“The decline seen in FY19 is because no major project was awarded in FY19,” said M S Unnikrishnan, managing director (MD) and chief executive officer (CEO) for Thermax. Data compiled from BSE announcement
shows FY19 lacked a large number of chunky orders as seen in the previous year. In FY18, for instance, the highest-valued project was worth Rs 20,400 crore, won by Bharat Heavy Electricals (BHEL) for a power plant. In FY19, the highest-value order was of Rs 7,000 crore, won by Larsen and Toubro (L&T) in the aviation segment. From February this year, L&T has stopped sharing the exact value for its projects and instead, it is stating a range. The data has been compiled assuming an average of the price range indicated in the announcement.
A CEO of another capital goods and EPC company argued that the large number of order wins in FY18 reduced the financial and execution appetite for companies in the infrastructure space to take on fresh orders in FY19. He added the slowdown in segments like transmission and distribution (T&D) also led to the decline. “The lower order inflow is owing to a slowdown in state and private orders in the T&D segment. In addition, there is also a backlog of orders from the March quarter… These orders are held back due to the election process,” he said.
The verdict on how FY20 may look in terms of new orders is not clear. A few like Unnikrishnan expect a repeat of the FY19 performance. “FY20 looks as good or as bad as FY19 as private capex continues to remain absent,” he said. Based on BSE announcements, Rs 1,786 crore worth of orders were termed as private orders in FY19. However, certain private orders may not have been disclosed to the exchanges owing to client confidentiality.
Others believe the general election outcome will decide the future course of orders. “I expect FY20 to show a single-digit growth over FY19 in terms of order inflows, as metals, power and oil and gas are expected to remain slow. The election outcome will be a key deciding factor. If the current government wins, we expect a weak period for the first quarter of FY20, and if there is a change in government, the weak period will be longer, before new orders come in,” said an analyst with a domestic brokerage firm. He added, irrespective of the election outcome, orders from state agencies will continue. In FY19, state governments alone contributed more than 21 per cent to the total order wins, according to the Business Standard data. The unnamed CEO quoted above said he expected new orders to come in starting the second quarter of the current financial year.