The Modi government last month released the list of 98 cities that will be part of its ambitious Smart Cities project.
The project is aimed at enhancing the urban life. Market experts see it as an initiative that will bring huge investment in infrastructure development, such as roads, rail, bridges, airports, water solution and real estate including housing, schools, hospitals, offices, retail, etc.
Prime Minister who launched the Smart Cities Mission in June, had defined a smart city as “one which is one or two steps ahead of the aspirations of people”. The union cabinet had approved an outlay of Rs 48,000 crore for the Smart Cities Mission. As a part of the Smart Cities Mission, each selected city would get central assistance of Rs 100 crore per year for five years.
“Smart cities will create demand across sectors like metals, cement, paints, etc. With the increase in demand we can see increased order book for the respective companies, which in turn would be a fillip to the overall growth of the company. When these respective companies would get strong revenue it would boost the stock prices further, ” DK Aggarwal, chairman and managing director, SMC Investments and Advisors said.
Under the smart cities initiative, the focus will be on core infrastructure services like adequate and clean water supply, sanitation and solid waste management, efficient urban mobility and public transportation, affordable housing for the poor, power supply, robust information technology, connectivity, governance, especially e-governance and citizen participation, safety and security of citizens, health and education and sustainable urban environment.
Vivek Gupta, CMT, director research, CapitalVia Global Research, said, “This program will boost up banking, real estate, cement, steel sector and other major sectors of the Indian economy over the long term.”
We list out stocks recommended by three brokerage houses that may benefit from Smart Cities project:
SMC Investments and Advisors
Ambuja Cements: The construction of new housing will surely create much demand for the cement and the Ambuja Cement being one of the largest manufacturer of white cements and grey cement in India, it is expected to ripe the benefit of the creation of smart cities.
National Building Construction Corporation (NBCC): NBCC is engaged in project management consultancy, civil infrastructure for power sector and real estate development, under the Ministry of Urban Development. It has been already taking projects under Jawaharlal Nehru Urban Renewal Mission (JNURM). So, it is expected that it may participate in government as smart city project.
Larsen & Toubro: Larsen & Toubro, which is India’s largest engineering and Construction Company, has formed a new unit to cater to smart cities, security solutions and communication projects. Moreover, the management of the company expects the business to grow to $1 billion in three to four years, driven by the government’s push in those areas.
Dewan housing Finance: Housing finance companies like Dewan housing Finance are expected to get a boost to the growth opportunities available in the country. Also the government’s other initiative mega flagship schemes is expected to give overall support to the Housing fiancé companies (HFC).
Kalpataru Power Transmission Ltd: As the company is engaged in power transmission & distribution, oil & gas pipeline, railways, infrastructure development, civil contracting and warehousing & logistics business with a strong international presence in power transmission & distribution and with the past goodwill, the company is expected to get much benefit from the governments smart city project.
Hem Securities recommends:
The brokerage house believes Ambuja Cement, Berger Paints, Asian Paints, NBCC, LIC Housing Finance, Cera Sanitaryware, VA Tech Wabag, Kajaria Ceramics, Zicom Security Systems and Schneider Electric are few of such listed companies to get benefit from the government ‘Smart City mission’.
CapitalVia Global Research recommends:
After the smart city announcement, the research house is looking bullish on companies such as Srei Infrastructure, JK Lakshmi Cements and Havells.