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Engg, construction firms post 10% order-book growth

Deepak Korgaonkar in Mumbai | January 06, 2009 09:49 IST

Engineering, constructions and capital goods firms have reported a 10 per cent growth in order-flow in the quarter ended December 2008 -- a new low in the last eight quarters.

On sequential basis, orders have declined by a record 36 per cent.

In the first quarter of calendar year 2008, the order book of these firms grew by 128 per cent, followed by 136 per cent in the second quarter and at a slower pace of 52 per cent in the third.

These firms receive orders for engineering, infrastructure development, gas and oil pipeline and power equipment projects from overseas and local firms as well as central and state governments on a turnkey basis.

So, the decline in order-flow indicates a cautious approach towards expansion and modernisation during the current credit crisis and slowdown in global economy.

Though there has been a marginal growth in orders from the Centre, states and local firms, the same from overseas entities have slumped substantially.

In fact, orders from overseas firms have declined by 26 per cent during the quarter under review.

While orders from local firms grew by a modest 6 per cent, the same from states grew by just 3 per cent during the quarter. However, orders placed by the Centre have more than doubled.

The Centre awarded orders worth Rs 9,324 crore (Rs 93.24 billion) in the October-December quarter, up by 114 per cent.

Of these, orders of Rs 3,574 crore (Rs 35.74 billion) were received for power projects, while the oil and gas, railway, shipping and engineering-related sectors accounted for works worth over Rs 500 crore (Rs 5 billion) each.

Overall, orders in the December quarter for 43 companies added up to Rs 38,770 crore (Rs 387.7 billion), compared to Rs 35,177 crore (Rs 351.77 billion) in the same period of 2007.

The top four companies -- Bhel, Larsen and Toubro, Patel Engineering [Get Quote] and ABG Shipyard [Get Quote] -- accounted for 60 per cent of the total orders with the top two cornering 41 per cent.

Companies in the capital goods sector such as ABB, Pratibha Industries [Get Quote] and Lanco Infratech [Get Quote] received orders between Rs 200 crore (Rs 2 billion) and Rs 500 crore (Rs 5 billion) in the December quarter.

However, for each of Nagarjuna Constructions, Punj Lloyd [Get Quote], Siemens and Subhash Projects, the order-flow has declined by more than 40 per cent.

Reliance [Get Quote] Infrastructure, Bharat Earth Movers [Get Quote] and Simplex Infrastructure, which bagged contracts worth over Rs 1,000 crore (Rs 10 billion) during the fourth quarter of CY07, received no orders during the same period of CY08.

Central and state governments have given orders to Bhel, L&T and Maytas Infra. KEC International [Get Quote], Bhel and Aban Offshore [Get Quote] bagged some orders from overseas firms too.

Bhel, India's largest power equipment maker in the public sector, showed a robust 220 per cent rise in orders during the quarter, but reported a 13 per cent drop on sequential basis.

L&T, India's largest engineering company, showed 37 per cent decline in order flow on sequential basis, while on year-on-year basis, the company registered an order growth of 81 per cent.

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