Engineering: What's stopping growth? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Engineering: What's stopping growth?

Sep 21, 2000

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.

Going nowhere…
  Sales Net Profit
Company FY99 FY00 FY99 FY00
BHEL 71,832 66,085 5,446 5,250
Crompton Greaves 16,825 16,746 231 -1,466
Bharat Electronics 12,263 15,406 536 1,015
Bharat Earth Movers 12,442 13,168 6 150
Siemens 10,080 10,834 -560 351
KEC International 10,579 9,373 259 86
Cummins 6,451 8,258 746 933
ABB 8,692 7,758 377 372
Blue Star 4,717 4,750 162 232
Ingersoll Rand 3,728 4,134 546 568
Total 157,609 156,512 7,749 7,491
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.

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.


Equitymaster requests your view! Post a comment on "Engineering: What's stopping growth?". Click here!

  

More Views on News

Mazagon Dock Shipbuilders IPO: Should You Apply? (IPO)

Sep 29, 2020

Should you bet on this public sector defence shipbuilder?

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE CAPITAL GOODS


Sep 29, 2020 12:45 PM

S&P BSE CAPITAL GOODS 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS