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Demand for mining and construction equipment sector falls 16-17% in January-August: ICRA

30 Oct 2019 Evaluate

The rating agency ICRA in its latest report has said that domestic demand for the mining and construction equipment sector fell sharply by 16-17 percent in the January-August period of calendar year 2019 (CY19), on the back of tight liquidity conditions in the market, delayed payment to contractors along with reduction in the government expenditure in infrastructure projects.

The report said while recovery in demand is likely during CY20 to about 5-10 percent, the October 2019 (post which production of BS-III vehicles are not allowed) transition to the next emission norm is a potential headwind given the changes in the equipment and its substantial cost implications. It noted that barring few select top-north pockets, overall demand has fallen significantly despite sizable discounting in the market. It added that immediate term demand outlook in the dealer community is also negative, although few expect a recovery in the fourth quarter of 2019.

ICRA further stated that lack of liquidity on account of delayed payment by contractors coupled with slowdown in project execution is a cause for concern. It also said equipment utilization in few markets is down almost 50 percent. It added that consequently, delinquencies, which were holding largely steady for the construction equipment asset class until Q1 of fiscal year 2020 (FY2020), are also expected to have increased in the past two months.

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