Kotak Sec, CONSTRUCTION : Budget Expectations

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CONSTRUCTION
Current view
q We expect Union Budget 2011-12 to be positive for the infrastructure sector
with higher budgetary allocations in different segments such as roads, irrigation,
urban infra, ports, airports, power etc. We expect infrastructure companies
to benefit positively in terms of higher order inflows going forward, as implementation
improves.
q The third quarter results of the sector were largely inline on revenue front but
most of the companies had to deal with lack of order inflows as well as higher
interest rates. Environmental clearance issues also impacted performance of
companies during 9MFY11.
q Order inflow during FY11 has been lower than expectations due to several issues
such as delayed land acquisition, environmental clearance or cancellations,
change in guard at the key ministry levels or at NHAI as well as corporate governance
issues. We expect budget to address issues such as faster land acquisition.
Along with this, we expect that NHAI to overcome the shortfall seen in
achieving FY11 targets. We would continuously watch out for order inflows
during H1FY12 which will translate into healthy revenue growth for FY12 and
going forward. We thus expect focus of budget to be on higher allocations as
well as implementation of targets.
q Key beneficiaries from higher order inflows in roads, irrigation and urban infra
are expected to be IRB Infra, IVRCL, NCC, Pratibha Industries, Unity
Infraprojects.