Real Estate

Centre, States keep impetus on roads, irrigation segments going with new orders

Our Bureau Hyderabad | Updated on May 18, 2021

While the sector-wise awards increased in roads as well as mining segments, the competitiveness also increased

Out of the overall order awards in FY21, 70 per cent of the orders were contributed by roadways, mining and Railways

Tenders floated (above ₹2.5 billion) across all divisions in the construction space rose 38 per cent y-o-y to ₹7,985 billion in FY21, indicating the focus of the Central and State governments.

As per data from Projects Today, the roads, irrigation and other real estate segments (including hospitals, hotels etc) on a combined basis contributed around 81 per cent to the overall tenders floated, according to India Ratings and Research (Ind-Ra) Project Tracker. It captures the segment and state-wise profile of the engineering, procurement and construction companies in the short-medium term, tenders floated and orders awarded across segments and States.

In FY21, the tenders floated had seen incremental growth, majorly contributed by Uttar Pradesh at ₹1.2 lakh crore (FY20: ₹38,100 crore). The tenders announced from UP contributed 15 per cent to the overall tenders in FY21. The orders are majorly from Bharatmala Expressway projects and Swachh Bharat Mission schemes. UP was followed by Telangana and Andhra Pradesh; both put together contributed around 16 per cent to the overall tenders.

The orders awarded grew 72 per cent y-o-y in FY21 to ₹3.18-lakh crore with the road segment contributing to the major chunk of the orders awarded at 27 per cent (FY20: 25 per cent). This was followed by mining at 23 per cent and Railways (including metros) at 21 per cent.

Out of the overall order awards in FY21, 70 per cent of the orders were contributed by roadways, mining and Railways. While the sector-wise awards increased in roads as well as mining segments, the competitiveness also increased. In FY21, 58 per cent and 69 per cent of the overall tenders awarded in the road and mining segments, respectively had seen a participation from more than five bidders.

Ind-Ra believes that the incremental order inflows in roads, Railways, irrigation, housing development projects and distribution segments would drive the demand forecast for the sector in FY22. The schemes such as Bharatmala, commissioning of Dedicated Freight Corridors, Swachh Bharat mission and Jal Jeevan mission and affordable housing Schemes coupled with the National Infrastructure Pipeline would drive the sector order inflows in the medium-term. However, continued competitiveness in these segments is likely to result in a moderation of operating margins of EPC players.

In its FY22 construction outlook, Ind-Ra has revised the sector outlook to improving from negative, based on the rich budgetary allocations which would result in huge order inflows coupled with better execution rates.

Published on May 18, 2021

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