|
| Factory Orders drop 42% in Q3 |
| B G Shirsat & Deepak Korgaonkar / Mumbai Jan 13, 2010, 00:22 IST |
|
Manufacturing sector suffers from project delays, lack of fresh capital.
With delays in award of government projects and no capital expansion in the manufacturing sector, India Inc’s order inflows during the quarter ended December 2009 declined by 42 per cent over the sequential quarter and by a marginal 1.5 per cent year on year.
Order inflows in the fourth quarter have been mainly for companies reliant on the power sector. Those dependent on capital expansion projects witnessed poor orders. Data compiled by the Business Standard Research Bureau from announcements made to the stock exchanges show that orders are raining in for power. Close to 45 per cent of the total order flow of Rs 43,220 crore have gone to build up 7,850 Mw of power plant, while orders worth Rs 4,700 crore have been received by power equipment and power solution companies.
WAITING FOR PICK-UP
Order flow Growth rate in % |
| Quarter ended |
Year on year |
Qtr on qtr |
| Mar-07 |
16.93 |
0.78 |
| Jun-07 |
24.56 |
-18.33 |
| Sep-07 |
155.66 |
101.08 |
| Dec-07 |
46.48 |
-11.49 |
| Mar-08 |
128.50 |
57.20 |
| Jun-08 |
136.29 |
-15.54 |
| Sep-08 |
52.44 |
29.73 |
| Dec-08 |
24.68 |
-27.61 |
| Mar-09 |
-20.16 |
0.66 |
| Jun-09 |
-27.79 |
-23.61 |
| Sep-09 |
23.41 |
121.70 |
| Dec-09 |
-1.46 |
-42.20 |
After the power sector, a majority of the orders have gone from from the engineering and construction sector for water projects and building of roads (Rs 13,760 crore), oil and gas (Rs 1,333 crore), pipes (Rs 1,100 crore) and metal (Rs 863 crore) sectors. The remaining Rs 2,291 crore of orders received from other sectors include telecom and pharma.
The capital goods industry is yet to see any considerable increase in order flows from other segments, as revival of the industrial capex cycle seems to be some time away, says an analyst at Mumbai-based Centrum Broking. While there has been a pick up in the replacement demand for power equipment, there is yet to be any big increase in orders from capital intensive projects.
An analyst at Edelweiss Research believes capacity expansion in the private sector is likely to be soft and unlikely to return in a hurry until there is comfort on the demand side. Capacity expansion in the public sector is likely to be primarily driven by power and infrastructure sectors. This can make up for lower capacity expansion in the private sector. Therefore, order accretion for companies catering to the public sector is unlikely to be significantly impacted.
Global lead indicators such as Project Management Information (PMIs) and New Orders’ indices continue to be in robust shape. The stimulus programmes undertaken by various nations have taken effect. The global economic recovery which was led by China is now at its early stages in developed economies such as the UK, Europe, and the US and is expected to gather pace in the first half of 2010. The Edelweiss analyst believes demand recovery is strong and sustainable, and not restricted to inventory restocking.
The power sector is one of the biggest growth sectors in India with the Government of India has set a capacity addition target of 78,000 MW by 2012. Four newly listed power companies – Adani Power, NHPC, Indiabulls Power and JSW Energy, are planning to spend around Rs 59,000 crore for the construction and development of new power projects. Jindal Power and Sterlite Energy are planning to raise funds for expansion of power capacity.
Bharat Heavy Electricals Ltd (BHEL) has received orders worth Rs 11,398 crore in the fourth quarter, of which Rs 11,200 crore of orders are for building up 4,650 Mw of power plants. Larsen and Toubro has received orders worth Rs 12,436 crore, of which Rs 8,532 crore is to build 3,200 Mw of power plants. ABB (Rs 506 crore) and KEC International (Rs 246 crore) bagged orders to provide power solutions and construction of sub-stations.
Most of the orders in the second quarter were awarded by central and state governments, accounting for 59 per cent of the total in the October-December 2009 quarter (59 per cent during the quarter ended September 2009), while the share of private sector orders dropped to 30 per cent (18 per cent). The share of foreign orders dropped to 11 per cent (23 per cent).
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
