Capital issues temporary, expect things to improve: Rohan Suryavanshi

Construction orderbook is a solid indicator which provides a fantastic visibility till 2022, says Rohan Suryavanshi, Head, Strategy & Planning, Dilip Buildcon. Even states are playing ball, he told ETNow.

Edited excerpts:

What is your assessment because growth in the construction sector has been strong in the third quarter, the second highest incidentally since 2012. What are you making of this trend and do you believe that it will continue?

You are right, the growth has been pretty robust this quarter and I personally expect this growth to be there for at least coming couple of years. And my reason for that is very simple, all construction companies are staring at a three-year forward looking orderbook at least. That gives us great visibility till almost the half of FY22.


I do not see any problem and what is more important is most of these orders have been won at decent margins, the competition was pretty much under control when the bidding happened. Just because of the sheer bulk of orders over the last few years, all companies have been inundated with work. The growth should be pretty decent.

On top of that, the Government of India has already floated about Rs 1,20,000 crore of orders in the market, specifically in the road sector. Now what that means is these orders can only be floated when a majority of the land acquisition has already happened. The government has already paid the farmers or whoever the landowners in that situation and even if these orders do not materialise before elections, these orders will still come out clearly after elections whichever government comes to power because already half the money has already been spent in these orders. These are very real orders. These orders are where a majority of land acquisition has been done.

Second, there is another round of orders where the government is in the process of acquiring land which have not come out to bid and that order pipeline is also coming. We can see that not just the current orderbook with the players but also the orders that have been floated by the government which provides a fantastic visibility till 2022. That is why I am optimistic about the growth even for the next eight quarters.

So far, the kind of order inflows have been driven by the central government or have come from the central government. Do you think that the orders from private players and the state government have the potential of now picking up or are you seeing them being picked up?

The central government has been robust in giving out orders across. Even state governments have been doing their part. They have been equal in terms of the central government. The Maharashtra government is building the Samruddhi Corridor, which is one example. If I look at UP, there is a lot happening there.

If I think about Andhra or Telangana, a lot of infrastructure projects happening there as well. I do not know how much more can they do, given their own balance sheet and their own financial issues but I think they have also been fairly robust.

Now private sector investment for sure has been a little tepid and part of it has been obviously the overhang from the last cycle. The realty sector has not had a good experience and the banking system has right now not been very supportive. Even for a new guy to come into the sector or act as a developer, he would not be supported by the banks.

To be fair, central and state governments have been giving out enough orders for us to not feel that the private sector has not really kicked off.

Do you think financial closure of various large projects has been an issue. You touched upon it just now, but do you think that is one of the key triggers to look out for in the investment space going forward, given how tight liquidity crunch we are facing right now?

The financing of the projects... I have a slightly different view. If you look at all the large listed players who account for a majority of the business, all of us have gotten financial closures for all of our projects and if not they are in the final stages of getting financial closure for all of it.

Even some of the smaller ones have been ultimately successful in getting the financial closure done for their projects. Now this has been tough just because the banks were under stress and there was not enough capital to go around.

If I look at the current data, I think most of them are in a good shape. While there are still cases where it is not there, that is a very small amount of time but yes getting non-fund base limits have been tough as was rightly pointed out.

In terms of the overall working capital, banks have been getting new working capital. All those things have been tough, but I think it is more of a temporary situation because the government is also looking at it very seriously and over the next couple of years, we should see some easing happening in the overall financing situation as well.