T&D players gain from rising demand

ABB, Siemens, Alstom gain from equipment focus

News of KEC International bagging orders worth Rs 1,036 crore lifted its stock price around three per cent in Thursday’s trade. While the order win is positive, a closer look reveals that around 60 per cent of orders came from West Asian countries. In fact, over the past few years, KEC has seen a steady increase in order flows from foreign countries. Such orders grew from 44 per cent of total order book in financial year 2011-12 to 47 per cent in FY16. While KEC always had a fair exposure to foreign orders, Kalpataru Power Transmission increasing its foreign presence is an interesting trend. The share of such orders has steadily increased to 50 per cent of its total order book in FY16 from about 45 per cent in FY12.

There are reasons why domestic power transmission and distribution (T&D) players shifted focus to countries in West Asia, Africa and America. Domestic T&D orders flow from private power distributors, state electricity boards (SEBs) and Power Grid Corporation of India (PGCIL). In the last few years, as orders from private players and SEBs have been sporadic, KEC and Kalpataru have attempted to broad-base their order profile by entering new geographies such as Africa and have strengthened their presence in West Asia and America. Secondly, intense competition from companies such as Skipper and Techno Electric and Engineering, apart from smaller unlisted entities, impacted profitability in the domestic market, forcing them once again to diversify.

  Last, PGCIL’s focus in recent years on upgrading its long-distance grid capacity from the earlier standards of 220 kilowatts (KV) and 440 KV to 765 KV and 1,200 KV has also had a bearing. With this upgrade, however, product-oriented companies with offerings such as transformers, switchgears and circuit breakers stand to gain more. Also, as ABB, Alstom T&D and Siemens have access to the strong research and development capabilities of their foreign parents, they have a higher ability to scale up to PGCIL’s requirement and this explains why their order book growth from PGCIL has been better than domestic peers.