With the overseas markets not showing signs of a recovery, power transmission & distribution (T&D) contractors are intensifying their focus on the Indian market.
According to Prabhudas Lilladher analyst Apurva Patel, international order inflows for most transmission players have dried-up in the last 6-9 months. “One of the biggest reasons for this has been the slowdown in the GCC (Gulf Cooperation Council) countries.
Although countries like Kuwait and Saudi Arabia have dished out a few orders in the recent past, we feel that it will be a while before the entire region as a whole starts looking attractive again,” Patel said in a recent report on the T&D sector.
RPG group-owned KEC International, the largest player in the sector, has scaled up the share of local business from 20.5% (of total order book of Rs 3,872 crore) in FY 2008 to 50.1% (of Rs 5,163 crore) in FY09.
Santosh V Nayak, deputy managing director, Jyoti Structures, the third-largest domestic T&D company, said foreign markets are not encouraging at all. “We are present in the Middle East and southern Africa. Both these markets are still seeing a slowdown,” he said. He added the southern African market is largely commodity-driven and, with the fall in commodity prices, there has not been much spent on T&D.
“In the Middle East, with the fall in crude prices from the $140-a-barrel peak, the spend has come down. Two years back, Dubai needed 10,000 mw over the next five years, but that has come down now,” Nayak said.
Jyoti Structures’ order book as on July 1, 2009, stood at Rs 4,100 crore, 85% of which is in India. “The share of overseas orders was higher last year…we will continue to focus on India,” Nayak said, adding there should be no slowdown in T&D in India at least for the next five years.
The Indian market is quite robust with the likely investment in transmission to be Rs 1.2 lakh crore and Rs 1.9 lakh crore during the Eleventh (2007-2012) and Twelfth (2012-2017) Five-Year Plans. This is exclusive of what the Power Grid Corporation of India will spend on strengthening & upgradation of transmission systems.
Moreover, there are the Restructured Accelerated Power Development Reform Programme and the Rajiv Gandhi Grameen Vidhyutikaran Yojna, with spends of Rs 50,000 crore and Rs 280 crore between 2007 and 2012.
Another reason for a shift in focus on the domestic markets is the rising raw material costs, said Manish Mohnot, executive director of Kalpataru Power Transmission, the second-largest player.
“Most of T&D contracts overseas are fixed price ones while those in India are variable price contracts. So, 9-10 months back, when prices of steel, aluminium & zinc were falling, it made sense to bid for contracts abroad. But now, with prices on their way up, the focus is on India,” said Mohnot.
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