Road and power sector rises as construction tenders swell by 96%

09 May 2024 CW Team

The roads sector is dominating, with 49% of all tenders issued in the quarter, up from 33% the year before. The water and real estate segments came next, with corresponding contributions of 20% and 16%. In contrast, highways accounted for 31% of all contracts awarded, while the electricity sector, which comprises generation and distribution, made up 40% of all orders.

With two big value orders, the power segment made about 45% of the granted order book, demonstrating its dominance in the activity throughout the quarter. In terms of order awards and tenders, other industries, including railroads, mining, irrigation, sewage, and others, had differing degrees of activity. .

Krishan Binani, the Director of Corporate Ratings at Ind-Ra, commented on the future of the sector, suggesting an expectation for an increase in contract awards in the near future. He stated that tender awards could see significant upward momentum starting in June 2024, in line with historical announcements starting in the second quarter of the fiscal year 2025. .

Ind-Ra has kept a neutral outlook on the construction industry for the fiscal year 2025, citing continued government capital expenditure as well as a likely rebound in state and private spending to drive 10%?12% growth in Engineering, Procurement, and Construction (EPC) sector revenues. The centre capital expenditure increase is anticipated to be 17%, consistent with a pattern of lower investment during election years. This might be countered by state expenditures and sector-specific private capital expenditures.

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India Ratings and Research (Ind-Ra) highlights that the fourth quarter of the fiscal year 2024 saw a 96% year-over-year rise in the number of construction tenders for roads and power, amounting to Rs 7,089 billion. This increase is characterised by a March Rush of increased tendering activity by the central and state governments. On the other hand, orders awarded decreased by 30% during that time, reaching Rs 1,623 billion the lowest growth rate during the previous eight quarters. . The roads sector is dominating, with 49% of all tenders issued in the quarter, up from 33% the year before. The water and real estate segments came next, with corresponding contributions of 20% and 16%. In contrast, highways accounted for 31% of all contracts awarded, while the electricity sector, which comprises generation and distribution, made up 40% of all orders. With two big value orders, the power segment made about 45% of the granted order book, demonstrating its dominance in the activity throughout the quarter. In terms of order awards and tenders, other industries, including railroads, mining, irrigation, sewage, and others, had differing degrees of activity. . Krishan Binani, the Director of Corporate Ratings at Ind-Ra, commented on the future of the sector, suggesting an expectation for an increase in contract awards in the near future. He stated that tender awards could see significant upward momentum starting in June 2024, in line with historical announcements starting in the second quarter of the fiscal year 2025. . Ind-Ra has kept a neutral outlook on the construction industry for the fiscal year 2025, citing continued government capital expenditure as well as a likely rebound in state and private spending to drive 10%?12% growth in Engineering, Procurement, and Construction (EPC) sector revenues. The centre capital expenditure increase is anticipated to be 17%, consistent with a pattern of lower investment during election years. This might be countered by state expenditures and sector-specific private capital expenditures.

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