Engineering majors are hopeful of bagging more orders from West Asian countries in the coming quarters despite concerns being raised about their order books getting dented with a sharp drop in oil prices. Global oil prices fell to $74 a barrel on Monday from a high of around $80 earlier this year.
A recent report by Credit Suisse expects West Asia (GCC) capex to grow sharply at 60% year-on-year in the current year ending December 2010, compared with 5% y-o-y growth in 2009. According to the report, a capex of $175 billion is expected in the next financial year in six GCC countries compared to a capex of $109 billion in current financial year.
Voltas Ltd executive VP-finance MM Miyajiwala had recently told FE, ?I cannot quantify the new orders that we are expecting, but I can tell you that there will be adequate new orders in the next few months. We are expecting these orders from the West Asia, Singapore and Hong Kong, among others.”
According to a BofA Merrill Lynch report, Voltas is likely to end the six quarter long drought in new order inflow from West Asia with about Rs 1,500 crore new order win by March 2010. The company aims to leverage its strong clientele in Abu Dhabi and Qatar to bag new contracts, the report adds. Qatar, for example, despite being a tiny country with a population of 1.45 million (2008), has a substantial investment programme.
As of June 2009, total projects in Qatar, in several areas of core infrastructure, were valued at $203 billion. The country is executing three large power projects with aggregate capacity of 6,730 mw which will raise the installed capacity to 10,000 mw by 2012. To meet the transmission requirement, Qatar General Electricity and Water Corporation’s (Kahramaa) is investing close to $18 billion in the electricity network expansion programme comprising in several phases.
Siemens India is the most prominent player among the global T&D equipment manufacturing companies in Qatar. The company had recently completed phase IX of the Kahramaa transmission grid project successfully.
Ambit Capital, in its report, expects Siemens India to win more packages from this phase. Successful implementation of transmission projects in Qatar will also open opportunities in other GCC countries for the company.
Oil and gas, power and water sectors are the growth areas in the Middle East for the capital goods industry. Hospital projects too are going to be a major area of growth in the Middle East, say experts.
Voltas Ltd is looking at gaining entry to these sectors either through organic or inorganic means.
Meanwhile, L&T has recently reported 5% on its total revenues being contributed by the Middle East. Larsen & Toubro faces stiff competition in the international market from construction majors in West Asia including ABB of Sweden and Bechtel of the US.