Fundamentals of

Investment

Analysis of HCC
and its Peers
Karuna K S
21bc346
Bcom hons H [H37]
 Robust demand

About the Attractive

opportunities
Indian
Infrastructure Policy support

Industry
Increasing
Investment

Page 2
 Company Profile
Founded : 27 January 1926; 98 years ago
Founder : Walchand Hirachand

Hindustan Construction Company Limited (HCC) is an Indian multinational

engineering involved in high-value projects that span across diverse sectors
such as transportation, power, marine projects, irrigation and water supply,
special buildings and industrial plants.

Vision : To be the industry leader and a market driven engineering

construction company renowned for excellence, quality, performance and
reliability in all types of construction.

Chairman : Ajit Gulabchand CEO : Arjun Dhawan

Stake : 2117294 shares (0.14%) Stake : nil

Page 3
 Company Analysis
:
1. HCC had negative PE ratio for 4 out of the last 5
Interest Return
Debt to years due to negative earnings. However in the last
P/E ratio coverag on
equity FY company showed a positive PE ratio of 8.2 which
e ratio equity
is less than the industry average of 20.7.
2. The Debt equity ratio is consistently above the ideal
mar’23 8.2 2.71 1.17 35.15
ratio of 2. This shows excess debt and thus makes
the company risky to invest in.
mar’22 -15.54 2.87 0.92 -32.69 3. The interest coverage ratio is lower than the ideal
ratio of 1.5. This may suggest that the either the
mar’21 -2.15 5.22 0.31 -92.57 company’s operating profits are insufficient to service
the debt or it has exposure to high cost debt. Both
create financial risk for the company.
mar’20 -3.53 2.31 0.52 -14.31
4. The return on equity was also negative for 4 out of the
last 5 years, implying loss of shareholders on their
mar’19 -0.89 2.16 0.80 -142.25 investment. However, it showed a positive and high
return for FY 22-23.

Page 5
Share price summary of HCC

Page 5
 Peer Analysis
Rail Vikas NCC

Interest Return Interest

Debt to Debt to Return
P/E ratio coverage on P/E ratio coverage
equity equity on equity
ratio equity ratio

mar’23 10.07 0.87 3.86 19.39 mar’23 10.86 0.16 3.12 9.87

mar’22 5.77 1.03 3.52 18.48 mar’22 7.40 0.23 2.29 8.61

mar’21 6.58 1.02 41.25 16.56 mar’21 17.95 0.34 1.78 5.18

mar’20 3.55 0.83 24.69 14.72 mar’20 3.35 0.38 1.81 6.85

mar’19 - 0.69 15.01 15.64 mar’19 11.72 0.51 2.93 12.59

Page 6
 PNC Infratech

Interest
Debt to Return on
P/E ratio coverage
equity equity
ratio

mar’23 11.25 1.46 3.58 15.36

mar’22 11.45 1.32 3.82 15.99

mar’21 13.31 1.23 3.59 16.29

mar’20 4.39 1.28 2.62 21.52

mar’19 11.18 1.25 2.03 17.35

Page 6
 Rail Vikas

NCC

PNC Infratech
Analysis

1. PE ratio:
When we compare the individual PE with the Industry PE, we will come to know which stock is undervalued or
which stock is overvalued or which stock is fairly valued. The stocks that should ignite our attention are those
which are currently undervalued, and, therefore have good future upside potential
The nifty infra PE of the Infrastructure Sector is 20.7.

HCC - 8.2
The stock with the lowest PE is
Rail Vikas - 10.07 HCC, closely followed by Rail Vikas
and NCC. All these stocks have PE
ratios significantly below the industry
NCC - 10.86
average and are therefore
considered to be undervalued.
PNC - 11.25

Industry PE 20.7
2. Interest coverage ratio ( ICR )

An interest coverage ratio of more than 1.5 is usually considered to be good, but it may vary from industry to
industry. With ICR the higher the figure the better. A strong ICR means that a company can fulfil their interest
obligations provided they have good earnings before interest and tax.

year/co Rail
HCC NCC PNC
mpany vikas
HCC’s current and historical ICR
is quite below the standard 1.5
23 1.17 3.86 3.12 3.58
ratio. Whereas, it’s peers show
22 0.92 3.52 2.29 3.82 stable and above standard ICR.
Of them all, Rail Vikas has the
21 0.31 41.25 1.78 3.59 highest ICR.

20 0.52 24.69 1.81 2.62

19 0.80 15.01 2.93 2.03

3. Return on Equity:

While average ratios can vary substantially from

sector to sector, a return on equity ratio of 15% to
HCC has the highest ROE in the last F.Y.
20% is usually considered good.
however, data of the past 5 years shows negative
With this ratio, it's a case of the bigger is better.
returns as well. Of its peers, both Rail Vikas and
However, consistency over the past 5 years is
PNC have high and consistent returns.
arguably more important. Fluctuations are okay
unless there is too much deviation which will require
further and deeper analysis.

4. Debt-to-Equity Ratio The DE ratio of HCC is dangerously above the

ideal ratio of 2 which makes it a very risky
Typically, a debt-to-equity ratio of less than 2.0 is
investment. Of its peers, NCC has the lowest DE
considered good. A higher ratio could mean that the
ratio, followed by Rail Vikas and PNC.
company has used too much debt to stimulate
growth.
Conclusion: Based on the above analysis, Rail Vikas is
the safest and best investment option.