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ICRA revises outlook on Construction Equipment sector to ‘Stable’ from ‘Negative'

04 Mar 2021 Evaluate

Ratings agency, ICRA has revised the outlook on the Construction Equipment (CE) sector to ‘Stable’ from ‘Negative’, following strong ramp up in volumes. Heightened focus on infrastructure spend, particularly in the road infrastructure segment has led to a sharp scale up in volumes since July 2020 (20%+ Y-o-Y growth during July-Jan’21 period).

It mentioned that the various underlying factors supporting healthy revival in industry volumes over the last few months are sharp increase in the awarding and execution pace of road construction; increased focus on rural infrastructure; strong rural volume off-take for equipment on the back of second consecutive good monsoon; improving demand from railway and mining segments and the regular payment flow from the government to contractors. 

Demand has also been supported by steady inflows from the Central government on infrastructure spend, particularly on roads, even though state infrastructure expenditure has been severely curtailed and diverted to the pandemic management. ICRA, Vice President & Sector Head, Pavethra Ponniah said following a sharp correction in unit sales in Q1 FY2021, CE OEM volumes have recovered sharply since, supporting industry credit profile. Raw material price hikes, particularly for steel, has however had an impact on profit margins. OEMs have and are expected to take further price hikes to pass on these cost pressures. 

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