Order inflows for the capital goods, construction, engineering and infrastructure sectors have been static for the past five quarters, confirming fears of the economy headed to a sustained slowdown.
With companies not committing fresh capital for expansion, order inflows were flat during the first quarter of the financial year, due to muted activity in key segments such as power generation equipment, power transmission and distribution (T&D) and hydrocarbons. Orders for the quarter fell 7.4 per cent quarter on quarter and one per cent year on year.
Bharat Heavy Electricals (BHEL), which largely depends on the power sector, saw the steepest fall, of 73 per cent. Tendering activity in the power T&D space was tepid until June, said an analyst at Edelweiss Research. In generation equipment, delays in NTPC tenders continued, while there were no major orders from either state electricity boards or independent power producers. There was also a slowing in order inflows for the central government’s road projects and water treatment and sewerage projects of various municipalities.
| ORDER INFLOWS IN Rs CRORE (QUARTER ENDED) | |||||
| Jun '10 | Sep '10 | Dec '10 | Mar '11 | Jun '11 | |
| Total* | 47,706 | 50,856 | Oct-33 | 51,119 | 47,333 |
| Larsen & Toubro | 7,757 | 12,779 | Apr-28 | 3,384 | 14,626 |
| BHEL | 6,300 | 7,855 | 4,113 | 13,697 | 1,662 |
| Punj Lloyd | 4,193 | 0 | Jul-11 | 1,380 | 2,508 |
| HCC | 1,927 | 1,220 | Feb-00 | 498 | 2,142 |
| IVRCL Infra | 5,323 | 2,250 | Jun-04 | 565 | 894 |
| *Total figures are not just of these five companies but of all firms | |||||
Public sector undertakings such as Power Grid Corporation, Oil and Natural Gas Corporation and NTPC had fewer capex plans and, so, poor order flows from these. Of the total order flow of Rs 47,333 crore, the private sector contributed Rs 19,630 crore, up 71 per cent year on year, while central and state governments and public sector units contributed Rs 22,027 crore, down 22.2 per cent. The overseas contribution drop was 28.6 per cent to Rs 5,686 crore.
Engineering giant Larsen & Toubro (L&T), however, reported a massive 88 per cent rise in order flow. During the quarter, it won Rs 14,626 crore of orders in this tough environment. The order wins are from diverse sectors such as oil & gas, power, roads, metal and process industries. Among these are Rs 1,366 crore worth of transmission & substation projects from the Gulf, a Rs 2600-crore concession agreement with National Highways Authority of India and a Rs 4,100-crore construction order to erect buildings & factories.
BHEL received one big order worth Rs 1,600 crore for nuclear power segment. The order flow was considerably poor for construction and infrastructure firms like Punj Lloyds and IVRCL Infra.
Domestic boiler, turbine, generator (BTG) companies continued to be hit by foreign competition. Muted inflows in 2010-11 and the deteriorating outlook for power engineering, procurement and construction companies and BTG ones should mean a sharp cut in order backlog. The order book for construction companies Madhucon Projects, Ashok Buildcon and Gammon India remained blank, while Ahluwalia Contracts and Unity Infra saw unchanged order flow in the June quarter.
