I learned the concept of Debt Capacity bargain from Prof Sanjay Bakshi vicariously and wrote on MOIL using the framework.

NBCC is looking like a similar opportunity e.g. in March 2020 it was available at a market cap of INR 2880 crore for few days, My calculations using optimistic and pessimistic average cash flow from operations are below

My Assumptions are

1. Any bank would be comfortable with a interest coverage of 3X or even less given its a Mini Ratna government-owned company
2. Have taken interest rate of 6% based on the latest GOI bond raising
3. INR 750 crores cash consolidated level based on credit rating report and also this figure is similar to FY20 balance sheet number
4. All cash is considered as excess cash( hence added to market cap) because they have a policy of executing projects against customer advances, which is also followed for real estate and redevelopment projects

Some other considerations positive

• As a thumb rule in past investors have done well-buying business below 10 times their free cash
• Decent dividend yield
• they have an order book of INR 70,000 cr and counting. At 5% margin and assume they execute all the projects in the next 5-6