Divestment to remain overhang on NBCC stock: Parag Thakkar

In a chat with ET Now, Parag Thakkar, Head Institutional Sales, HDFC Securities, shares his views on select infrastructure companies.

ET Now: Could the divestment overhang play a spoilsport for NBCC? The stock has enjoyed good days, but could it eventually head lower from where we are right now?

Parag Thakkar: True. Any news on fresh supply of papers would definitely disappoint investors. The scrip has climbed from levels as low as Rs 170-175 (it now trades at Rs 920 level). So, some correction was warranted. That said, I would always say the divestments are done very timely in the NDA regime. We have seen how successful Coal India and REC OFS' were. They were actually introduced at a right time. The government has put NBCC in the PSU divestment list. It is a smart move because they know that the stock has done really well and there is still demand for this stock.

ET Now: What about some of the other construction companies? A stock that you recommended on closing trades, the other day, KNR Construction, has won a large order worth Rs 730 crore; Sadbhav Engineering has done reasonably well. Are they in a sweet spot?

Parag Thakkar: Yes. Indeed, they are in a sweet spot. The roads, railways and the whole of infra cycle has started reviving. Companies with a very low leverage, good capabilities and good corporate governance are set to gain. So, KNR Construction, which had an order book of just Rs 1,200 crore a few days ago, got Rs 725 crore worth of orders. They are also L1 for another Rs 1,500 crore worth of orders. Hence, the company has a long way to go. This is because, the leverage is negligible and that the working capital cycle is just 50 days. So, it is extremely well-poised to ride this cycle.