Low capex hits capital goods companies but could be bottoming out

Jun 04 2014, 00:45 IST
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SummaryWith private sector companies shying away from committing to capital expenditure in fiscal 2014, and government-sponsored infrastructure

With private sector companies shying away from committing to capital expenditure in fiscal 2014, and government-sponsored infrastructure projects failing to gain momentum due to delays in taking decisions and securing approvals, the aggregate order book of India’s key capital goods companies showed only a marginal improvement, reports Shubhra Tandon in Mumbai.

In 2013-14, companies refrained from investing towards capacity expansion as economic growth remained subdued, affecting demand for products across categories, and borrowing money remained an expensive affair.

Indeed in the last quarter of fiscal 2014, the aggregate order book of six large capital goods firms showed

an 8.4% decline over the previous year.

Bharat Heavy Electricals reported a sharp year-on-year decline in quarterly order inflows mainly on account of dependence on the power sector for orders, which has been a laggard as far as capacity addition is concerned.

Apart from Larsen & Toubro (L&T) and Thermax, which saw significant growth in order inflows and overall order book in 2014, all others have struggled due to a lack of new orders.

However, with a stable and pro-reforms government in place, projects — both in the private and the public sector —

are expected to move faster with the government facilitating the process.

As a result, companies like L&T expect their order books to grow healthily in the present fiscal.

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