Construction and realty sector is becoming one of the hottest sectors around with private equity players and FIIs betting on it highly as there is an infrastructure boom in the country. The recent news is that De Shaw, leading US hedge fund with over USD 30 billion in assets, has invested USD 400 million in a DLF group firm that will set up SEZ across the country.
Associated Chambers of Commerce and Industry of India, ASSOCHAM, estimates that domestic construction enterprise is poised to grow at 15% per annum from about 10% now to touch USD 120 billion by 2012 from its current size of over USD 70 billion.
Both domestic and foreign equity players are taking a strong interest in the construction and realty sector.
In April, UK-based Trinity Capital PLC, a private equity firm, acquired a 5.92% stake in Mumbai-based DB Realty Limited for £ 25.72 million. In the same month, ICICI Venture picked up 50% equity stake in three Pune based Kolte Patil projects.
According to ASSOCHAM, the government aims to invest USD 150 bn for infrastructure in the coming 5-6 years. Infact, any kind of investments made in road projects, construction of telecom networks and for the growth of the civil aviation sector, in turn will help in the growth of the construction sector.
ASSOCHAM says that the road sector will witness an investment of USD 60 bn by 2010. Civil aviation sector will also propel the growth of construction industry in view of air passenger traffic reaching new heights in 2-3 years, an investment of USD 4 billion would be made in next decade.
The construction companies with a strong order book is seen as having a multiplier effect on the economy.”Construction is large and central to the ongoing growth of the economy” said Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission at the 5th Construction Summit – organised by the Confederation of Indian Industry and Construction Federation of India, on Wednesday.
The sector accounts for 5.2% of the GDP, 38-40% of the gross domestic investment and is the second largest employer.
Major constructure companies likeL&T has an order book of Rs 35,300 cr, Gammon India has a current order order of Rs 3,070 crore that includes several projects in the roads and bridges sector. IVRCL Infrastructure 's order book position is close to about Rs 7500-8000 crore and Simplex Infrastructures order book is at Rs Rs 5,500 crore.
Experts feel that the impending DLF IPO is making the real estate sector attractive.
Rajiv Anand of Standard Chartered Mutual Fund feels that foreign investors are showing a lot of interest for the Indian real estate space. “The flow of money will ensure that you are at least neutral as far as the real estate sector is concerned” he said.
Experts like Anil Singhvi, Partner of Notz Stucki, a very large European asset manager said that they are looking more at construction companies and feels that construction industry will do well. ” We are also looking for some plays in IT and media as well. But I strongly believe that the construction industry will do very well, coming from cement. It is a little biased opinion but I think that I am right on that because, I am seeing construction happening all over the place.”
So bet on construction sector as it has a multiplier affect on our economy and on real estate as DLF IPO is attracting lot of attention from investors.
Source : Money Control