The newly listed company is on the lookout for a joint venture (JV) partner to develop a coal block and a power project.
By its own admission, National Buildings Construction Corporation (NBCC), a listed company majority owned by the government, was formed to engage in the following activities: project management consultancy services for civil construction projects (which generate 90% of its revenues); civil infrastructure for power sector; and real estate development.
But guess what NBCC is up to these days, having raised Rs127 crore ($25 million) for the government which divested its 10% stake (or 12 million shares) at Rs106 via the initial public offer last month?
Well, the newly listed company is on the lookout for a joint venture (JV) partner. No, the proposed JV is not for any of the above-listed works. But, as its ‘expression of interest’ (EoI) published in dailies reveals, to develop a coal block and a power project!
The EoI closed on May 14. Eleven corporates, including majors such as Tata Power and Monnet Ispat, expressed interest to partner with NBCC. And NBCC will select its partner around May-end.
In a seemingly unrelated development, the NBCC stock closed on Friday at Rs80.40, down 25% from its IPO price. What’s going on?
Sources close to the development informed DNA that NBCC is planning to construct a 1,000 MW power plant at a cost of Rs5,000 crore. Apparently, NBCC requires a coal mine for the purpose. It had planned to apply for allotment of a coal mine under the government dispensation route.
NBCC’s equity contribution to the planned power project alone will be around Rs1,500 crore. Asked how NBCC plans to organise this fund, officials concerned could not answer.
Is NBCC trying to bail out a private party that failed to bag a coal block and the necessary capital for a planned power project? Such an inferential question arises from three criteria listed in NBCC’s published EoI.
One, the JV partner needs to have a net worth of over Rs750 crore. Two, it should have over 500 acres of land in possession. Three, it should have done preliminary work for environment clearance.
It is possible to wonder if NBCC already has a prospective partner in mind that meets all the three criteria. So, does this mean, this prospective partner, due to non-availability of coal linkage or a coal block for its project, has become non-bankable?
Top NBCC officials, including Vishnu Das, CMD, were not available for immediate comment on the proposed foray into mining and power plant construction, activities that appear orthogonal to the company’s core competence.
However, a highly placed NBCC official, seeking anonymity because he is not authorised to speak to media, said, “Through this move, we want to increase our order book position as work for a 1,000 mw power plant would be around Rs3,000 crore.”
Asked how pursuit of a robust order book justifies a huge investment risk, he said, “These responsibilities will be shared with the joint venture partner. NBCC will bring the coal block to the table, while mining will be done by the JV partner. Equity capital for the proposed power plant will also be shared.”
DNA can reveal that although the EoI is already in the public domain, some of the directors on the NBCC board are not aware of the planned foray into mining and power.
“To my knowledge, NBCC higher officials never informed the board that they are applying for coal blocks. Nor have they shown any inclination to form a joint venture for mining a coal block and erecting a power plant in India,” said Brajeshwar Singh, chairman of the audit committee and an NBCC board member.
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