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FM puts infra on fast track; reviews 191 infra projects

Prabhudas Lilladher | 10 Oct, 2012  | Follow Author | Add to my Favourites 
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Stocks in the Infrastructure sector show an upward trend, mainly due to announcement of host of reforms in Power, Infrastructure and Retail sector.


The Finance Minister proposed to clear projects worth about Rs10bn. From around 109 pending ministry clearances, nearly 76 projects need regulatory clearances, 33 need nods from State Government and banks, whereas 22 projects are yet to achieve financial closure.

Moreover, the announcement of minority stake sales in four PSUs is expected to raise nearly Rs150bn, which may aid Infra growth. It was topped by RBI cutting CRR by 25 basis points which Prabhudas Lilladher expects would release Rs170bn in the system. The Cabinet Committee on Economic Affairs also approved the scheme for Financial Restructuring of State Distribution Companies (Discoms). All these events will help some liquidity easing in the system and thus, give some impetus to Infrastructure funding.

Ordering activity was flat YoY and QoQ though it is an encouraging sign. Going ahead, Prabhudas Lilladher still believes that the stock performance will depend on 1) improvement in the balance sheet and 2) improvement in order inflows with the softening in competitive intensity.

For the overall sector, order inflow stands at Rs256bn (approx) as against Rs306bn (approx) for Q1FY13 and is down by 17% as compared to Q2FY12.

On the order inflow front, Prabhudas Lilladher is expecting 6% YoY de-growth (for their coverage universe), Order inflow for their universe stands at Rs236bn for Q2FY13E as against Rs296bn for Q1FY13.

Key developments to watch out for in Q3FY13E are 1) DFC orders 2) revival of Power and Hydrocarbon sector and 3) fund raising plans in infrastructure asset SPVs.

Sectoral Insights


In Q2FY13E, NHAI has awarded close to 350kms. Total order inflow in roads is Rs57bn. IVRCL, HCC and KNR Constructions were among the players who have bagged projects from NHAI. Apart from that, smaller players like J.Kumar and others also got some EPC-based road projects.


Orders from the power sector continue to be a drag on account of domestic fuel deficits and poor financial health of the State Electricity Boards. However, delay in order inflows from the power generation sector has not much affected the power transmission projects which continue to pour in, though on a smaller scale. During the quarter, L&T has booked few orders from the transmission and distribution segment. Total order inflow is Rs26‐30bn.


Order inflows improved in Q2FY13E with some revival in ONGC orders. Order inflows are expected to improve in the Middle East and South East Asian markets. Total order inflow is Rs38bn.


Infrastructure orders continue to show signs of recovery. L&T witnessed highest order inflows in Factory and Building segment, Water and effluent treatment business and Road sectors. Total order inflow is Rs63bn. Mining, Railways and other smaller sectors also performed well with an order inflow of Rs52bn.

Policy paralysis at the centre is loosening up and benefits of various initiatives are expected to flow in. However, the company level issues like poor balance sheet and bad performance of their BOT assets are adding to the woes. Re-rating of the sector has materialised; however, it is not being backed by a fundamental improvement in company level health.

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About Prabhudas Lilladher

Prabhudas Lilladher has a nationwide distribution network, consisting of branches, franchisees and associates, providing a comprehensive gamut of financial services in the Institutional and Retail domain. Their services includes Equity, derivatives; margin funding, mutual funds, PMS, IPOs and online trading.


For more information please write in to [email protected]

Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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