Indian companies look to cash in on bulging infrastructure order book

The growth of the big companies is trickling down to smaller companies and suppliers too

Investments worth more than Rs 80 trillion are expected in roads, railways and urban infrastructure between now and FY30 and the supply chains helping to build this core infrastructure are also readying to cash in on the growth.

In the first half of the current financial year, orders worth more than Rs 2.6 trillion were tendered in the roads and railways segment alone, according to data sourced from ICRA Ratings and Research.

“India’s transportation infrastructure sector is in high gear, and we enjoy a sizable share of it,” said S V Desai, whole time director and senior executive vice president (Civil Infrastructure) for Larsen & Toubro.

Desai expects this transport-related boom to continue at full throttle. The company is executing orders worth Rs 4.5 trillion, of which, said Desai, a fair amount comes from transport-related infrastructure.

Though Desai did not reveal the exact percentage, one third of Tata Projects’ total order book of Rs 48,000 crore was in transport-related infrastructure as of March 2023, company executives said.

Besides big players such as L&T and Tata Projects, a host of smaller construction companies also have orders that will keep them busy. In its December 2023 note, ICRA said its sample of construction companies (which includes realty exposure and excludes L&T) were executing orders worth more than Rs 2 trillion, almost three times their operating income combined.

Within transport  infrastructure, the awarding of road-related projects slowed in the current financial year but they still remain a significant contributor to the overall order book.

The growth in other segments such as metros and railways has also attracted interest from a host of smaller companies.

C G Power and Industrial Solutions, for instance, in a call with analysts this month noted that it plans to tie up with partners, including a tech tie-up with a Korean company, to qualify for certain train set orders in India.

For those already present in the railways segment, order book growth has been rising. In the current financial year, Titagarh Rail Systems added close to Rs 19,500 crore worth of fresh orders related to Vande Bharat, metros and wheel set manufacturing, according to Crisil’s latest note on the company released this month.

An additional focus on metro systems and other tunnelling projects has also shown a trickledown impact on those supplying to the construction companies.

“Tunnel boring machines are in huge demand in India and several manufacturers are considering setting up manufacturing plants in India to cater to this demand because, till now, only refurbishment or re-manufacturing facilities have been available in India,” noted Raman Kapil, president and chief operating officer, buildings and infrastructure, Tata Projects.

Kalpataru Projects International marked its entry into the electric mobility business in December with an order for building an underground metro project. The company has indicated that it has plans to procure tunnel boring machines  for a capex of up to Rs 100 crore in the next financial year.

The infrastructure boom has prompted others, such as UAE-based Ducab India, to tie up funds locally as they go about catering to India’s appetite for infrastructure-related wires and cables solutions.

“We work with different engineering companies in India as suppliers to them and the growth in infrastructure projects over the last couple of years has made us take note of this market and, with our latest announcement, look to expand ing through tie-ups of local currency funding,” said Mohammed Abdul Rahman Al Mutawa, group chief executive officer for the Ducab group.

Mutawa was recently in India to tie up the local currency funding facility with Emirates NBD.

Sharad Agarwal, CEO for Emirates NBD also commented on India's expanding infrastructure attracting considerable attention from global companies.

“The sector is poised for substantial international investment, mirroring the interest witnessed in the Indian consumer segment,” said Agarwal.