• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Sowmya Sundar

THE order book for companies in the engineering industry is bulging. Top companies such as BHEL, L&T and Thermax have shown a sharp upswing in the value of contracts still to be executed.

BHEL, for instance, had an order book value of approximately Rs 23,500 crore as of December 2003, higher than the corresponding previous period by 83 per cent. The company booked orders worth Rs 10,000 crore in the current fiscal alone, an all-time high.

Commenting on the composition of the orders bagged, Mr A.K. Puri, Executive Director (Marketing), Power Projects, said, "This year we have seen a surge in power projects. Out of the total orders, power would constitute close to Rs 17,000 crore."

On the shift towards turnkey EPC (engineering, procurement and construction) contracts, he said: "The execution time of a project reduces when done on a turnkey basis. Earlier turnkey projects contributed 5-10 per cent. Now they contribute 30-40 per cent of the orders received." The margins are also higher in turnkey projects, he added.

Mr Amitabha Mukhopadhyay, Executive Vice-President (Finance), Thermax, agreed that there is a trend towards larger size, high value projects and the growth rate for EPC contracts is higher than product orders.

What is more, orders on hand should translate into operating revenues for these companies sooner than they have been in the past. The gestation period of execution, the time taken for the projects to translate into revenues, too have reduced.

Mr Puri said: "A 500-MW generation project on an average used to take 60 months. This has come down to 40 months due to a combination of factors. One, the projects are planned better and financial closure happens earlier. When funds are tied up execution is smooth. Secondly, we have improved our efficiency by devising new methods for erection and commissioning. Turnkey execution has also brought down the time lag from nearly 13 months to 9 months. Thirdly, the time taken to import raw materials and components has reduced from 12-18 months to 6-12 months due to better efficiency at ports."

The pick up is evident in other areas also. Mr Mukhopadhyay said: "Core industries such as power, metals and the refinery sector are coming into the investment cycle pushing up demand for industrial water treatment. The new sector reforms guidelines issued for urban water and sanitation will provide a framework for significant investment in this sector."

A number of mid-cap companies too have seen an upswing in order booking over the past few months. For instance, companies such as IVRCL and Jyoti Structures have received a spate of new orders over the past month. Mr S. Ramachandran, Senior Vice-President, IVRCL Infrastructure, a Hyderabad-based mid-cap construction company, is expecting its revenues to almost double to Rs 1,200 crore by 2004-05. He added the key is to bag high value projects and move up the value chain.

Given the uptrend in the flow of fresh orders, companies could expect a smooth sailing on turnover and profits for the next one year at least if not longer. The country's stock markets seem to agree as these stocks have out performed the market in the last one-year. If the Sensex has risen by 77 per cent, these stocks have close to tripled.

More Stories on : Engineering | Engineering

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Rescue work on

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line