NBCC Set To Double Its Net Profit This Fiscal

New Delhi, Aug 29: | Updated: Aug 30 2003, 05:30am hrs
The National Buildings Construction Corporation (NBCC) will be exceeding the Rs 600 crore turnover target set for the year 2003-04. The company which is due for disinvestment in the current year was in the red three years back but now hopes to double its net profit on a turnover of Rs 700-750 crore.

The turnover increased to Rs 503 crore in 2002-03 from Rs 410 crore in 2001-02 a growth of about 61 per cent. The growth in net profit is much higher at which rose to Rs 7.5 crore from Rs 4.9 crore in 2001-02.

The companys business prospect looks good for the next two to three years. Speaking to FE, chairman and managing director Arup Roy Choudhury said the companys order book is at a healthy Rs 1,600 crore compared to Rs 600 crore two years back. This could be attractive for prospective bidders, he said.

The increase in profit has also resulted from reduction in overheads. The cost of overhead has come down to 13-14 per cent from 19 per cent of turnover in 2001-02 and 24 per cent of turnover in 2000-01.

The company has introduced concept of cost to completion to keep a check on the expenditure being incurred on various heads of the project. A profit centre concept has been delegated to the unit level and close monitoring on the expenditure is maintained to avoid any cost overrun on the project.

Some 80 people have been assigned a profit target for their unit. These employees sign an agreement with the management, said Mr Choudhury.

The government has decided to sell 74 per cent stake of its 100 per cent shareholding in NBCC to a strategic partner while retaining 26 per cent for three years. NBCC has an equity base of Rs 120 crore.

The government appointed advisors UTI Securities are under the process of preparation of bid documents for sale of the company. Expressions of interest from bidders are expected to be invited in about a months time.

In its report, the Disinvestment Commission had noted that there was no rationale for the government to continue in the company as there were no social benefits accruing from future association due to existence of employment opportunities.