All eyes on Hyderabad's NECL after Uttarakhand tunnel collapse

The recent tunnel collapse in Uttarakhand, a part of the Char Dham project, has raised concerns about Navayuga Engineering Construction Limited (NECL), the company responsible for the construction. NECL, a key player in infrastructure and civil engineering construction, is part of the Navayuga group led by C.V. Rao. With over three decades of existence, the Hyderabad-based group operates in diverse sectors, including civil construction, infrastructure development, information technology, and spatial technology.

Last April, the unlisted NECL's long-term bank facilities were upgraded to a CARE A rating from Care A- (minus) by ratings agency CareEdge. The short-term facility also underwent a rerating, reflecting significant improvement in the company's financial position due to debt reduction initiatives. However, there hasn't been a credit rating report on NCEL for at least 18 months.

NECL, the flagship company of the group, specializes in construction work such as piling, marine structures, and port works. The company has developed an extensive equipment base and engineering capabilities to handle technically complex projects independently, reducing dependence on subcontracting. Engaged in executing civil construction contracts on an EPC basis, NECL also participates in infrastructure development projects through Public Private Partnerships (PPP).

As of December 31, 2021, NECL's order book stood at Rs. 22,651.58 crore, providing long-term revenue visibility at 6.28 times the gross billing level of FY21. The order book spans eight states, with Andhra Pradesh accounting for approximately 25%, followed by Maharashtra and Telangana at around 21% each. The orders in Andhra Pradesh are mainly related to defense projects and projects for private entities.

The order book is well-diversified, with roads, bridges, and tunnels constituting 45%, irrigation at 31%, and defense projects at 24%. In FY21, NECL reported a total operating income of Rs 3,967 crore with a net profit of Rs 184 crore.