CHENNAI: With the government beginning to pour in capital into infrastructure projects, companies in the construction sector are seeing an upturn in investor confidence. Analysts say the sector could be looking at improved earnings.
According to research reports, construction sector groups have outperformed the general trend of falling earnings in Q1. A group of 12 companies from the sector monitored by Macquarie Capital Securities India saw total revenue growing by 12 per cent during the quarter after three consecutive quarters of nil growth. Another research note from Goldman Sachs says that even cement, a major allied sector, is starting to see “green shoots” driven by low-cost housing and infrastructure spending.
Meanwhile, Larson and Toubro, India’s largest engineering firm, has both outperformed the market in stock value and seen construction earnings rise. With order books robust with government contracts, L&T saw stock rise by 27 per cent this year. The company also reported a 16 per cent jump in revenue from its infrastructure segment, the most in five quarters, which the firm said was primarily driven by the domestic market.
“Most of this is being driven by a massive influx of public funds, as projects are being financed by both the central and state governments,” said a Mumbai-based analyst. During April-to-June, the government spent Rs 69,000 crore on building infrastructure assets including roads and power plants. In February, it had pledged a cumulative Rs 3.96 lakh crore for modernising infrastructure, and analysts see company’s order books swelling as other agencies get in on the act after the monsoon season.