No pre-election lull in execution, orders so far, say cement, steel firms

Cement dealers and executives from ratings agencies echo Acharya's view

Cement and steel companies have not witnessed a pre-election lull in their orders and execution activities so far, with some expecting it to be “business to be usual” during the January-March 2024 quarter.

Some industry executives had anticipated a lull in business activity in 2024, the year when the country is set to hold general elections.

At the start of the current financial year, top executives from Larsen & Toubro (L&T) indicated they expect it to be a ‘truncated’ year, with the upcoming general elections having an impact on orders.

But not everyone agrees.

“We are not seeing any sign of a pre-election lull so far,” said Jayant Acharya, joint managing director and chief executive officer (CEO) of JSW Steel.

Acharya said there was a weakness in infrastructure-related demand in October this year when the festival season had typically gripped the country. However, demand has picked up since, he added.

Cement dealers and executives from rating agencies echo Acharya’s sentiments.

“We have so far not seen a lull in the construction or project tendering activity,” said Soumyajit Niyogi - director - India Ratings & Research.

In December, Adani Energy Solutions, Tata Power, KEC International, Kalpataru Projects International, and Thermax Global announced order wins, largely related to the energy and infrastructure segment in India.

In addition to steel, cement demand is seen as another indicator of construction activity.

“Demand has been constant for the past few months, with the Diwali and state elections-related subdued demand seeing a recovery in December,” said Deepak Navandar, a cement distributor from Hyderabad.

Executives from L&T in their investor call in November, noted the March 2024-ended quarter could be a little subdued on tendering and ordering activity, assuming general elections announcements would happen at that time.

L&T was not available for comment.

“We expect a further pick up in tendering in the next two months, closer to the elections, as that has been the trend in the past few fiscals, where the ministries increase spending after ensuring fiscal prudence,” said Niyogi.

“We do not expect any temporary slowdown in the run-up to the elections in 2024. Some of the contributing factors are that the economy is doing much better this time (as compared to 2019) and real-estate activity is at its peak,” Niyogi added.

Virendra D. Mhaiskar, chairman and managing director of IRB Infrastructure Developers, concurred.

“Do not expect any slowdown as such due to the upcoming elections as the government has already announced a slew of build-operate-transfer projects. Not expecting any meaningful labour shortage either,” he explained.