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Govt to keep focus on roads, irrigation, water works for tendering in FY23: Ind-Ra

Government to Keep Focus on Roads, Irrigation, Water Works and Buildings Segments for Tendering in FY23: Ind-Ra 

The amount of overall tenders floated (with value above INR2.5 billion) across all divisions in the construction space grew 11% yoy in FY22 to INR8,901 billion, signifying the impetus shown by the central & state governments in increasing the order inflow on the COVID-19 pandemic hit season, India Ratings said on Wednesday. 

In its FY22 edition of Project Tracker, which captures the segment-wise and state-wise execution profile of the engineering, procurement and construction (EPC) companies in the short-medium term, the ratings agency said that the overall tender inflows in FY22 grew 11% yoy to INR8,901 billion, after growing 38% yoy in FY21. Out of the overall tenders floated, roads, irrigation and other real estate segment (including hospitals and hotels) on a combined basis contributed around 78% to the overall tenders floated. 

Other than these segments, there were incremental tender inflows from railways, power and other industrial (includes gas & oil, basic chemicals and telecom) segments, although they contributed only 18% to the overall tenders floated.

As per the report, in FY22, the tenders floated grew incrementally, majorly contributed by both Uttar Pradesh and Maharashtra at INR888 billion and INR872 billion, respectively. The tenders announced from both the states contributed 20% to the overall tenders (10% each) floated across the country in FY22. The orders floated are majorly from Bharatmala Expressway projects and Swachh Bharat Mission schemes. Rajasthan and Madhya Pradesh followed next with a share of 7% and 6%, respectively.

Out of the overall order awards in FY22, 40% of the orders were contributed by roadways (FY21: 27%), 17% by railways (21%) and 12% by water (including irrigation; 10%). While the mining segment had seen huge growth of 1115% yoy in FY21 in the order awards, it decreased 58% yoy in FY22. The overall orders awarded grew 10% yoy in FY22, majorly on account of the revival of the EPC sector post pandemic. Ind-Ra, based on the incremental budgetary allocations announced by the central government in February 2022, believes the thrust on the EPC sector would continue in FY23 as well.

Ind-Ra in its FY23 Construction Outlook has revised the sector outlook to neutral from improving, majorly on account of an expected uptick in the execution profile of the companies during the year. This is backed by the incremental order inflows the sector had witnessed in FY21-FY22 which would result in execution in the next two to three years.

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