NCC jumped 4.21% to Rs 94 after India Ratings and Research upgraded the company's long-term issuer rating to 'IND A+' from 'IND A' with 'stable' outlook.
On the BSE, 14.90 lakh shares were traded in the counter so far compared with average daily volumes of 8.41 lakh shares in the past two weeks.
India Ratings said that the upgrade reflects NCC's demonstrated ability, over the 20 months ended September 2022, to replenish the cancelled and slow-moving orders from Andhra Pradesh (AP) with orders coming majorly from the government of India (GoI) owned counterparties and improved geographical diversification.
The upgrade also reflects the agency's expectation that NCC's interest coverage (operating EBITDA/finance cost) will remain above 2.5x in FY23 and FY24, if the improvement in EBITDA and gross working capital cycle demonstrated in its IHFY23 results continues.
Events that could, individually or collectively, lead to a positive rating action are timely execution of the order book with a majority share of strong counterparties, and increased segmental and geographical diversification; a substantial improvement in the working capital cycle with GWC reducing to below 70% of revenues and total outside liabilities (TOL)/EBITDA reducing to below 6x and strong cash flow generation on a sustained basis; and the gross interest coverage exceeding 3.5x, while net leverage staying below 1x on a sustained basis.
However, a continued decline in the profitability; an elongation of the working capital cycle resulting in GWC exceeding 90% of revenues and/or TOL/EBITDA exceeding above 8x on a sustained basis; and the gross interest coverage falling below 2.5x and/or net leverage exceeding 1.5x on a sustained basis could lead to a negative rating action.
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 Middle East through its subsidiaries in Muscat and Dubai. NCC also has interests in road and energy projects through its 62.1%-owned subsidiary NCC Infrastructure Holdings and in real estate through its 80%-owned subsidiary NCC Urban Infrastructure.
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The company's consolidated net profit rose 15% to Rs 131 crore on a 30.68% increase in sales to Rs 3,373.43 crore in Q2 FY23 over Q2 FY22.
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