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Capital goods: Raking in big orders

Sep 25, 2008

In a growing economy like India, companies across sectors are bound to invest for their future growth. The fact that India lacks basic infrastructure still persists. As such, companies from across the sectors are willing to exploit the opportunities based on the same. Infrastructure, engineering and construction companies are taking advantages of core competencies to expand their capabilities across segments. In the fiscal till date, the number of order inflows has been relatively slower in absolute terms. However, in value terms majority of the order intakes have been massive in size. Companies across infrastructure segments like engineering (products and services), construction and power (generation, transmission and distribution) have announced big contracts over the past few months, with most of them being their largest till date. The table below states some of the large orders announced in this fiscal.

Major orders announced during the current fiscal

Month Company Details* Size (Rs bn)
Sept L&T Various construction orders 50.0
July BGR Energy EPC power project 49.0
Aug L&T Orders from steel and zinc industry 38.2
Sept Punj Lloyd Pipeline project 36.4
July BGR Energy EPC power project 31.0
June L&T Steam turbine generator package 15.6
July L&T Railways order 10.5
July Punj Lloyd Balance of plant and EPC power project 0.1
June L&T Hi-tech equipment order 10.0
July Thermax Equipment supply contract 8.2
Sept L&T Its largest Brazilian equipment order 7.2^
Sept Patel Engg Delta system modernisation 7.0
July HCC Barrage construction project 6.4
Sept Simplex Infra Tower construction project 6.3
Aug Nagarjuna Cons. Various orders 4.7
July ABB Power products, systems, and solutions order 4.6
July L&T Transmission line order 4.5
Aug Nagarjuna Cons. Various orders 4.4
April Areva T&D Electrical balance of plant and equipment order 4.2
Aug Thermax EPC captive power plant project 4.2
Sept Nagarjuna Cons. Various EPC orders 4.1
July HCC BOT highway project 3.4
July ABB Electrical products and systems 3.2
April HCC Civil power project 3.0
July Siemens Baggage handling contract 3.0
June ABB Power plant package 3.0
July Areva T&D Substation package contract 2.7
* Includes contracts won in form of consortiums of joint ventures; ^ approximate figure

What to expect?
With strong experience and capabilities to take up larger sized contracts (for engineering and construction firms) and bigger manufacturing capacities, these large companies have in fact taken up massive sized projects and orders of late. While the larger players have been taking up huge orders, the relatively smaller players are also slowly entering the big league at a steady pace.

However, all said and done, execution remains the key. Companies from the infrastructure, engineering and construction sectors will continue to face issues like raw material availability and pricing, manpower availability and spiraling wage cost and capital as they work on these big orders going forward. Considering that some projects do not have inbuilt cost escalation clauses might also impact the profitability of companies.

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