Riding on the overall optimism in the economy, Indian corporates posted healthy order book positions as of FY23 end, even as it is expected to gain further momentum in the medium term mainly due to increase in capex spends. While order books of most companies rose, a number of them also fell, as execution gained pace.
The total order book position of 25 major companies – across infrastructure, power and capital goods – rose by 9.6% to Rs 10.27 trillion as of FY23 end, compared with Rs 9.36 trillion, according to full year earnings data of these companies. For most of these companies, the order book position as of March end was the highest ever.
“Many companies have witnessed higher growth in order book supported by strong inflows in certain segments such as roads, power transmission & distribution, water and buildings among others. The increased order inflow in these segments is led by Government (both Centre and key states) push in increasing infrastructure capital outlay as evident in the recent budgetary allocations. Further, as we are approaching the last years of the originally envisaged National Infrastructure Pipeline (NIP), a step-up in infrastructure investments is expected to meet the planned capex,” Abhishek Gupta, vice president & sector head at ICRA said.
“Increase in capital outlay by the central government has been a key factor behind the increased investments in infrastructure sector, particularly National Highways and Railways. Besides, the Centre has also provided grants to states for capital outlay, which has improved the ability of State Governments to undertake higher capex. The trend is expected to continue over the medium term, with the Government’s plan of increasing overall infrastructure investment in the country,” Gupta added.
Engineering and construction major Larsen and Toubro (L&T) topped the charts with an order book position of Rs 4 trillion as of March 31, 2023, a 11.7% rise from that recorded over the same period a year ago. Bharat Heavy Electricals (BHEL), with an order book position of Rs 91,336 crore, came in second, followed by Hindustan Aeronautics (HAL) at Rs 81,784 crore and Bharat Electronics at Rs 60,690 crore.
While the order book of Bharat Electronics rose 5.4% that of BHEL (down 10.9%) and HAL (down 0.5%) from the year-ago period. Mazagon Dock Shipbuilders (-15.4%), J Kumar Infraprojects (-0.7%), KNR Construction (-21.2%) and Thermax (-33.6%) were the others to record a fall in order book positions as of FY23 end, compared with that a year ago.
L&T expects its order book to rise to Rs 5 trillion in the next two years. The company has also earmarked a capex of Rs 5,000 crore for FY24 that includes investments for data centre and electrolyser plant. It expects to record 70% of its order book from infrastructure, 20% from energy and the rest from other sectors.
“I am optimistic with a reason. If this is the trend and the momentum continues, we may get there (Rs 5-trillion mark) in the next two years. There’s a good chance if the election is smooth and the policy continuity is there,” R Shankar Raman, whole-time director & CFO, L&T, told FE.
Increase in capex, both private and government, would see companies’ order book positions rising further by at least 15% per annum for the next couple of years. This is also unlikely to cause backlogs, as along with the increase in appetites for orders, execution has also gone up, industry experts said.
The capex plans of India Inc are also on the rise. According to Crisil, the capex of sectors it tracks – which was about ₹5-5.3 trillion in FY23 – is expected to grow by 12-14% to ₹6 trillion in FY24. New age sectors such as green hydrogen, solar modules and semiconductors are expected to grow by 4 times in FY24, increasing their share to 11% from 3% in FY23.