 "India Inc expects sales, demand to pick up in second half")
With the Indian economy showing signs of a pick-up in the first six months of 2016-17, CEOs are expecting the second half to be better in terms of new orders, profitability and capital expenditure. A cut in interest rates would go a long way to revive earnings in the rest of 2016-17, they said.
The rise in sales will be led by higher government spending in highways and electricity generation and transmission, thus providing a fillip to the private sector.
“We had earlier targeted earning 50 per cent of our revenue overseas, but now we see the opportunity in India,” said Harsh Goenka, chairman of the RPG Group. Flagship Ceat Tyres will invest Rs 1,800 crore to double its capacity in Vadodara and Ambarnath near Mumbai and a new factory in Nagpur.
“Our engineering, procurement and construction company KEC International has started receiving orders for substations, transformers and other power equipment as the government has started spending on building infrastructure,” Goenka said.
Research firm CMIE says the commissioning of projects during the September quarter was up by 129 per cent, year on year, with 243 projects commissioned involving an investment of Rs 2,01,000 crore.
Among these, Reliance Jio Infocomm launched its wireless telephony services with an investment of Rs 1,00,000 crore, equivalent to 50 per cent of the total project completions by Indian companies.
“New tenders have also been announced and we expect substantial business from these. The implementation of the green energy corridors has also commenced, which is expected to augment demand in the second half,” said Vimal Kejriwal, managing director and CEO of KEC International.
Analysts said many indicators showed things were getting better for Indian companies. In the first quarter of 2016-17, order inflows for capital goods companies rose 14 per cent, year on year. Outstanding loans to the roads sector grew by 8.8 per cent. And light commercial vehicles sales grew by 11 per cent in August.
AM Naik, chairman Larsen & Toubro, said India was at the cusp of a turnaround. "All indicators are positive. With a projected growth rate of 7.4 per cent in 2016-17, this is the fastest growing large economy in the world. The government's thrust on infrastructure and its ‘Make in India’ initiatives provide a range of opportunities,” he told reporters in a recent interaction.
“I don’t think there is a dramatic change in the fortunes of all companies, but slowly things are getting better,” said Ajit Gulabchand, chairman of construction major HCC. “The growth is skewed in favour of roads and highways. Power and port projects are still lagging behind,” he added.
The CEO of an electricity generation company said demand would pick up in the second half of the year mainly due to increased demand from farmers and steel and cement companies. “With the financials of the state electricity boards improving, we expect demand to pick up substantially, thus utilising idle capacity in the industry,” he said.
Vikram Amin, executive director of Essar Steel, said normally steel demand started picking up from October, and signals from the ground were positive. “There are clear signs of demand emerging from the infrastructure and fixed-asset investment sectors,” he said. The demand for local steel shot up sharply after the government increased an import duty on cheap Chinese steel that was flooding the Indian market.
