Chennai: After a slow December and March quarter, the tenders floated and awarded by the central and state governments for construction activities are expected to pick up by June.
The overall tenders floated with value above Rs 250 crore across all divisions in the construction space fell 24 per cent in the December quarter of FY24. In the December quarter, a total of Rs 3.097 lakh crore were announced against Rs 1.466 lakh crore in the same quarter of the previous fiscal, finds India Ratings.
This was lowest in the past four quarters. In the September quarter, Rs 3.497 lakh crore was announced. Among the tenders announced in the December quarter, roads contributed to 42 per cent, followed by buildings with 20 per cent, irrigation and sewage with 16 per cent and power 10 per cent.
Even in terms of awarding contracts, there was a slowdown in the December quarter to Rs 1.339 lakh crore against Rs 1.466 lakh crore in the same quarter of FY23. The immediate previous quarter also had recorded higher awards of Rs 2.326 lakh crore.
With the general elections to be held during 1QFY25, tender awards could slow down further over 4QFY24 and larger part of 1QFY25. Tender announcements could see upward momentum from June 2024 and in line with historical announcements starting 2QFY25.
“The awarding activity is likely to slow down further in 4QFY24-1QFY25. That being said, the tendering momentum could rise significantly from the last month of 1QFY25 “said Krishan Binani, Director of India Ratings.
The central government’s moderation in growth of capital spend, while on expected lines, is likely to weigh on the revenue outlook of the Engineering, Procurement and Construction sector in FY25. Although the headline capex growth of 17 per cent announced in the union budget FY25 is modestly higher than expectations, the same has to be viewed in conjunction with the track record of lower than budgeted spends in FY24. The quality of spending has continued to improve with the central capex forming 23 per cent of the projected overall budget spend, higher than pre-covid level of 12-14 per cent.
