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Amit Mitra

Mumbai March 4

BULLISH winds continue to shore up stocks of engineering and construction companies on the bourses.

Ever since the Finance Minister, Mr P. Chidambaram, presented the Union Budget on February 28, stocks of construction companies have been in the limelight. The increased allocations to the infrastructure sector, including roads, housing and water projects, in the Budget had triggered increased trading in these stocks, as investors cottoned on to the market expansion that would benefit construction companies.

The stock price of IVRCL moved up from Rs 386.35 on February 25 to Rs 403 on the day of the Budget and closed at Rs 471.65 on Friday. Similarly, stocks of Simplex Concrete Piles India Ltd increased from Rs 369 on February 25 to Rs 385 on February 28 and closed at Rs 438.85 on Friday.

Nagarjuna Construction and Hindustan Construction Co saw their stock prices rise from Rs 496 to Rs 541 and from Rs 411 to Rs 444 respectively during this period.

Clearly, investors expect that the allocation of over Rs 20,000 crore for infrastructure projects in the Budget, including Rs 4,700 crore for water supply schemes, Rs 450 crore for highway development projects in the North-East and Rs 9,320 crore for the National Highway development, would significantly open up market for the domestic companies.

The industry is also bullish over the amount of work that will be emerging in this sector in the wake of the increased Budget allocations. "As of now, Simplex is having orders worth Rs 3,500 crore. I am sure with the increased allocations, there will be enough work for all of us (in this sector)," Mr Amitabh Mundhra, Director of Simplex Concrete Piles India Ltd, pointed out.

The industry is especially excited over the announcement of creating a special purpose vehicle (SPV) to finance infrastructure project.

However, as an industry analyst put it, what is important is how this funding mechanism will be effectively operationalised, with the challenge being how it would stay inflation neutral.

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