Tenders and awards slow down in June 2019

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Published: July 20, 2019 3:08:17 AM

According to analysts tendering was slow in Q1FY20, on account of the Lok Sabha elections’ code of conduct in effect and, later, on account of the impending FY20 Budget.

Tendering activity witnessed a major slowdown in June 2019 with tendering activity of `30,000 crore, which was less than half of the past 27-month average of Rs 70,000 crore.

Tender and awards activity in infrastructure sector remained muted for the month of June with election code of conduct in effect and Union Budget slowing down the pace. However, with these events behind, expectations are that the momentum will pick up in the second half of financial year 2019-2020.

While the project announcements during June 2019 were the second highest in the past 27 months at Rs 1.9 lakh crore and more than the total projects announced in the three months of April-June 2018, the tenders and awards were not that brisk, according to analysts. Announcements declined in roads and real estate from a year ago, but were offset by strong announcements in manufacturing and shipping infrastructure.

Tendering activity witnessed a major slowdown in June 2019 with tendering activity of Rs 30,000 crore, which was less than half of the past 27-month average of Rs 70,000 crore. This resulted in an announcement-to-tender conversion ratio of about 16%, which again was the lowest in the past 27 months.

According to analysts tendering was slow in Q1FY20, on account of the Lok Sabha elections’ code of conduct in effect and, later, on account of the impending FY20 Budget.

“By July 12, 2019, the live-tender pipeline was Rs 1.1 lakh crore, largely in roads, and buildings and housing,” said an analyst from a domestic brokerage.

Awards worth Rs 20,000 crore were recorded in June 2019, which was a sharp decline of 43% on a year-on-year basis.
Meanwhile, core Exim trade on major ports in India (excluding oil and gold) witnessed a sharp decline in June 2019, led by declines across both core imports falling 9% y-o-y and core exports seeing a decline of 6% y-o-y. This is the worst rate of decline in core Exim trade (-7.5% y-o-y) since May 2016, analysts at Nomura observed.

Major port volume growth declined in June 2019 to the tune of 0.5% y-o-y, versus 2.5% y-o-y growth in Apr-May 2019. Container volumes growth at major ports fell to 1% y-o-y in June 2019 from a rise of 10.2% y-o-y in April-May 2019. This is the slowest growth since Mar 2017.

However, railway container volume growth was above port container volume growth. Container Exim volumes handled by railways were up 5%, higher than container volume growth at major ports in June 2019, a rise of 1% y-o-y. Overall, container leads fell on account of declines in both domestic leads (-6.5% y-o-y) and Exim leads (-2% y-o-y).

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