The near full circle that the HCC stock came to largely reflects the stock market's evergreen hopes and the unobliging ground realities in the construction industry. With the end of the industrial slowdown, the market obviously expected companies such as HCC to benefit the most. This was assumed to be true especially since spending on infrastructure could only be increased. The company is a leading player in the power sector with a speciality in setting up hydel power plants. The stock currently trades at one of the lowest price earning multiples for the construction sector.

One reason why the market had high hopes from HCC is the fact that the company had been growing at a fast and furious pace of 50 per cent, even during the worst period of the recent slowdown. For example, the topline grew by 66 per cent in 1998-99 to Rs 625 crore. Therefore the basic reason for the fall in the stock price from the end of September onwards is the first quarter results. The figures shocked the market by recording a loss of Rs 2.29 crore for that period. Coming close on the heels of strong growth in the previous year, the stock naturally took a hammering. But to a very large extent, the beating down of the stock clearly looks to be overdone.

Construction companies such as HCC (or even EPC contractors for that matter) account for their profit only in the last two quarters of the financial year. Hence, looking at income and expenditure for only a part of the year will lead to erroneous conclusions.

HCC will benefit significantly from the fact that there is now a stable government in place and there is hope that spending on infrastructure will accelerate. In addition, the possible lifting of US sanctions which will resume funding by multilateral funding agencies will give a boost to its activities. But even if neither occurs and the present pace of growth continues, the company's fortunes seem to be very stable. Its current orders on hand are huge and are more than adequate to see it through the next year.

The company has outstanding orders amounting to Rs 1,430 crore as on June 1999. Some of the more prestigious projects currently under implementation are the Mumbai-Pune expressway, the Nathpa Jhakri Hydel project (a joint venture with Impregilo of Italy) and two hydel power projects in Bhutan for Tata Hydro. The company is currently in the race in bidding for additional projects. As per the latest annual report HCC has submitted tenders for 9 projects worth Rs 1,600 crore, they have been pre-qualified for 11 projects worth Rs 1,500 crore. HCC has also submitted pre-qualification bids for 19 projects worth about Rs 4,200 crore.

Independent of the above, even with the existing orders on hand the company is expected to report a total profit of Rs 18 crore for the entire year, which is roughly double the profit reported in the prevous year, 1998-99, which in turn had more than doubled from the 1997-98 profit of Rs 4.3 crore.

On its estimated earnings the stock trades at a forward price earning multiple of under four times.