IANS | 21 Nov, 2023
The busy elections season in the next six months is leading to a
moderation in new capex activity, as per new projects data, and it is
slowing order inflow momentum for large projects especially in capital
goods, railways as well as the roads sectors, Elara Securities said in a
report.
Management commentary from companies post Q2FY24 results corroborates the loss in pace in order awarding, the report said.
“Within
our capital goods coverage, growth in inflows decelerated to 39 per
cent in Q2FY24 from 62 per cent in Q1FY24 and 65 per cent in Q4FY23.
Likewise, in the infrastructure space, for the companies under review,
cumulative order inflow rose 49 per cent YoY in H1FY24. However, if we
were to exclude L&T, which saw large international order inflows,
aggregate order inflow declined 27 per cent YoY,” the report said.
Likewise,
while the Ministry of Roads & Highways has spent 64 per cent of
budgetary allocation up to October 2023, new project awarding activity
has fallen 48 per cent YoY to 2,595 km, highlighting that focus has
shifted toward completing existing projects.
With significant
amount of spending lined up in rural India and the agriculture sector,
such as likely hike in PM Kisan amount and higher MGNREGA allocation, as
well taking into account the freebies announced in Assembly Elections
of five states where voters will decide the next government (Rajasthan,
Madhya Pradesh, Telangana, Chhattisgarh & Mizoram), focus is
shifting to election preparedness and related spending, delaying the
impetus toward new ordering activity by the government and
wait-and-watch approach by the private sector, the report said.
“We
expect further moderation in order inflows momentum, led by
infrastructure spending in railways and metros, power T&D,
renewables, wastewater treatment, and the civil sector,” the report
said.
“However, one sector that may buck the trend is water
sector. Since spending on schemes related to last-mile delivery, such as
Nal Se Jal Scheme, which is under the Jal Shakti Ministry, helps in
enhancing positive sentiments prior to elections, we expect spending in
Jal Shakti to remain in the fast lane in the run-up to the elections,
bucking the likely slowdown in other infra space."
Moreover, since the Jal Jeevan Mission is targeted to be completed by end-CY24, execution may remain healthy through FY25.
This
fiscal too, the Jal Shakti Ministry has spent 21 per cent of BE
April-September vs an average of 19.2 per cent during April-September
FY21-23.
