Political uncertainty may affect capex in short term: Thermax

Wednesday 9th January, 2019

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Political uncertainty may affect capex in short term: Thermax
Surabhi Upadhyay
Political uncertainty might dampen public investment over the next 6 months, says Thermax managing director M.S. Unnikrish-nan. Edited excerpts:
Is it true that there are good capex orders like what L&T seems to indicate, or your own numbers, or the GDP seem to indicate? Or is CMIE right that there is nothing new starting?
Order intake for the capital good industry has been fairly positive for the past 3-4 quarters. It is not going to go down for the next few quarters. However, in the larger sectors, which are related to government spending and infrastructure may see some
stagnations for__
next 2-3 quarters. But private capex is continuing irrespective whatever could be the outside talk. In my understanding, generally many things are positive at this point in time.
The big worry about crude oil prices, which could have impacted our fiscal deficit, is well under control, possibly stabilizing at early $50s. Indian rupee has stabilized by 4% almost at 69.8, and on top of that inflation is fairly well under control. So the macro factors seems to be playing in favour of the investment climate. But only uncertainty could be the political one, which may impact the larger capex for a short period of couple of quarters. Otherwise I would be positive about it, but not bullish.
What should be the volume growth for the capital goods space to say it is doing well? How do we ascertain if this is the real pick up in capex? Thermax will grow in the current year andwill possibly grow in the next year also, but that cannot be the bellwether for the entire industry. There are sectors in capital goods which are related to construction, automobile and maybe machinery are doing very well. In any case, all construction
M.S. Unnikrishnan, MD,Thermax..
companies are doing extremely well because the number of projects already announced and
_ taken up by the
government both center and states are fairly large. So there will be ripple effect to that in the cement industry also going forward. My expectation is that private capex is continuing to be happening in the positive direction. Considering the order intake and the enquiries floated in the market, midsize projects are fairly positive and that will continue irrespective of whatever uncertainty is prevailing in the global macros, or maybe the domestic political uncertainty.
For example, if we were to take automobile industry, all of you are complaining about the decline of the past 3 months. But I am aware of the fact that every tyre company in the country is investing for new capacity and not by small numbers. One of them even possibly investing ^15,000 crore in tyre manufacturing, that is one company alone, and there are multiple companies coming in. The feeder industry, every carbon black company in the country is expanding capacity. So, below the line, where people are not
noticing, lot more of investments is happening, targeting the consumer spending in future, in the durable sector, FMCG sector and also possibly in the auto sector. But nothing is happening in the power sector, the ordering has come down to maybe 3,000-4,000 megawatt as against the real demand of maybe 4 times more, at a minimum 15,000 megawatt. There is a laxity in that area which certainly will be impacting us in terms of electricity available as the economy picks up.
Steel capacity, barring two of them which are already announced, I don't think there is anything going to take off in the immediate future. That will waitfortheNCLT to be over and then fresh capacity will be added, because most steel companies in India are running to the brim. We need capacity to be created, other- -*] wise we will have to resort to importing.
I am quite ashamed to say that despite all the requirement, of the kind of automobile growth happening in the country there is no investment in oil refineries. These 3-4 sectors will eventually open up, but I think it will possibly take couple of more quarters. feedback@livemint. com
'Order intake for the capital good industry has been fairly positive for the past 3-4 quarters. It is not going to go down for the next few quarters.'