• OUTLOOK ARENA
  • VIEWS ON NEWS
  • SEPTEMBER 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.

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.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407