Pre-election lull in ordering, execution activity yet to show, say cos

At the start of the financial year 2024, top executives from Larsen & Toubro indicated they expect it to be a ‘truncated’ year, due to the upcoming general elections and its impact on ordering. However, so far, executives from various sectors suggest the lull is yet to show.

Some also expect the March-24 ended quarter to turn out to be ‘business as usual’.

“We are not seeing any sign of a pre-election lull so far,” said Jayant Acharya, joint managing director and chief executive officer (CEO) for JSW Steel, when inquired about steel demand, an important input material in construction projects. He added, there was weakness in infrastructure-related demand in October, which has picked up since.

Cement dealers and executives from ratings agencies echo Acharya’s view.

“We have so far not seen a lull in the construction or project tendering activity,” said Soumyajit Niyogi, Director at India Ratings & Research. In December, Adani Energy Solutions, Tata Power, KEC International, Kalpataru Projects International, and Thermax Global are amongst others that have announced order wins, largely related to the energy and infrastructure segment in India.

In addition to steel, cement demand is seen as another indicator of construction activity. “Demand has been constant for the past few months, the Diwali and state elections related bad demand recovered in December,” said Deepak Navandar, a cement distributor from Hyderabad.

Executives from L&T in their investor call in November noted the March-24 ended quarter could be a little subdued on tendering and ordering activity, assuming general elections announcements would happen at that time. An updated comment from L&T for the story was not available.

However, not all share a similar view on the quarter to start.

“We expect a further pick up in tendering in the next two months, closer to the vote of account, as that has been the trend in the past few financial years, where the ministries increase spending after ensuring fiscal prudence,” said Niyogi from India Ratings.

Virendra D. Mhaiskar, chairman and managing director for IRB Infrastructure Developers agreed, “Do not expect any slowdown as such due to elections as the government has already announced a slew of build-operate-transfer projects. Not expecting any meaningful labour shortage either,” he said.

Niyogi from India Ratings also pointed out, “We do not expect any temporary slowdown in the run-up to elections this year. Some of the contributing factors to the absence of a lull (as seen in 2019) are overall the economy this time is doing much better and real-estate activity is at its peak.”

First Published: Dec 31 2023 | 6:05 PM IST