Sep 21, 2000|
Engineering: What's stopping growth?
If we take a look at the operational performance of the top 10 engineering companies (by sales), all figures stating an economic revival come to a nought. The turnover of the top 10 companies actually fell in FY2000 when compared to FY99. The same is true for the net profit figures of these companies.
Why this degrowth, when almost every other manufacturing sector has shown encouraging results. One reason could be that when economic recovery takes place, the engineering sector is last one to record the same. The recovery takes time to trickle down to this sector. Another major reason is that almost all the big engineering companies depend largely on the power sector led demand growth. The power sector as we know, has huge potential. But going by the happenings in the power sector the potential looks like remaining just that i.e. potential.
|Bharat Earth Movers
On the macro front, the growth in India's index for industrial production has been mostly consumption led. Even that is now showing signs of slowing down. During April-May 2000 the IIP actually fell to 5.6% from 6.2% in the corresponding period during FY99. On top of that, the rising crude oil prices will further put the pressure on this sector's growth, atleast in the short term.
What can probably bring the spotlight back on the engineering sector is major growth in power sector investments and also restructuring of the government owned engineering companies. By restructuring we mean, either a divstment in favour of a strategic partner or dividing big behemoths like Bharat Heavy Electricals (BHEL) into smaller companies with sharper focus.
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