Tue, 26 Dec 2017
NBCC May Remain Unscathed By Corruption Charges, Analysts Say

 NBCC India Ltd. is likely to remain unscathed by the corruption charges leveled against it, as the amount involved is insignificant compared to the size of the company, according to analysts.

The Central Bureau of Investigation on Friday filed a case against NBCC India Chairman Anoop Kumar Mittal and four others for alleged corruption in a redevelopment project of the ITPO Complex at Pragati Maidan in New Delhi.

The alleged corruption amount of Rs 2,150 crore for a company with an order backlog of $12 billion (Rs 76,885 crore), and a market capitalisation of $3.5 billion is a non-starter by all measures, Rohit Natrajan, analyst-institutional equities at IDBI Capital Markets, told BloombergQuint. It is unclear if the prosecution can prove criminal conspiracy under Section 120B easily, and even if they do, it's a long drawn legal battle, he said.

The case involves the allotment of a subcontract to Mumbai-based Capacite Structures, according to wire agency PTI. The CBI alleged in its FIR that a contract for Rs 2,149.93 crore was awarded by NBCC to a joint venture of Shapoorji Pallonji and Company Pvt. Ltd. and Shapoorji Pallonji Qatar WLL.

Another infrastructure company - the Mumbai-based Capacite Structures was trying to get work from Shapoorji Pallonji on subcontract basis. According to the CBI FIR, the deal for the subcontract was allegedly influenced by a government official who demanded a Royal Enfield bike as illegal gratification to exert his influence on NBCC's Mittal and swing the subcontracting work in favour of Capacite Structures.

Alok Deora, Assistant Vice President (Research), IIFL Wealth Management expects the case to put some pressure on the stock till clarity emerges on the matter, but reiterated that the quantum of funds involved is insignificant given the company's size and scale of operations. From a fundamental viewpoint, we expect the company to deliver very strong growth in the current financial year and the next. 

Reliance Securities' Senior Research Analyst Binod Modi also doesn't see any impact of the charges on the building construction company. If these charges come true, then the fine levied on the company for the same will have limited bearing on the financials of the company given the contracted awarded was to the tune of Rs 2,150 crore only.

Source: Bloomberg Quint

Last updated by: anil.mascarenhas on Wed, 27 Dec 2017 1:13 PM