In our quarterly publication – Orderbook-Keeper – we saw some interesting trends in the order inflows for the infrastructure sector this quarter (read the latest one eher). The NET order inflow reported was quite weak in Q3FY20 at Rs 7bn only (-96% yoy) vs. Rs 201bn in Q2FY20. However, this was largely due to record order cancellations at Rs 131bn by various players including NCC, IRB, and Simplex. Adjusting for this and with the new/L1 order received at Rs 70bn, GROSS order inflows for Q3 stood at a strong Rs 209bn (+6% yoy, last four-quarter average at Rs 183bn). Strong order award activity across segments (excluding roads) boosted order inflows.
Interestingly, almost all EPC companies currently have decent orderbooks, representing 2-3x book-to-sales. This is despite muted order inflows in the last few quarters, especially from NHAI. While orders have trickled in from other segments like buildings and metros, one reason for a healthy book-to-sales ratio is the lower turnover. Most companies (excl. PNC, KNR) reported a yoy decline in topline in Q3 and 9MFY20, primarily due to a delay from govt. bodies (in payments, awarding) and an extended monsoon. This led to lower TTM (trailing twelve months) topline and hence higher book-to-sales numbers.
Overall, NHAI has been largely responsible for the lackadaisical order inflow this year, having awarded less than 3,500km YTD in FY20 (FY18/19 awarding at 7,400/2,200km). However, we have seen a sharp pickup in NHAI order award activity in the last few weeks, with PNC/Ashoka grabbing orders of Rs 51/10bn in this month already. We see a healthy pipeline of orders from NHAI over the next two months and expect order award momentum to continue through Q4FY20 into Q1FY21.
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