West Asian countries have raised spending on infrastructure projects.
This is good news for Indian construction companies, faced with slowing of orders within the country.
Some have already won new orders. Dubai and Iraq are expected to spend more, resulting in more projects.
A report by Prabhudas Lilladher, the financial consultancy said the ordering environment had improved over the past six months in the Gulf countries.
“However, most of the activity is still in Saudi Arabia and Abu Dhabi. Activity levels in Oman, Kuwait and Qatar have not picked up to the desired levels since the beginning of the year,” said Kunal Sheth, research analyst at PL India.
The overall momentum is expected to improve by the end of the year. The report says the total opportunity in the region could be as high as $137 billion for 2013.
This, it says, could happen if Saudi Arabia has a modest rebound in project ordering, with Qatar.
Qatar has been conservative after the end of the liquefied natural gas boom and the collapse of the real estate and construction market.
Larsen & Toubro has already got a substantial chunk of projects in the region. It recently won one of its biggest ever projects, the $1.4-billion (Rs 8,250 crore) Riyadh metro rail.
The company is looking forward to more.“We have a fair share of projects there (in the region).
“We have bid for other projects as well. More ordering is good news,” said S N Subrahmanyan, senior executive vice-president, construction.
Construction companies, especially in engineering, procurement and construction, will gain the most, says M S Unnikrishnan, managing director of Thermax.
“Industrial machinery ordering from these countries is low,” he said.
However, Thermax, a capital goods company, could gain later in the cycle of ordering as the construction companies that get contracts would sub-let for equipment.
Thermax has already got two orders from Saudi Arabia this year.
Abu Dhabi is another place where companies have the opportunity, as orders from the Museum and Khalifa medical city are expected in the coming months.
Retail, tourism and hospitality-related projects are also likely to increase in Dubai, which has seen a 20 per cent increase in tourist arrivals, leading to high occupancy levels.
If Dubai manages to bag the Expo 2020 in November 2013, it will also become fertile with construction projects.
“It is these kind of projects that we are looking for,” said Subrahmanyan.
These markets, however, will not be easy pickings for Indian construction companies.
Competition for these projects is expected to remain strong, with a number of French, Italian, Spanish, Chinese and Turkish contractors likely to participate.
“Despite the improved momentum in ordering, the margin profile has not improved.
“In some projects, the competition is as high as 10-12 bidders each, so pricing plays the key part, apart from capability,” said the report by PL India.
BUILDING BLOCKS
- Increased spending on infrastructure projects by West Asia nations has resulted in new orders for India construction companies
- L&T recently won the Rs 8,250-crore Riyadh metro rail project
- Thermax, a capital goods company, has got two orders from Saudi Arabia this year
- Orders from the Museum and Khalifa medical city are expected in the coming months
- Retail, tourism and hospitality-related projects are also likely to increase, which has seen a 20 per cent increase in tourist arrivals
- If Dubai bags the Expo 2020 in Nov 2013, it will become fertile with construction projects
The image is used for representational purpose only
