Economic activity hit by Covid-19 pandemic may be gradually returning back to normal levels

Economic activity hit by Covid-19 pandemic may be gradually returning back to normal levels of last year as tendering activity, a good barometer to gauge the level of economic activity, growing by a staggering 43 per cent in September as compared to same month last year.

On path to recovery: Sept tendering and awarding grows 43% Pixabay pic.

Economic activity hit by Covid-19 pandemic may be gradually returning back to normal levels of last year as tendering activity, a good barometer to gauge the level of economic activity, growing by a staggering 43 per cent in September as compared to same month last year.

Though the high growth during the month is largely on the back of low base YoY, still tendering in September has reached the highest level since March 2019, Emkay Global Financial Services said in a research report.

With the gradual lifting of the lockdown, tendering and awarding activity had picked up in July but slipped again modestly in August and was still below the normal run-rate despite a low base, it h as licked up now in September.

TRENDING NOW

The bulk of the pick-up in tendering during the month was driven by Water Supply (up 24 per cent yoy) and Roadways (up 57 per cent yoy) while Irrigation (down 34 per cent yoy) was weaker than recent run-rate.

Average monthly run-rate of tender value after FY19 has been around Rs 45,000 crore as compared to which September 2020 was at Rs 74,100 crore. The September 2020 tendering activity is still down 15 per cent yoy despite a low base in the second half of the previous comparable period.

Emkay said that despite signs of a pick up, in FY21 with the fiscal situation of both the Centre and State governments already under pressure and further worsening likely due to Covid-19, tendering and awarding activity should remain subdued.

The awarding activity in September 2020, in value terms, was up 25 per cent yoy. The total awards stood at Rs28700 crore for the month which compares with a monthly run-rate of Rs 30,000 crore until FY19 and

L&T has so far reported an order inflow (ex-services) of only Rs 17,500 crore for the entire Q2FY21 as compared to a normalized run-rate of more than Rs 30,000 crore, the brokerage said.

The breakdown of the orders suggests that bulk of the increase is due to orders such as a charter lease of FPSO from ONGC and renewable energy sector orders bagged by Sterling & Wilson, some of which may not be relevant or sustainable.

For September 2020, key sectors which reported ordering growth were Process (up 33x yoy), Water Supply (up 5x yoy), Power Equipment (up 3x yoy) and Roadways (up 2x yoy), while Real Estate (down 90 per cent yoy) and Irrigation (down 73 per cent yoy) saw a decline. TTM Sep-20 orders however, are still down 21 per cent yoy due to sharp declines across the board.

TAGS: