‘Government thrust on infra boost to help transmission tower companies’
| Date :26-May-2020 |
Business Bureau :
Even as the global economic slowdown and COVID crisis have severely hit the steel industry, players engaged in supply of transmission and distribution (T&D) equipment are expected to be more resilient mainly on the back of government orders, says India Ratings (Ind-Ra). According to the ratings agency, the prolonged nationwide lockdown would impact the revenue growth of transmission tower suppliers in the near term, however, the companies that supply T&D equipment are expected to be more resilient than the traditional steel industry players.
“Orders for customised transmission towers are obtained through tenders from Government organisations with a 6-12 month supply period, which are backed by secured funding programmes. Even for export orders, the counterparties are government backed entities or projects,” the agency said. Ind-Ra considers the Government’s thrust on infrastructure development to support the economy could result in a faster recovery for transmission tower companies than traditional steel companies. “However, there would be a slowdown in order execution in the near term due to delays in construction activities and shortage of labour at construction sites amid the lockdown.
As a result, revenues could decline more in FY21 than in FY20,” it noted. According to the agency, tower companies are also competitive in export markets, which is visible with the increasing share of export orders from countries in Africa, Latin America and Europe. “Orders from economically weak countries are generally backed by funding from World Bank, thereby securing payments.
Furthermore, companies have a diversified product portfolio, with products ranging from specialised structures for solar power and railways to different grades of fasteners, which also provides support to their top line,” it added. Ind-Ra further said that T&D suppliers generally hold an order book of 9-12 months in the domestic circuit, which extends to 15-18 months in export markets.