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Data culled by Business Standard Research Bureau from announcements made to the stock exchanges showed that about 17 companies has received a combined fresh orders amounting to Rs 28,170 crore from the state and the central government.
The capital goods sector accounted for the highest 83%, or Rs 23,448 crore, of the total order inflow, while the construction sector accounted for 12% (Rs 3,487 crore) and the oil and gas accounted for 4% (Rs 1,114 crore), data shows.
Meanwhile, total order flow in July - September quarter declined marginally by 2.6% year-on-year (y-o-y) after reporting 27% y-o-y drop in new order flows during the April - June quarter. However, on sequential basis, the order growth was 45%, highest in past one year.
"The Indian power equipment (boiler, turbine and generator) BTG demand has seen surge in past seven months. During this period, around 9GW (giga watts) of fresh orders have been placed /finalized. We believe that this is the beginning of the new power capex cycle, which is expected to strengthen over the next couple of years," says an analyst at Antique Stock Broking.
Strong flow
Since July, India Inc has bagged fresh orders worth Rs 86,226 crore. Of these L&T (Rs 33,068 crore) and BHEL (Rs 16,607 crore) collectively account half or Rs 49,675 crore of the order inflows.
In the past one month, however, BHEL has bagged fresh orders amounting of Rs 12,081 crore. Of these, engineering, procurement and construction (EPC) division orders amount to Rs 7,800 crore.
L&T, on the other hand, has bagged orders worth Rs 8,072 crore, while IL&FS Engineering and Construction Company received a two contracts amounting of Rs 1,412 crore, in the past one month.
Outlook
Analysts suggest that capital goods sector should be a significant beneficiary of the domestic capex cycle revival going ahead. Emerging areas like green energy corridors, intra State transmission projects, substation automation are to drive growth, analysts say.
Another important trend is that the share of UHV (utra high voltage) segment in Twelfth Plan (FY13-17E) is increasing to 30-32% from 5-7% earlier, and given that there are few players prequalified in this segment, the business economics should possibly improve, point out Satyam Agarwal and Amit Shah of Motilal Oswal in a recent report on the capital goods sector.
Within the capital goods sector, analysts expect L&T to also gain from dedicated freight corridors (DFCs). According to reports, Dedicated Freight Corridor Corporation of India (DFCCIL) plans to award orders worth around $7.5 billion for civil construction ($3.8 billion) and electrical/signalling ($3.5 billion) works during FY15-16.
"In our view, DFCs are set to benefit many sectors, besides the capital goods sector, which could be an initial beneficiary. We believe freight operators will benefit from increased traffic, wagon suppliers will benefit from higher wagon demand and the industry will benefit from lower transportation costs. L&T will be largest beneficiary of potential DFC orders," point out Satish Kumar and Jay Kakkad of Standard Chartered in a report.
While MNC players, particularly Alstom T&D and ABB India (neutral rating) are best positioned to capture the upsides from high-end products, CRG (buy rating) has been expanding presence in the chain, say Agarwal and Shah of Motilal Oswal.
