Signs of green shoots? Seven firms bag orders worth Rs 42,000 cr in Q1

Contract award activity was expected to be a total washout globally during the first quarter. However, order inflow for capital goods and construction firms received a shot in the arm thanks to state-owned entities and foreign markets like the US and West Asia.

Industry executives and analysts said most of this new order activity was a spillover, and fresh project finalisation remains weak. According to disclosures by more than 20 firms to the exchanges, at least seven companies bagged orders worth Rs 42,000 crore.

An average order value was assumed for Larsen & Toubro’s (L&T) new orders, as the firm shares only a range (value terms) for such order wins. These comprise order wins for infrastructure, capital goods, as well as engineering companies, but not all of them disclose their new order wins to the exchanges.

“Nothing much happened in April and May. There were orders in June, but nothing significant. Most of the orders announced now were tendered earlier and awarded now. There is only a limited amount of discussions in capital goods that can happen over zoom calls,” said an executive of a capital goods company.

As a major portion of the June quarter was spent under the lockdown, capital goods firms found new orders in global markets. Orders of solar projects and pipes in the US, as well as power station projects in West Asia, Africa, and Europe were among orders reported.

“There are notable orders for a few companies. Some orders were finalised in the T&D market, largely from overseas. Most of these were already finalised or the company was already (pre-lockdown) the lowest bidder,” said Renu Baid, vice-president (research), IIFL Institutional Equities.

“Even if one tries to price that in, there would be some unannounced orders. This means the level of project finalisation in the June quarter would be 10-20 per cent of the usual level,” she added.

In India, Uttar Pradesh, Telangana, Maharashtra, West Bengal, and Karnataka have awarded new contracts largely in the areas of water supply, irrigation, and regional rapid transport systems.

The Centre’s awarding activity — based on disclosures — has been limited. Order wins disclosed so far include a road project from the National Highways Authority of India (NHAI), a smart communications award from the armed forces, and a contract related to the dedicated freight corridor.

Of the 25 new order wins, three were explicitly marked as ‘new’ ones awarded by private firms. Bharat Heavy Electricals (BHEL) and Indian Oil Corporation (IOC) are among the public sector undertakings (PSUs) to have awarded new orders to these listed capital goods and engineering firms.

“Government customers and utilities have delayed their projects. The few state orders awarded this quarter had been finalised before the lockdown,” said Baid. More PSUs are expected to take the lead in awarding new contracts.

A June 26 report by Narnolia Financial Advisors said: “Engineers India’s management, during an investor call, told analysts that the current order pipeline includes the BPCL Mumbai refinery expansion project of Rs 200 crore, GAIL’s Kakinada petchem project of Rs 400 crore, and the Panipat refinery expansion project worth Rs 600 crore. The MRPL expansion project of Rs 700 crore is also in the pipeline.”

The management added that the Paradip refinery expansion project, worth Rs 1,000 crore, was also in the pipeline, besides the Cauvery basin greenfield refinery projects totalling Rs 26,000 crore.

Baid from IIFL expects the September quarter to be better, with large tenders due for opening in July and August. “The September quarter will still see weak ordering activity year-on-year,” she added.