The share price of Government-owned National Buildings Construction Corporation (NBCC) has been zooming in the past two days.

The stock rose over 10 per cent so far in today’s trade, having already spiked 17 per cent yesterday. So what’s propelling the stock? There are three possible reasons.

Order book boost

One, reports indicate that the company is in "advanced stage of talks'' with the Andhra Pradesh Government to develop the new capital city of Vijaywada.

NBCC Chairman and Managing Director Anoop Kumar Mittal had said that that it would involve construction of the Assembly House, Government offices and Government housing colonies, apart from real estate. This can provide a significant boost to the company’s order book, which was around ₹17,000 crore as of March 31, 2014.

Two, the company indicated that new projects worth ₹30,000-₹40,000 crores are set to flow in. The company has a strong project pipeline in redeveloping old Government housing societies and buildings.

Three, NBCC, this week, signed a memorandum of understanding with the recently set-up National Waqf Development Corporation for developing waqf properties all over India as institutional and commercial projects.

All this boils down to strong order book growth for NBCC.

Government spending

It’s not just the past two days that have been good for the NBCC stock.

The stock has been on an uptrend since its March 2014 low of ₹152. The uptick was thanks to successful project delivery, overseas expansion plans and importantly, being perceived as a key beneficiary from higher Government spending.

NBCC is the default consultant for construction projects in various Ministries such as Defence and Home Affairs. It is also the notified implementation agency for Government programmes such as JNNURM; higher spending on infrastructure should help its order book.

Besides its consultancy business, its construction unit could witness a revenue leap if the planned tie-ups with sick public sector units to develop their land pans out. This segment offers higher margin of around 16 per cent.

NBCC has five projects of 4.4 million square feet (msf) under execution and plans to develop 18 more projects totalling 8.1 msf in the next two-three years.

Revenue, profit

NBCC has delivered robust financial performance. In 2013-14, revenue and profit increased 20 per cent over the year before to ₹4,008 crore and ₹257 crore,respectively.

Also, unlike other realty players who are battling high debt, NBCC is debt-free. Government ownership is at 90 per cent and divestment plans are being considered for 2014-15, which can lead more price gains.

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