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IDFC Infra Pulse - Order awards and tenders improve, but cargo volumes decline

Our monthly report on the infrastructure sector comprises of order inflow analysis, new project announcements, perspective on road sector, major port volume, air traffic movement, power generation trend and events/ news in the sector. The objective is to provide timely updates and a detailed perspective on these issues and other sector dynamics.

Construction contract awards grew 10.7% yoy to Rs376bn (up 44.7% mom), led by strong rebound in orders from transportation and railway & metro rail segments. Feb witnessed the highest monthly tender announcements YTDFY19 at Rs1.1trn (up 10.6% yoy, includes revised tenders worth Rs95bn), led by irrigation, educational/ training institutes and water supply tenders. Further, NHAI’s bid pipeline remained strong (as on 11 Mar 2019), with projects worth Rs596bn under various stages of bidding, which should translate into strong order awarding activity ahead. Traffic at major ports fell 1.2% yoy to 55mt, due to 35.9% yoy decline in iron ore volumes. Container volume growth moderated in Feb 2019.

• Construction contract awards and tenders improve in Feb 2019: Order awards grew 10.7% yoy to Rs376bn and were up 44.7% mom in Feb 2019 (robust growth of 47.9% yoy at Rs4.3trn on trailing twelve month (12M) basis). The improvement in order awards was led by strong rebound in transportation and marine infra (up 29.3% yoy to Rs55bn) and railways & metro rail (up 106% yoy to Rs49bn). Despite a high base in PY, tender announcements improved 10.6% yoy to Rs1.1trn in Feb 2019, which was the highest in YTDFY19. Roadways, irrigation and community services segments led the growth. Tender announcements in the irrigation segment at Rs233bn were heartening, given that these were the highest monthly tendering in the segment over the last few years. These largely comprised river interlinking, micro and lift irrigation.
• NHAI ordering YTDFY19 remains subdued with focus on road construction: NHAI has awarded projects worth Rs230bn in YTDFY19, spanning 940kms. Total highway projects worth ~Rs721bn were awarded in 11MFY19 with a majority awarded from MORTH and state PWDs (Rs198bn), followed by UPEIDA (Rs141bn). NHAI’s bid project pipeline remains strong, with projects worth Rs596bn under various stages of bidding. Of this, EPC projects comprised Rs339bn (57%) and HAM projects were worth Rs257bn (43%).
• Major ports see moderation in container traffic growth; total cargo volumes de-grow: Growth in container volumes at major ports moderated at 5.5% yoy to 792K TEUs in Feb 2019, (8.9m TEUs YTDFY19, +8.1% yoy), due to 3.9% yoy decline in Chennai (loss of volumes to Kattupalli). JNPT reported robust 6.2% yoy growth in container volumes to 414K TEUs. Total cargo volumes at major ports de-grew 1.2% yoy to 55mt, led by 35.9% yoy decline in iron ore volumes. Container volumes on the west coast (including minor ports) grew 11.1% yoy (+12.7% yoy in FY18) in Q3FY19.
• Other sectors: Domestic air passenger traffic moderated 9.1% yoy to 12.5m pax in Jan 2019 (+16% yoy YTDFY19). Conventional power generation declined 0.8% yoy to 91.2bn units during Feb 2019.
• Key sector news

o  Union Cabinet approves Delhi Metro Phase-IV

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