NCC Limited Q1 FY26: Revenue Dip Hides a Staggering 797% Growth Story. What It Means for Investors
The Indian infrastructure sector continues to be a beacon of domestic growth, strongly supported by ongoing government capital expenditure and policy momentum. While the broader market experienced a strong rally in Q1 FY26 before a July correction, sectors like capital goods and infrastructure remain outperformers, riding the wave of capex revival. This sets a promising backdrop for companies like NCC Limited, a veteran in the construction and infrastructure space.
NCC Limited’s Q1 FY26 results present a nuanced picture. On one hand, the headline revenue figures show a slight year-on-year degrowth, which might initially raise an eyebrow. However, a deeper dive into the numbers, particularly the explosive growth in order inflows and the robust order book, reveals a company that is not just surviving but is strategically positioning itself for accelerated growth in the quarters to come. The management’s clear explanations from the earnings call provide critical context, emphasizing that the first quarter’s performance is more a matter of project phasing and initial mobilization rather than a fundamental slowdown.
The Engine of Growth: Robust Order Book & Inflow 🚀
Perhaps the most compelling aspect of NCC’s Q1 FY26 results is its stellar performance on the order front. For an infrastructure company, the order book is akin to its future revenue pipeline, and here, NCC has truly outdone itself.
The consolidated order book stands strong at ₹70,087 crore as of June 30, 2025, marking an impressive 33% year-on-year increase. This substantial backlog provides excellent revenue visibility for the coming years, underpinning the company’s long-term growth potential. Management confirmed this backlog provides strong revenue visibility for the next 2.5-3 years.
However, the real showstopper is the new order inflow during the quarter. NCC secured new orders worth ₹3,658 crore in Q1 FY26. What makes this figure truly remarkable is the 797% year-on-year growth compared to Q1 FY25. This exceptional inflow demonstrates renewed client confidence and NCC’s strong competitive positioning in the market, highlighting a significant positive change.
Consolidated Order Performance (Amounts in ₹ Crore)
| Metric | Q1 FY25 | Q1 FY26 | Y-o-Y Change | Y-o-Y % Change |
|---|---|---|---|---|
| Order Book | 57,536* | 70,087 | 12,551 | 33% |
| Order Inflow | 408 | 3,658 | 3,250 | 797% |
*Note: Q1 FY25 Order Book is the FY24 closing Consolidated Order Book value.
The total orders booked year-to-date (till August 12, 2025) have already reached ₹6,719 crore, representing about 31% of the lower band of their aggressive FY26 guidance of ₹22,000-25,000 crore for new orders. Furthermore, the company has an additional ₹5,000-6,000 crore worth of projects in L1 (lowest bidder) status, suggesting a strong pipeline continues to build.
Division-wise, Buildings continue to be the backbone, contributing a significant 34% to the total order book and an overwhelming 79% to the new order inflow in Q1 FY26. This indicates a concentrated focus and success in this high-demand segment.
This robust order pipeline is the most critical positive change observed in NCC’s Q1 performance, directly impacting future earnings potential and laying a strong foundation for the company’s ambitious growth targets. The ability to convert these orders into sales will be key, and management’s focus on project execution is crucial here.
Navigating the Q1 Speed Bump: Sales Performance 📊
While the order book shines brightly, NCC’s revenue for Q1 FY26 saw a slight dip year-on-year. Consolidated revenue stood at ₹5,208 crore, a 6.3% decline from ₹5,558 crore in Q1 FY25. Standalone revenue also mirrored this trend, dropping 6.7% to ₹4,430 crore.
Consolidated Quarterly Revenue Trend (Amounts in ₹ Crore)
| Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Y-o-Y Q1 FY26 vs Q1 FY25 |
|---|---|---|---|---|---|---|
| Revenue | 5,558 | 5,224 | 5,383 | 6,189 | 5,208 | -6.3% |
This initial look might be concerning, but the management’s explanation from the earnings call provides crucial context. They clarified that a significant portion of the large orders (approx. ₹20,000 crore) were bagged towards the end of March FY25. These projects require initial phases of design, clearances, and site mobilization, which typically take several months before they start contributing materially to revenue. Therefore, the Q1 degrowth is primarily a result of the timing of new project commencements and initial execution phases, rather than a slowdown in demand or execution capabilities.
Management expressed strong confidence in achieving their annual guidance of 10% revenue growth for FY26, anticipating a significant pickup in project execution and revenue contribution from Q2 onwards, especially picking up in Q3 and Q4. This indicates that the current quarter is a transient phase, and the market should look forward to accelerated sales in subsequent quarters as these large projects gain momentum. The key is to observe if the actual sales in Q2, Q3, and Q4 align with this ambitious forecast.
Steady Hand on the Helm: Profitability & Margins 📈
Despite the slight revenue degrowth, NCC demonstrated a commendable ability to maintain its profitability margins, which aligns with its classification as a well-managed stalwart in the infrastructure space.
Consolidated Quarterly Profitability Trend
| Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Y-o-Y Q1 FY26 vs Q1 FY25 |
|---|---|---|---|---|---|---|
| EBIDTA | 478 | 443 | 441 | 556 | 456 | -4.6% |
| PAT | 193 | 163 | 193 | 254 | 192 | -0.5% |
| EBIDTA Margin | 8.60% | 8.48% | 8.19% | 8.98% | 8.76% | +0.16% points |
| PAT Margin | 3.47% | 3.12% | 3.58% | 4.10% | 3.69% | +0.22% points |
While EBITDA saw a marginal year-on-year decline in absolute terms (₹456 crore vs ₹478 crore), the EBITDA margin actually improved slightly to 8.76% from 8.60% in Q1 FY25. Similarly, PAT margin also saw a modest improvement to 3.69% from 3.47%. This suggests diligent cost management and operational efficiencies, even during a period of top-line moderation. This is a positive change, demonstrating the company’s ability to protect its bottom line.
The management has maintained its EBITDA margin guidance of 9% to 9.25% for FY26, expressing optimism that margin expansion is possible as revenue growth accelerates in the coming quarters. This indicates that the Q1 performance is not indicative of any structural issues with profitability, and future earnings growth should be robust if revenue targets are met.
Managing the Balance Sheet: Debt and Working Capital 📊
Q1 FY26 saw an increase in both gross and net debt for NCC Limited. Consolidated net debt stood at ₹1,574 crore, up from ₹695 crore at March 2025 end (which was Q4 FY25’s close). The standalone debt-to-equity ratio also edged up to 0.24 from 0.20 at FY25 end.
This might appear concerning at first glance, but the management provided a clear rationale during the earnings call:
- Seasonal Factors: Q1 often sees higher debt for construction companies due to the initial mobilization costs of new projects and before client payments for the new financial year fully kick in. Government projects, a significant portion of NCC’s book, often release payments more towards the year-end due to budget cycles.
- Project Mobilization: The large orders bagged late in FY25 require significant initial capital outlay for equipment, manpower, and site preparation, which temporarily increases debt.
Management expects gross debt to normalize to ₹1,400-1,500 crore by the end of FY26, indicating that the Q1 increase is temporary and part of the business cycle. This expectation, coupled with a healthy consolidated debt-to-equity ratio of 0.21 (from earning call) for a capital-intensive industry, suggests responsible financial management.
From a working capital perspective:
- Debtors Outstanding increased to 77 days in Q1 FY26 from 65 days in Q4 FY25. Management noted that Q1 FY25 saw 85 days, implying the current level is not unusually high for the quarter and is in line with cyclical patterns. The goal will be to ensure receivables growth does not significantly outpace sales growth in future quarters.
- Unbilled Revenue stood at ₹6,442 crore (37% of revenue), which is common for long-term projects where billing lags execution. This represents work done, but not yet billed, showing future billing potential.
- Mobilized Advances also increased by ₹846 crore from March end, reflecting the initial cash outlays for new projects. This is normal for a company starting large new projects.
- Cash and Cash Equivalents decreased significantly to ₹355 crore at the end of June 2025 from ₹789 crore at March 2025 end. This was partly seasonal and partly due to advances given for projects, which management expects to normalize.
The key takeaway here is to monitor the debt levels and working capital cycle in subsequent quarters. If debt normalizes as guided and receivables days remain stable or improve with revenue acceleration, it would confirm the management’s view of Q1 as a temporary, cyclical blip.
Investing for Tomorrow: Capital Expenditure 🏭
NCC’s CapEx for Q1 FY26 was ₹92 crore, against a full-year budget of ₹750 crore for regular projects. This indicates a measured approach to capital allocation, focused on supporting existing and new project execution. The nature of CapEx for a construction company is primarily growth-oriented, investing in machinery and equipment for project execution, which directly fuels future revenue. Given the strong order book, sustained CapEx is necessary to ensure timely project delivery and conversion of orders into sales. This aligns with a growth strategy and suggests management is investing for future earnings.
For specific projects, a total investment of ₹430 crore is required for the Smart Meter projects, with ₹150 crore expected to be invested in the current year. Management also indicated an openness to bringing in a partner for equity sharing in this segment, showing prudence in funding growth.
Project Spotlight & Strategic Trajectory 🛣️
NCC is actively pursuing and executing several key projects:
- Smart Meter Projects: Good progress with 15 lakh meters installed. Equity investment so far is ₹70 crore.
- Mumbai Metropolitan Region (MMR) Projects: Critical clearances for projects like the GMLR Tunnel and Versova-Dahisar Coastal Road are nearing completion, with significant revenue contribution expected once TBMs commence operations for the complex GMLR tunnel. This is a key area to watch for future revenue growth.
- Ken-Betwa River Interlinking Project: Currently in design and permissions, this 6-year project reflects NCC’s involvement in long-term, national-importance projects.
- Real Estate (NCC Urban): Secured a 0.4 million sq ft redevelopment mandate in Mumbai, with expected contribution of ₹350 crore to the topline/bottom line this year. Monetization remains linked to obtaining Occupancy Certificates (OCs).
- Mining: Target of ₹2,600 crore for MDO work for FY26, with ₹720 crore achieved in Q1, indicating steady progress.
The management candidly addressed operational challenges like delays in payment release from certain state governments (e.g., SWSM projects) and the systemic issue of labor availability. However, they expressed confidence in managing these, citing established systems for labor and improvements post-elections in Maharashtra for project execution and payments. The disciplined project management and stringent cost control initiatives, as highlighted in the investor presentation, are crucial for navigating such industry-specific headwinds and ensuring project profitability.
The Road Ahead: Management Guidance & Our View 💡
NCC management has reaffirmed its FY26 guidance:
- Revenue Growth: 10% year-on-year.
- EBITDA Margins: 9% to 9.25%.
- Debt: Gross debt expected to normalize to ₹1,400-1,500 crore by year-end.
- New Order Inflow: ₹22,000-25,000 crore for FY26.
Considering the macro tailwinds for the Indian infrastructure sector, NCC’s exceptionally strong order inflow and robust order book provide significant credibility to its revenue guidance. The Q1 revenue degrowth appears to be a temporary, transitional phase as new large projects move from mobilization to full-scale execution. The stability in margins despite revenue volatility demonstrates good operational control.
NCC Limited can be classified as a stalwart cyclical in the Indian market. While its growth can be lumpy due to the nature of large project awards and execution cycles, its established track record, strong order book, and focus on profitable opportunities position it as a reliable player benefiting from the long-term infrastructure boom.
Key Takeaways for Investors:
- Future Growth Visibility is High: The 797% Y-o-Y consolidated order inflow and a strong ₹70,087 crore order book are the clearest signals of significant future revenue potential. This is the most impactful change from this quarter.
- Q1 Revenue Dip is Temporary: The degrowth is attributed to new project mobilization and phasing. Management expects a strong acceleration from Q2 FY26 onwards, crucial for achieving their 10% annual revenue growth guidance.
- Profitability Maintained: Despite revenue challenges, margins remained stable, indicating efficient cost management and operational resilience. This stability provides comfort regarding future earnings quality.
- Debt is Manageable: The Q1 debt increase is largely seasonal and project-mobilization related, with an expectation of normalization by FY26 year-end. This aligns with responsible financial strategy for a capital-intensive business.
- Sectoral Tailwinds: NCC is well-positioned to capitalize on India’s infrastructure push and domestic growth themes, making it a compelling play in this segment.
- Execution & Clearances are Key: Monitoring the progress on critical project clearances (like MMR) and state government payment cycles will be crucial for assessing execution efficiency and working capital management, which directly impacts cash flow and earnings conversion.
Overall, NCC Limited’s Q1 FY26 paints a picture of a company laying the groundwork for substantial future growth, rather than facing a slowdown. Investors should focus on the underlying strength of its order book and management’s ability to convert this pipeline into accelerated revenue and sustained profitability in the coming quarters.
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