Infra Sector Industries Reported Weak Performance - Jan 31, 2009

The key infrastructure sector industries reported weak performance by registering a dismal growth of 2.3 per cent during December. The economists feel the trend is likely to continue during the remaining part of the fiscal.

During the month, steel and crude oil showing negative growth. The six infrastructure industries in December reported the second-lowest growth during 2008-09, which was marginally up from 1.8 per cent in November. NCAER Director General Suman Bery said "Sectors, particularly electricity and coal, might be affected because of problems of supply in general... the numbers do suggest slowing of the economy." The core sectors in December last year, expanded by 3.2 per cent.

The steel, which is reeling under the demand recession reported a negative trend of 0.8 per cent. On the other hand, the petroleum-refining products increased at 3 per cent as compared to 1.9 per cent in a year-ago period. The core sector data showed that the production of crude oil showed a decline of 0.3 per cent in December.

For the April-December period, the growth of the infrastructure sector - crude oil, petroleum refinery products, coal, electricity, cement and finished steel - fell to 3.5 per cent from 5.9 per cent in the same period of 2007-08.

Infrastructure Sector Faces Capital Crunch - Oct 17, 2008

The infrastructure sector in India has finally started to feel the heat of the slowdown. Although India''s top engineering firm L&T posted a 31 per cent rise in the quarterly net profit, a disappointed market pushed its stock down more than 11 per cent on Oct 15. The company, however, said that it will reach its annual targets. L&T is not the only company which is seeing lower margins. State-run BHEL is also facing raw material pressures and for it, too, margin growth would be a challenge.

Moreover, most infrastructure firms operate at a debt of 60 per cent. Now, with the cost of debt rising nearly 2 per cent, earnings are evidently under pressure. The sentiment in the stock has slipped significantly, with shares of BHEL sliding 17 per cent in one month, L&T declining 30 per cent and Crompton dipping 12 per cent.

India Inc is now worried about new projects and new businesses. The investment cycle is threatened and fresh working capital has become expensive. This implies that from now on corporate India would have slower its pace when it cones to new businesses.