC's Rs.1.25-billion commercial paper and Rs.1.2-billion NCD programmes, as there is no amount outstanding against them. Also, CRISIL has placed its rating on NCC's bank loan facilities on notice of withdrawal for 180 days at the company's request. The ratings will be withdrawn at the end of the notice period, in line with CRISIL's policy on withdrawal of its bank loan ratings.
 
The rating upgrade reflects NCC's timely debt servicing following the improvement in its liquidity, driven by successful equity infusion of Rs.6 billion through a rights issue in October 2014; CRISIL believes that NCC will sustain the improvement over the medium term. Additionally, the company has contracted long-term corporate loans of Rs.3.0 billion from a consortium of lenders to be repaid over a period of four years, including a moratorium of two years; this has significantly reduced the short-term refinancing risks that the company was earlier exposed to because of large short-term loans outstanding. CRISIL believes that NCC's profitability and cash accruals will improve over the medium term, supported by savings in interest cost on account of significant reduction in overall debt.
 
The ratings reflect the NCC group's weak financial risk profile marked by weak debt protection indicators and high working capital requirements, and its exposure to intense competition in the construction sector. These rating weaknesses are partially offset by the group's established market position across diverse construction segments and its healthy order book.
 
For arriving at the ratings, CRISIL has combined the business and financial risk profiles of NCC and its subsidiaries, NCC Urban Infrastructure Ltd, NCC Vizag Urban Infrastructure Ltd, Nagarjuna Contracting Company LLC, and NCC International LLC, collectively referred to as the NCC group. CRISIL has not combined the business and financial risk profiles of the NCC group's project special purpose vehicles (SPVs), as the project debt is non-recourse in nature and the group's management has stated that NCC will not extend any additional support to these SPVs. CRISIL has, however, factored in the NCC group's support for funding the equity component of the investment in these project SPVs, in addition to support for funding cost overruns. The structuring of, and any change in management policy regarding support to, these SPVs will be key rating sensitivity factors.

Outlook: Stable

CRISIL believes that the NCC group will maintain a stable business risk profile over the medium term, supported by its established market position and healthy order book. The outlook may be revised to 'Positive' in case of sustained improvement in the group's profitability, driven most likely by a better working capital cycle, or if its capital structure improves. Conversely, the outlook may be revised to 'Negative' in case of large-scale order cancellations or delays in order execution, leading to a significant stretch in the NCC group's working capital cycle.

About the Group

NCC, established by Mr. A V S Raju in 1978, provides construction services across diversified sectors, including industrial structures, transportation, water and environment, electrical installations, irrigation, power, real estate, and property development. NCC has formed several joint ventures with Indian and overseas construction companies for civil construction projects.
 
For 2013-14 (refers to financial year, April 1 to March 31), NCC, on a standalone basis, reported a profit after tax (PAT) of Rs.405 million on a total operating income of Rs.61.2 billion, against a PAT of Rs.627 million on a total operating income of Rs.57.2 billion for 2012-13. For the six months ended September 30, 2014, NCC, on a standalone basis, reported a PAT of Rs.191 million on a total operating income of Rs.37.4 billion, against a PAT of Rs.157 million on a total operating income of Rs.27.2 billion for the corresponding period of the previous year.

Annexure 1 - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Million) Rating Facility Amount (Rs.Million) Rating
Advance Against Retention Money 1000 Withdrawal Advance Against Retention Money 1000 CRISIL D
Bank Guarantee 65000 CRISIL A4(Notice of Withdrawal) Bank Guarantee 65000 CRISIL D
Cash Credit 20000 CRISIL B+/Stable(Notice of Withdrawal) Cash Credit 20000 CRISIL D
Letter of Credit 5000 CRISIL A4(Notice of Withdrawal) Letter of Credit 5000 CRISIL D
Short Term Loan 2000 Withdrawal Short Term Loan 2000 CRISIL D
Total 93000 -- Total 93000 --
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February 05, 2015

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