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Saturday, March 19, 2005

Construction Cos with 40K Crore Orders




THE wheels of the domestic construction industry are spinning at a frenetic pace.

With the Government sharpening its focus on infrastructure development, the top 15-odd construction companies are today sitting on bulging order books that have projects, under various stages of implementation, worth an estimated Rs 40,000 crore.

And with the flow of orders expected to increase by at least 30 per cent in the next two-three years, the message is loud and clear — India is going through a significant makeover in the infrastructure sector.

"We have to now literally choose the projects we want to take up," says Mr E. Sudhir Reddy, Managing Director of the Hyderabad-based IVRCL Infrastructure & Projects Ltd.

The meaty order books of these companies found an echo on the bourses. Top gainers in this sector include Madhucon with 84 per cent, Patel Engineering 73 per cent, Gammon India 64 per cent (after adjustment for stock split) and Simplex Concrete Piles India Ltd 30 per cent in the last one month.

The top 10 construction firms among themselves have orders worth in the neighbourhood of Rs 30,000 crore, which will be executed in the course of the next two to three years.

Leading the band is L&T, which has an order book for over Rs 9,000 crore, with about 40 per cent coming from the infrastructure sector and 12 per cent from the power sector.

While Gammon is sitting pretty on orders worth Rs 4,500 crore, Hindustan Construction Co (HCC), Simplex, Nagarjuna Construction Co (NCC) and Patel Engineering are having orders aggregating Rs 4,000 crore, Rs 3,500 crore, Rs 3,400 crore and Rs 3,171 crore respectively.

Other companies such as ICRCL and Madhucon are executing orders worth between Rs 2,000 crore and Rs 2,500 crore each.

"Clearly our concern is now not on getting new orders, but enhancing our capabilities and expertise to execute them," points out Mr Amitabh Mundhra, Director of Simplex Concrete Piles.

The new orders indicate the broadening range of sectors that these companies are getting into. Consider some of the recent orders: Patel Engineering bagged irrigation projects worth Rs 878 crore in Andhra Pradesh, HCC secured a Rs 404-crore contract for construction of the Chennai by-pass phase II, IVRCL mopped up orders worth Rs 311 crore in water transmission and buildings sector and Simplex is implementing a Rs 107-crore order involving wharf/approach bridge construction and causeway reclamation.

Says Mr Y.D. Murthy, Vice-President of NCC: "This is only the tip of the iceberg. The sector to be watched is the BOT segment in road construction, which is estimated to generate orders worth Rs 60,000 crore in the next five years. Just to give you an idea, only 50 per cent of 58,000 km of national highway is now under proposed development, including the 5,800 km under the Golden Quardilateral and 7,300 km under the North-South-East-West corridor projects."

Literally struggling to keep pace with the flow of orders, these companies are on an expansion drive, raising money from the equity market to fund the new projects that are cropping up their way.

While IVRCL will be raising Rs 145 crore from the primary market and HCC Rs 130 crore through preferential allotment this month, others such as NCC and Gammon had earlier gone in for dilution of equity. Gammon's wholly owned subsidiary, Gammon Infrastructure Project Ltd, is planning an IPO of at least Rs 250 crore later this year.