NCC Limited — Capital/Financing Update 2019

Oct 10, 2019

Ref. No Date NCCU Regulation 30/2019 10-10-2019

The Secretary National Stock Exchange of lndia Ltd 5rh Floor, Exchange Plaza Bandra - Kurla Complex Bandra (E) MUMBAT - 500 051.

The Secretary BSE Limited Rotunda Building, P J Towers Dalal Street, Fort MUMBAI-400001.

Dear Sir(s),

Scrio Code: NSE: NCC & BSE: 500294

Sub; Disclosure under regulation 30(4) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Pursuant to regulation 30(4) of SEBI (Lrsling Obligations & Disclosure Requirements) Regulations, 201 5 read with SEBI Circular No.ClR/CFD/CMD/4/2015 Dt. September 09, 2015, we are forwarding herewith the letters received from ICRA and lndia Ratings & Research.

Kindly take the above informalion on record

Thanking you,

Yours faithfully

For NCC LIMITED.

M V Sriniv Company ls-to-.a-5I.t asa Murthy ^t Secretary & EVP (Legal)

Encl :As above

Mr. Y. D. Murthy Executive Vice President (Finance) NCC Limited NCC house, Madhapur, Hyderabad-500081. Telangana.

October 7, 2019

Kind Attn: Mr. Y. D. Murthy, Executive Vice President (Finance)

Dear Sir.

Re: Rating Letter for NCC Limited

India Ratings and Research (Ind-Ra) has placed NCC Limited's Long-Term Issuer Rating of 'IND A' on Rating Watch Negative (RWN). The Outlook on the earlier rating was Stable. The instrument-wise rating actions are as follows:

Instrument Type Sold Size of Issue (billion)		Rating/Rating Watch Ricating Action
Fund-based working capital limits	INR20.58	IND A/RWN/IND A1/RWN	Placed on RWN
Non-fund-based limits	INR93.0	IND A/RWN/IND A1/RWN	Placed on RWN
Non-fund-based limits*	INR5.54	IND A/RWN/IND A1/RWN	Assigned & Placed on RWN
Term loans	INR3.0	IND A/RWN	Placed on RWN
Proposed non fund-based working capital limits#	INR0.88 (reduced from $INR6.42$ )	Provisional IND A/RWN/ Provisional IND A1/RWN	Placed on RWN

The ratings are provisional and shall be confirmed upon the sanction and execution of the loan documents for the above facilities by NCC to the satisfaction of Ind-Ra.

*The final ratings have been assigned based on the sanction and execution of the loan documents by NCC to the satisfaction of Ind-Ra.

Details of division wise bank facilities mentioned in the annexure

In issuing and maintaining its ratings, India Ratings relies on factual information it receives from issuers and underwriters and from other sources India Ratings believes to be credible. India Ratings conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security.

The manner of India Ratings factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in India where the rated security is offered and sold, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing thirdparty verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors.

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Users of India Ratings' ratings should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information India Ratings relies on in connection with a rating will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to India Ratings and to the market in offering documents and other reports. In issuing its ratings India Ratings must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts.

As a result, despite any verification of current facts, ratings can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed.

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Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer. Ratings do not comment on the adequacy of market price, the suitability of any investment, loan or security for a particular investor (including without limitation, any accounting and/or regulatory treatment), or the tax-exempt nature or taxability of payments made in respect of any investment, loan or security. India Ratings is not your advisor, nor is India Ratings providing to you or any other party any financial advice, or any legal, auditing, accounting, appraisal, valuation or actuarial services. A rating should not be viewed as a replacement for such advice or services. Investors may find India Ratings ratings to be important information, and India Ratings notes that you are responsible for communicating the contents of this letter, and any changes with respect to the rating, to investors.

It will be important that you promptly provide us with all information that may be material to the ratings so that our ratings continue to be appropriate. Ratings may be raised, lowered, withdrawn, or placed on Rating Watch due to changes in, additions to, accuracy of or the inadequacy of information or for any other reason India Ratings deems sufficient

Fitch Group

Nothing in this letter is intended to or should be construed as creating a fiduciary relationship between India Ratings and you or between India Ratings and any user of the ratings.

In this letter, "India Ratings" means India Ratings & Research Pvt. Ltd. and any successor in interest.

We are pleased to have had the opportunity to be of service to you. If we can be of further assistance, please contact the undersigned at +91 22 4000 1700.

Sincerely,

India Ratings

Rakesti Valecha Senior Director

Prashant Tarwadi Director

Bank	INR bn	Example 19 Rating Commission 网络 的现在分词
Fund Based Limits
State Bank of India	6.23	IND A/RWN/IND A1/RWN
Canara Bank	1.73	IND A/RWN/IND A1/RWN
Andhra Bank	1.73	IND A/RWN/IND A1/RWN
Syndicate Bank	2.51	IND A/RWN/IND A1/RWN
Indian Overseas Bank	0.60	IND A/RWN/IND A1/RWN
Allahabad Bank	0.86	IND A/RWN/IND A1/RWN
ICICI Bank	1.00	IND A/RWN/IND A1/RWN
IDBI Bank	1.22	IND A/RWN/IND A1/RWN
Standard Chartered Bank	3.00	IND A/RWN/IND A1/RWN
Punjab National Bank	0.50	IND A/RWN/IND A1/RWN
Oriental Bank of Commerce	0.50	IND A/RWN/IND A1/RWN
Union Bank of India	0.40	IND A/RWN/IND A1/RWN
Punjab & Sind Bank	0.30	IND A/RWN/IND A1/RWN
Total(A)	20.58
ación de la propiedad de la contradición de la contradición de la contradición de la contradición de la contra	Non-Fund Based Limits	n'ar
State Bank of India	26.66	IND A/RWN/IND A1/RWN
Canara Bank	15.00	IND A/RWN/IND A1/RWN
Andhra Bank	8.05	IND A/RWN/IND A1/RWN
Syndicate Bank	11.23	IND A/RWN/IND A1/RWN
Indian Overseas Bank	7.90	IND A/RWN/IND A1/RWN
Allahabad Bank	6.59	IND A/RWN/IND A1/RWN
ICICI Bank	3.35	IND A/RWN/IND A1/RWN
IDBI Bank Standard Chartered Bank	3.12	IND A/RWN/IND A1/RWN
	4.50	IND A/RWN/IND A1/RWN
Punjab National Bank Oriental Bank of Commerce	1,64	IND A/RWN/IND A1/RWN
Union Bank of India	2.75	IND A/RWN/IND A1/RWN
Punjab & Sind Bank	2.60 2.15	IND A/RWN/IND A1/RWN
IndusInd Bank	3.00	IND A/RWN/IND A1/RWN IND A/RWN/IND AI/RWN
rich Total(B)	98.54	77. BE
	Term Loans
Canara Bank	1.83	IND A/RWN
A K Capital	0.20	IND A/RWN
Hero FinCorp	0.80	IND A/RWN
Unallocated Limits	0.17	IND A/RWN
Total (C)	3.00	æð
Proposed Non Fund Based Limits	0.88	Prag Provisional IND A/RWN/
$\mathbf{D}$		Provisional IND A1/RWN
Total(A+B+C+D)	123.00 $-1.366$
Source: NCC

$\cdot$

Annexure: Details of Bank Facilities as on October 07^th 2019

ተብር

7 October 2019

Fitch Group

India Ratings Places NCC on RWN

By Harsha Rekapalli

007-2019

India Ratings and Research (Ind-Ra) has placed NCC Limited's Long-Term Issuer Rating of IND A' on Rating Watch Negative (RWN). The Outlook on the eartier rating was Stable. The instrument-wise rating actions are as follows:

Instrument Taxes	istoria dell'	Date of Coupon, Maturity	Size of Issue	Rating Rating Watch Contract Restrict Advised Birth Additional Property of the United States of the United States of the United States of the United States
Fund-based working capital iimits			INR20.58	IND ARWAISND ALARWN	Placed on RWN
Non-fund-based limits			INR93.0	IND ARWA/IND A1/RWN	Placed on RWN
Non-fund-based limits"			INR5.54	IND ARWA/IND A1/RWN	Assigned & Placed on RWN
Term loans		FY23	INR3.0	IND ARWN	Placed on RWN
Proposed non fund-based working capital limits#			INR0.88 (reduced from INR6.42)	Provisional IND ARWN/Provisional IND A1/RWN	Placed on RWN

The ratings are provisional and shall be confirmed upon the sanction and execution of the loan documents for the above facilities by NCC to the satisfaction of Ind-Ra

*The final ratings have been assigned based on the sanction and execution of the loan documents by NCC to the satisfaction of Ind-Ra.

Analytical Approach: Ind-Ra continues to factor in the support extended by NCC to its subsidiaries including corporate guarantees extended to Nagarjuna Construction Company International LLC, an Oman-based entity to arrive at the ratings.

The RWN reflects a dedine in NCC's revenue visibility on account of cancellation of work orders by the government of Andhra Pradesh (GoAP) along with the uncertainty related to execution and payments of the remaining work orders exposed to AP. The company's net working capital lockup pertaining to the unexecuted order book in AP was around INR7.5 billion at June 2019. However, Ind-Ra derives comfort from NCC's ability to replenish the lost order book from other geographies, as witnessed in the past, and the management clarification regarding the initiation of discussions with the GoAP regarding commencement of Andhra Pradesh Township and Infrastructure Development Corporation (APTIDCO) projects amounting to INR43.1 billion of the overall unexecuted order book by end-October 2019. However, Ind-Ra would monitor the progress in the order book replenishment and the collections of receivables/work-in-progress orders from the GoAP.

KEY RATING DRIVERS

Cancellation of GoAP Orders: In June 2019, the Chief Secretary of AP announced the new government's intent of cancelling work orders issued by the previous government prior to 1 April 2019, where work is yet to commence. Following which, NCC's order book amounting to around INR61.0 billion was cancelled. However, the adjusted order book, post the cancellation of orders, remained comfortable at INR351.0 billion at end-March 2019 (around 2.9x of FY19 revenue). As per discussions with the management, the agency understands that the capex incurred and the mobilisation advances availed for these cancelled orders are miniscule and would not impact NCC's credit profile in FY20. Excluding the cancelled orders, the execution risk still persists with exposure to orders persistent to the GoAP remaining around INR117.7 billion, where the progress is on hold.

However, Ind-Ra draws comfort from the company's ability to replenish the cancelled orders from other geographies backed by its strong business profile and execution capability. Excluding orders from AP, NCC's order book stood at INR233.3 billion at FYE19 (FYE18: INR125.7 billion), despite higher order execution in FY19, indicating NCC's ability to secure orders from other geographies/counterparties. In 1QFY20, NCC secured around INR6.0 billion of orders from outside AP.

Working Capital Lock up Pertaining to AP: The company's credit profile moderated in 1CFY20 due to an increase in net working capital lock up backed by an increase in debtor days, majorly pertaining to the orders executed in AP. The net working capital lock up from AP at end-June 2019 was around INR7.5 billion with receivables of INR6.3 billion, unbilled revenue of INR5.8 billion and mobilisation advances of INR4.6 billion,

The agency expects NCC's liquidity profile to improve by FYE20 as the company is in discussions with the GoAP to commence APTIDCO projects, which could result in release in the locked working capital (1QFY20: INR2.0 billion). However, there is uncertainty involved regarding AP capital city developmental job works, which accounted around INR66,1 billion of NCC's order book and locked net working capital of around INR2.5 billion at end-June 2019. Any further delay in releasing the locked net working capital from AP-related orders would impact the company's liquidity profile and be negative for the ratings.

Improved Operational Performance: In FY19, NCC's revenue surged 60% yoy to INR120.8 billion backed by faster execution of the order book, while revenue contribution from AP was around 34%. Its EBITDAmargin excluding one-off events improved to 11.8% in FY19 (FY18: 10.0%), majorly on account of execution of high-margin orders availed in FY18-FY19, as well as increased scale of operations.

However, the revenue declined to around INR21.9 billion in 1QFY20, majorly on account of election season prevailing across the country and uncertainty pertaining from the GoAP. Despite this, NCC was able to maintain EBITDA margin of 12.2% on account of its closing order book, which had high-margin orders. Basis discussion with NCC's management, Ind-Ra understands that the company has stopped execution works for the pending order book from AP, Ind-Ra expects NCC's FY20 revenue to be around INR100.0 billion-110.0 billion with existing profitability levels.[

Credit Metrics Improves in FY19 before Moderating in 1GFY20: NCC's net adjusted leverage (net adjusted debt/EBITDA) improved to around 1,3x in FY19 (FY18: 1.9x FY17; 2.9x) and interest coverage (EBITDA interest cost) to 3.2x (2.3x 1.7x) owing the improvement in revenue and profitability. However, the net leverage deteriorated to 2.1x and interest cover to 2.1x in 1GFY20, largely on account of increase in working capital utilisation, backed by the increase in debtor days to 134 from 95 in FY19. The company's net adjusted debt increased to INR22.7 billion at 1QFYE20 (FYE19: INR17.9 billion). Revenue from AP accounted around INR4.5 billion of the total revenue in 1QFY20.

Liquidity Indicator- Adequate: NCC had sufficient cash balance of INR2,7 billion at FYE19 (FYE18: INR0,65 billion, 1QFYE20: INR2,0 billion) as against repayment obligations of around INR2.6 billion (FYE18: INR1.4 billion). It has modest capex requirement of INR2.0 billion for FY20 which is likely to be funded by INR1.5 billion debt. Its average use the fund-based limits was 80%-85% during the 12 months ended September 2019; NCC is looking to enhance its fund based bank lines to INR22.0 billion from INR20.58 billion in FY20-21. It had a comfortable debt service coverage ratio (DSCR) with a minimum DSCR at 1.3x in FY20 and through the tenure of its equipment term loan. In FY19, the promoters have subscribed to share warrants of about INR0.28 billion, and the remaining INR0.82 billion will be infused in FY20.

Proposed Investment in Road HAM Projects: NCC is exploring bidding for road hybrid annuity model (HAM) projects, due to the significant number of projects being offered by National Highways Authority of India ('IND AAA'/Stable) under the model. However, the management wants to continue its focus on engineering, procurement and construction projects and would limit its investment in HAM projects. NCC received around INR0.83 billion in FY19 from its subsidiary NCC Urban Infrastructure Limited, a real estate entity, the management expects to receive additional INR1.0 biflion in FY20, Ind-Ra has factored in the cash inflows from the subsidiary to be utilised for any equity requirement of HAM projects in FY20 and any incremental cash outflows beyond the factored amount of INR 1.0 billion would be negative for the ratings.

RATING SENSITIVITIES

The RWN indicates that ratings may be either affirmed or downgraded, Ind-Ra will continue to closely monitor the ability of the company to replenish the cancelled order book of AP and impact of the liquidity profite based on collection of its receivables/MP from AP. Ind-Ra will undertake an appropriate rating action and will resolve the RWN by April 2020 post considering the developments.

COMPANY PROFILE

NCC is a Hyderabad-based construction company listed on the National Stock Exchange Limited and BSE Limited, It is engaged in the construction of roads, buildings, irrigation, water and environment, electrical, metals, mining and railways. Apart from executing projects across India, the company has a presence in the Mddle East through subsidiaries in Mascat and Dubai, NCC also has interests in road and energy projects through its 62.1%-owned subsidiary NCC. Infrastructure Holdings Limited and in real estate through its 80%-owned subsidiary NCC Urban Infrastructure.

FINANCIAL SUMMARY

Parti de la provincia del mondo del provincia del mondo del mondo del mondo del mondo del mondo del mondo de	$\sim$ $\sim$ $\sim$ $\sim$ $\sim$ $\sim$ $\sim$ $\sim$
Revenue (INR billion)	120.8	75.6
EBITDA (INR billion)	14.23	8.55
EBITDA margin (%)	11.8	11.3
Total adjusted debt (INR billion)	20.6	16.66
Cash and cash equivalent (INR billion)	2.7	0.64
Net adjusted debt (INR billion)	17.9	16.0
Source: NCC, Ind-Ra

RATING HISTORY

THE STATE OF STATE OF STATE OF STATE OF STATE OF STATE OF STATE OF STATE OF STATE			Entre Match THE REAL PROPERTY OF STATISTICS		Ellis Father Light
Allen Control		THE EXISTENT OF A REAL PROPERTY	The contract of the contract of the contract of the contract of the contract of the contract of the contract o The Communication of the Communication
Issuer rating	Long-term		IND ARWN	IND A/Stable	IND A/Stable	IND A/Stable
Fund-based facilities	Short-term	INR20.58	IND ARVAVIND A1/RVAN	IND. A Stable IND A1	IND A'Stable/IND A1	IND A /Stable/IND A2+
Non-fund-based facilities	Short-term	INR99.42	IND ARWAIND A1/RWN	IND. A'Stable/IND Aî	IND A'Stable/IND A1	IND A /Stable/IND A2+
Term loans	Long-term	INR3.0	IND ARWN	IND A/Stable	IND A/Stable	IND A/Stable

COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity level of the instruments, please visit and mass assigning success percentations of

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings.

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

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About India Ratings and Research: India Ratings and Research (Ind-Ra) is india's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market,

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ALL CREDIT RATINGS ASSIGNED BY INDIARATINGS ARE SUBJECT TO CERTAN LIMTATIONS AND DISCLAIMERS. PLEASE READ THESE LIMTATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDA DIENCE DO INTRATING-DEFINITIONS, IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCYS PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS' CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.

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Senior Analyst India Ratings and Research Pvt Ltd 36 Urban Center, Level 4, Road no.36, Jubilee Hills Hyderabad - 500 033 +91 40 67661922

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ICRA Limited

Confidential

RetNo.tCRA/HYD.AIC CU20 19'201 I 609

September 17,20I9

Mr. Y,D. M'rrthy Ex€cutive Vice President (Finance) NCC Limited NCC House, Madhapur Hyderabad - ⁵⁰⁰⁰⁸¹

Dear Sir,

Re: ICRA Credit Rating for k.f2i00.00 Crore Line of Credit of NCC Limited (iDstrume t details in Annerure 1)

As you are aware that in terms of the mandate letter received ftom its clients, ICRA is required to revie\, all its ratings, on an annual basis, or as and when the circumstances so warlart.

Please nole that the Rating Commitlee o[ ICRA, after due consideration, has placed the ratings under 'rating watch with developidg imPlications' The long-term rating is now denoted as UCRAIA & (pronounced ICRA A) for Rs 12300.00 crore Lines of Credit of NCC Limited. The aforesaid ratings will be due for surveillance anytime before March 10, 2020.

The ratings as stated above are specific !o the lerms and conditions oflhe LOC as indicated to us by you. In case there is any change in the te.ms and conditions, or the size ofthe rated LOC, the same must be brought to our notice immediately. Any such change would warrant a rating review, following which there could be a change in the ratings assigned. Notwithstanding the forcgoing, any chan-ge in the over-all limit ofthe LOC from that specified in the lirst paraBraph ofthis letter would constitute an enhancement that would not be covered by or under the said Rating Agreement,

ICRA reserves the riSht to review and/or, revise the above rating at any time on lhc basis ofnew information or unavailability of information or such other circumstances, which lCRA believes, ,..1> :,t.,. ; may have an impact on the rating assiSned to you ;cSt' ..

^fFot complete rating defrnition please reJer to lCE4 tlebsile wwv'-icra in t any oJ the ICRA Rating Publications

4A,4h Foor, SHOBHAN Tel.: +91.40.40676500 Website iwwwicrain e3 927lA&B EaiBhavan Road clN 174999011991P1C042749 Email : into@icrarndra.com Somaiiguda, Hyderabad-5ooo82 Helpdesk i +91.124 3341580

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Registered Ol lice i 1 los, Kailash Buitding, 1 1" Floor 26 Kasturba Gandh, Marg, New Delhi ' 1 1 0001 . Tel. : +91 .1 1 .23357M0-45

RATING . RESEARCH INFORMATION ⁶⁴²²⁷

'No Default Statement on the Company Letter Head'

To

Mr. Abhishek Lahoti ICRA Limited 401, 4th Floor, 6-3-927/A&B Shobhan, Rajbhavan Road Somajiguda Hyderabad - 500 082

Dear Sir.

• $\mathbf{I}$ . We hereby Confirm that as on date there are no Over dues or default on our debt obligations
• $2.$ We also confirm that in the month ended , there has been no instance of delay in servicing of our debt obligations.
• We also confirm that there has not been any instance of devolvement of Letter of Credit in $3.$ the month ended .
• We also confirm that in the month ended , there has been no $\overline{4}$ instance of delay in servicing of debt obligations guaranteed by us.
• We also confirm that there has been no overdraw of the drawing power sanctioned by the 5. bank for a period of more than 30 consecutive days in case of bank facilities which do not have scheduled maturity/repayment dates.
• Details of delay/ default/ rescheduling of interest or principal as on date/ in the month 6. ended, in any of the above case (if any):

Name of the $\parallel$ ISIN Instrument	be paid	Amount to $\Box$ Due Date of Payment Payment	Actual Date of Remarks

Thanking You,

Yours faithfully,

YoLr are requested to furnish a monthly 'No Defo|lt Statenent (llDS) '(;n the format enclosed) on the first working day of every month, confirming the timeliness of payment of all obligations against the .ated debt programme [interest and principal obligations for fund based as well as obligations unde. LOC/BG fo. non-fund based facilityl. This is in accordance lvilh requirements prescribed in circular dated JLrne 30,2017 on 'Mohitoring and Review ofRalihgs by Crudit Ratihg Agencies(CRAs)' issted by the Securities and Exchange Board oflndia.

You are also requested to inform us forthwith of any default or delay in the payment of interesr and/or principal against the rated debt programme, or any other debt inskuments and/or borrowings of your company. Further, you are requested to keep us informed of any other develophents that could have a direct or indirect impact on the debt servicing capability of your company, with such developments including, but not limrted to, any proposal for re-schedulement or posrponemelt ofrepayment against any dues and/or debts ofyour company with any lender(s) and/or investor(s).

We thank you for your kind co-operation extended during the course ofthe ratiDg exercise. Please let us know ifyou need any cLarification.

We look forward to further strengthening our existing relationship and assure you of our best seryices.

With kind regards, t'

Yours sincerely, For CRA Limited

j€shwar Burlal Vice President rajeshwar.burla@icraindia.com

l,':''' ul

lAbhts ek Lahotil Senior Analyst abhishek. lahoti@icraindia.com

Annexure ¹

etails of Iated ICRA ted

Name of the Ban k	Instrument Dclails	(Rs. Cr.)	Raling Assigned	Rating Assigred On
	Cash Credit	623.00	[ICRA]A &	September 16,2019
Srate Bank of	Bank Guarantee	247 5 .00	llcRAlA &	Seplember 16, 2019
tndia	Letter ofCredit	r 9r.00	ucRAlA &	September 16, 2019
	Term loan	r83.00	IICRA]A &	September 16, 2019
	Cash Credit	I ?3.00	IICRA]A &	September 16,2019
Canara Bank	Bank Cuarantee	I350,00	ucRAlA &	September I6, 2019
	Letter ofCredit	150.00	IICRA]A &	September 16,2019
	Cash Credit	173.00	UCRA]A &	September 16,2019
Andhra Bank	BanI Guarantee	745.00	ucRAlA &	September'16,2019
	Letter ofCredit	60.00	ucRAlA &	September 16, 2019
	Cash Credit	251.00	ucRAlA &	September 16, 2019
Syndjcate Bank	Bank Cuarantee	E63.00	ucRAlA &	September 16, 2019
	Leter ofCredit	60.00	UCRA]A &	September 16, 2019
	Cash Credit	60.00	ucRA]A &	September 16, 20 t9
lndian Overseas Bank	Bank Cuarantee	620.00	[ICRA]A A	September 16, 2019
	Lefter ofCredit	66.00	IICRA]A &	September 16,2019
	Cash Credit	100.00	lrcRAlA &	September 16, 2019
ICICI Bank	Bank Cuarantee	330.00	ucRAlA &	September I6, 2019
	Letter ofCredit	500	IrcRA]A &	September I6, 2019
	Cash C.edit	86.00	IICRA]A &	September 16,2019
Allahabad Bark	Bank Guarantee	614.00	ucRAlA &	September 16, 2019
	Letter ofCredir	45.00	IICRA]A &	September I6,2019
	Cash Credit	122.00	[ICRA]A &	September 16,2019
IDBI Bank	Bank Guarantee	287.00	lrcRAlA &	September 16, 2019
	Letter ofCredit	25.00	[ICRA]A &	September I6, 2019

Name of the Bank	Instrumeot Details	(Rs. Cr.)	Rating Assigned	Rating Assign€d On
	Cash Credit	300.00	[ICRA]A &	September 16, 2019
Standard Charte.ed Bank	Bank Cuarantee	266.00	IICRA]A &	September I6, 2019
	Letter ofCredit	34.00	ucRAlA &	September 16, 2019
	Cash Credit	50.00	ucRAlA &	September 16,2019
PunjabNational Bank	Eank Guarantee	100.00	ucRAlA &	September 16, 2019
	Letter ofCredit	64.00	[ICRA]A &	September 16, 2019
	Cash Credit	50.00	lrcRAlA &	September 16, 20I9
Oriental Bank of Commerce	Bank Guarantee	225.AA	ucRAlA &	September 16,2019
	Letter ofCredit	50.00	UCRAIA &	September 16,2019
	Cash Credit	40.00	lrcRAlA &	September 16, 2019
Union Bank of India	Bank Guarantee	200.00	ucRAlA &	September 16, 2019
	Letter of Credit	60.00	ucRAlA &	September 16,2019
	Cash Credit	30.00	IICRA]A &	September 16,2019
Punjab & Sind Bank	Bank Cuarantee	100.00	lrcRAlA &	September 16,2019
	Letler ofCredit	115.00	ucRA]A &	September 16, 2019
lnduslnd Bank	Bank Guarantee	300.00	lrcRAlA &	September t 6, 2019
Hero Fincorp	Term Loan	100 00	IICRA]A A	September I6, 2019
Unallocated limits		559.00	[ICRA]A &	September I6,2019
Total Iimits rated on long-term scale		12,300.00

& - rating watch with developing implications

NCC Limited

September 23, 2019

NCC Limited: Rating placed on Watch with Developing Implications

Summary of rating action

	Previous Rated Amount (Rs. crore)	Current Rated Amount (Rs. crore)	Rating Action
Fund-based Term Loan 79. ST 1980	: 283.00 :	283.00	(ICRA)A & placed under rating watch with developing implication
Fund-based Cash Credit	2058.00	2058.00	[ICRA]A &; placed under rating watch with developing implication
Non-fund Based Limits	9400.00	9400.00	[ICRA]A & placed under rating watch with developing implication
Unallocated Limits	559.00	559.00	[ICRA]A &; placed under rating watch with developing implication
Total : *Instrument details are provided in Annexure-1	12300.00	-42300.00

Rationale

ICRA in its earlier release dated June 10, 2019 (link) has taken note of the cancellation of Rs. 6,100 crore worth orders from NCC's order book. Adjusting for these orders, the orderbook stood at Rs. 33,495 crore as on June 30, 2019 with orders from Government of Andhra Pradesh (GoAP) accounting for Rs. 12,068 crore (36% of order book). Currently, all works in AP (barring Asian Development Bank (ADB) funded projects) are stalled and the company has de-mobilised its resources from many of these sites to projects in other states. These orders can be broadly segregated into three categories-affordable housing (11 packages) from Andhra Pradesh Township and Infrastructure Development Corporation (APTIDCO); urban infrastructure projects for development of core capital city from the Amravati Development Corporation Limited (ADCL) and Andhra Pradesh Capital Region Development Authority (APCRDA); and others (largely funded by ADB). ICRA is given to understand that the works from APTIDCO are expected to re-commence execution by October 2019, while there is no clarity with respect to timelines for ADCL, APCRDA and APSFL projects. As on June 30, 2019, Rs. 578.8 crore of unbilled revenue, Rs. 634.3 crore of receivables are pending from the AP projects, against Rs. 463 crore of mobilisation advances availed from these projects. Of these, the net exposure (unbilled revenues plus receivables minus mobilisation advances) from non-moving projects viz. ADCL, APCRDA and APSFL is Rs. 257.5 crore. The liquidity position of the company is adequate with unencumbered cash of Rs. 115.37 crore as on June 30, 2019 and undrawn working capital limits of Rs. 259 crore as on August 31, 2019. Considering the situation of AP projects, the rating has been placed under watch with developing implications. ICRA will closely monitor the developments and would keep the investors updated on the implication of the same on the credit profile of the company. Any prolonged delay in resolution of stuck projects in AP beyond Q3FY2020 that results in build up of receivables and unbilled revenue, thereby impacting liquidity adversely, would be a credit negative.

The rating continues to take into account the healthy revenue visibility in the medium term on account of healthy order book accretion of Rs. 25,612 crore in FY2019 and Rs. 636 crore in Q1 FY2020 across various segments, resulting in robust unexecuted order book of Rs. 33.495 crore (adiusted for Rs. 6076 crore of AP order cancellations) as on June 30, 2019, which is 2.8 times of the operating income (Oi) in FY2019. The company's leverage and coverage indicators are healthy, with gearing and TOL/TNW at 0.4 times and 1.7 times, respectively. The interest coverage and TD/OPDBIT were at 3.2 times and 1.4 times as on March 31, 2019. Further, NCC's order book is well diversified across segments viz, buildings

(accounts for 44% of the outstandinB order book as on lu.e 30, 2019), roads {25%), wat€r supply, envrronment and railways (13%), elecrrica (s%), irrigation {s%) and others (8%) rhe .auns continues to draw cohfor. from the erperienced manasement and NCCt four decades of operationa kack record with demonstrated erecutron capab lities across the segments. The company has completed arge-si?ed marquee projects wrthin the stpulated hmernes, whrch enhances its chances to win repeat orders.

The ratlnB, however, remains constrained by the execution nlks as _35% of the outstandinS orde. book is in preliminary states of execution, with lesr than 5% financial proSress, and 14% of the order book yet to start execut on as on June 2019. Further, ordets worth Rs 12,058 crore from AP are at standst I , with no ere.ution in the past three-four months The unbilled revenue from AP projects is around Rs. 578 8 crore and the receivables is around Rs. 634.3 crore. Therefore, timely resolution of stuck projects based in AP would rema n a key rat ng sens tivity and any further de ay will result i. buidup of receivables and inventory, which could adverse y 3ffect NCCt liquidity The rating is also coistralned by the high loans and advanc€s €xtended to varlous real estate subsidiaries viz. NCC Urban lnlrastructure timited, NCC vizag Urban lnkastrlrcture etc in the past, which remahs a d.ag on the consolidated ba ance sheet Further, th€ company has extended Rs. 83 crore loans and advances to NCC Urban ln Q1 FY2020. The company has long pending recelvab es with 10.6% of the debtoB as on lune 30, 2019, amountin8 to Rs.317.2 crore pending for more than one year. Of these, Rs 132 8 crore has been pending for more than two yea6.

Key rating drivers and their description

Credit strengths

Roburt order book porition provider medium-term revenue visibility - The revenue visibili!y in the med um term is healthy on account of stron8 order book accretion of Rs. 25,512 crore in FY2019 and Rs. 636 crore rn Q1 FY2020 across various segments- The unexecuted order book of Rs.33,495 crore (adlusted for Rs 5076 c.ore ofAP order caicellation, as on lune 30,2019, is robust, and is 2 8 times ofthe O in FY2019.

Healthy lcverage and coverage indicaloE - The company's levela8e and coverage indicators are healthy with gearing and TOITITNW at 0.4 times and 17 times respectively. The interest coverage and TDIOPDBIT were at 3.2 rimes and 1.4 times at the end ofFY2019

Stront execution capabilrties and diversified order boot - Ihe experienced management and NCC's fo!r de.ades of operational track re.o.d with demonstrated executon capabilities across the seEments are credrt portives- The company has a record of completing lar8e sized marquee projects within the sripulated trmelnes, which enhancer its chances to wrn repeat orders. Further, NCCs orde. book is we I dive6ified across segments vD. buildings (accoun6 for 44% of outstanding order book as on luie 30, 2019), roads (25%), water slpply, environrnent and ra lways (13%), electrical (5%), iriEatlon 1s%) and others (8%).

credit challenges

AP order execution in abeyance Curently, all works n AP (bafiing ADB funded prolects) Ere stated and the company has de-mobllised its rerources kom many ofthese sites to projects in other states. The outstanding orderbook from AP,s Rs. 12,068 crore (36% of total orderbook). These orders can be broadly segretated into three cate8ories - affordabte housin6 APTIDCO; development of core capital crty ADCL and APCRDA; a.d others. tCRA is given to !ndersrand that the works from APTIOCO are expected to re-commen.e execution by Ocrober 2019, whie there is no (tarity wrrh respect to timelines for ADCL, APCRDA and AP5F[ projects. As on lune 30, 2019, Rs. s7a.a crore of unbitt€d revenue. Rs. 634.i .rore of receivabler are pendinE from the AP projects against Rs. 463 crore of mobitisation advances avaited from these

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projects. Of these, the net exposure (unbilled revenues plus receivables minus mobilisation advances) from non-moving projects viz. ADCL, APCRDA and APSFL is Rs. 257.5 crore. Any prolonged delay in resolution of stuck projects in AP beyond Q3 FY2020 that results in build up of receivables and unbilled revenue thereby impacting liquidity adversely would be a credit negative.

Execution risks - NCC is exposed to execution risks as ~35% of the outstanding order book is in preliminary stages of execution, with less than 5% of the financial progress, and 14% of the order book yet to begin execution as on June 2019.

Exposure to group entities - High loans and advances extended to various real estate subsidiaries viz. NCC Urban Infrastructure Limited, NCC Vizag Urban Infrastructure etc. in the past remains a drag on the consolidated balance sheet.

Long pending receivables - The company has long pending receivables with 10.6% of the debtors as on June 30, 2019 amounting to 8s.317.2 crore pending for more than one year. Of these, Rs.132.8 crore has been pending for more than two years.

Liquidity position: Adequate

The liquidity position of the company is adequate with unencumbered cash of Rs. 115.37 crore as on June 2019 and undrawn working capital facilities. The average utilisation of fund-based facilities during September 2018 to August 2019 remained at 82%. The company's principal debt repayment obligation in FY2020 is Rs. 257.0 crore, which can be comfortably met through the cash accruals.

Rating sensitivities

Positive triggers - ICRA could upgrade NCC's rating if TOL/TNW falls below 1.2 times and there is a cushion of 25% in the working capital limits on a sustained basis.

Negative triggers - Negative pressure on NCC's rating could arise if TOL/TNW increases beyond 2.0 times and/or any further delay in resolution of stuck projects in AP results in build up of receivables and unbilled revenue, thereby impacting liquidity adversely.

Analytical approach

Analytical Approach and Capacitan Comments and The
Applicable Rating Methodologies	Corporate Credit Rating Methodology
Wall Chairman Handels Commander	Rating Methodology for Construction Entities retanilikke state
Parent/Group Support	Not applicable
	For arriving at the ratings, ICRA has used limited consolidation approach, under which only the proposed equity investments/funding commitments to various
Consolidation/Standalone	subsidiaries towards debt servicing and coperational shortfall have been
	considered. The list of companies that are consolidated to arrive at the rating are
	given in Annexure 2

About the company

NCC Limited (NCC) was established as a partnership firm in 1978, which was subsequently converted into a Limited Company in 1990. The operations can be broadly classified into EPC business (both domestic and international and development business), BOT projects in infrastructure and real estate development. Under EPC, the company is into the construction of industrial and commercial buildings, roads, bridges and flyovers, water supply and environment projects, housing, irrigation, security services etc. The shares of the company were listed on the stock exchanges in India in 1992.

Key financial indicators (standalone, audited)
المقمة		EXAMPLE 2018
Operating Income (Rs. crore)			7,559.3	12078.8
PAT (Rs. crore)	$\cdots$ .		286.8	563.9
OPBDIT/OI (%)			11.3%	11.8%
RoCE (%)		어디 가수 있었다.	14.2%	21.8%
Total Debt/TNW (times)				$\begin{array}{ c c c c c c c c c c c c c c c c c c c$
Total Debt/OPBDIT (times)
Interest Coverage (times) Source: NCC			$\frac{1000}{1000}$ , $2.3\,$ $^{1000}$	ು ಾಂಡಿ

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

					Rating (FY2020)				▓▒ Years
	Instrument		Amount	Amount	Current Rating	Earlier Rating	Earlier Rating	法定 2000年2月 FY2019	FY2018	FY2017
		Type	Rated *	Outstanding	:September 2019	June 2019	Mav 2019	Sune 12018	November 2017	$M$ arch 2017
	Fund-based	Long	2058.00	2058.00	[ICRA]A &	[ICRA]A	[ICRA]A	IICRAIA	[ICRA]A-	$[ICRA]A-$
	Cash Credit	Term				(Stable)	(Stable)	(Stable)	(Stable)	(Stable)
	Fund-based	Long	283.00	:283.00.	[ICRA]A &	ficra a'	IICRAIA	IICRAIA	IICRAIA	ficraia-
	Term Loan	ाerm ।				(Stable)	(Stable)	(Stable)	(Stable)	(Stable)
3	Non-fund-	Long	9400.00	9400.00	[ICRA]A &	[ICRA]A	[ICRA]A	IICRAIA	[ICRA]A-	IICRAIA-
	based limits	Term				(Stable)	(Stable)	(Stable)	(Stable)	(Stable)
4	Unaliocated	Long	559.00	559.00	[ICRA]A &	ICRAIA	IICRAIA	IICRAIA	[ICRA]A-	IICRAIA-
		Term :				(Stable)	:{Stable}	(Stable)	(Stable)	ा(Stable)

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.jcra.in

л.

Annexure-1: Instrument Details

	$\sim$ and the start formation of	Date of	a sa ng pikalawan na sang s Alexandr		Amount Rated
JSIN No		Issuance/	Coupon	Maturity	.IRs.	Current Rating and
	Instrument Name:	Sanction	Rate	Date:	crore)
NA	Term Loan	October 2017	10.5%	December 2021	283.00	[ICRA]A &
$\mathbf{A}$	TRANSPORTS. Self- Cash Credit		98	(法罪的)	2058.00	. will be IICRAIA &
NA	Bank Guarantee and Letter of Credit				9400.00	ficraia &
NA	Unallocated Limits	Æ.			559.00	[ICRA]A &	$\sim$ $\frac{17}{20}$ , $\sim$ $\sim$ $\sim$
Source: NCC

Annexure-2: List of companies considered for consolidated analysis

Company Name Company Name (2009) Service Service School Company Name (2009) Name (2009) Service School Company Name (2009) Service Service Service Service Service Service Service Service Service Service Service Service S
NCC Infrastructure Holdings Private Limited	62.13%	Limited Consolidation
NCC Urban Infrastructure Limited New York New York 20,00%	Ver	Limited Consolidation
NCC Infrastructure Holdings Mauritius Pte. Limited	100.00%	Limited Consolidation
Nagarjuna Construction Company International LLC (Dubai)	100.00%	Limited Consolidation
OB Infrastructure Limited	64.02%	Limited Consolidation
Pondicherry Tindivanam Tollway Limited and The Manuscription	47.80%	Limited Consolidation

$\blacksquare$

6

"lFF:i'Tr::

ANALYST CONTACTS

Shubham Jaln +911244545306 shubhami@icraindia.com

Abhishek Lahoti +9L 40 4067 5s34 abhishek lahoti@.ra,ndra.com Rajeshwar Eurla +9! 40 4461 6521 raieshwar.burla@icralndia com

RELATIONSHIP CONTACT

L Shivakumar +91 22 5114 3406 shivakumar@ craindia-corn

MEDIA AND PUBLIC RELATIONS CONTACT

Naznin Prodhani Tel: +91124 4545 850 communications@icBindia.com

Helpline for business queries:

+91- 9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

About ICRA Limited:

ICRA Limited was set up in 1991 by leadin8 financial/investment institutons, commercial banks and fiiancia servces companiesas.n independentand professiona investmen t I nforma tion and Credit RabngAgency.

Today, lcRA and rts sLrbndrares to8ether form the ICRA Group of Companies (Group |CRA). |CRA is a pubtrc Limted Company, wrth its shares lsted on the Bonbay Stock Ex.hange and rhe National Srock Exchan8e. The inrernatronat Credit Rating Agency Moody's lnvestors Serv ce is CRA'S largest shareholder.

For more information, visit www.icra.in

ICRA Limited

Corporate Office Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002 Tel: +91 124 4545300 Email: info@icraindia.com Website: www.icra.in

Registered Office

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Branches

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Contents may be used freely with due acknowledgement to ICRA.

ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA's current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.