Amidst demonetisation driving significant demand contraction in consumer discretionary sectors, public sector contracting can be a ‘safe haven’. Subsequent push on infra spending, subject to ability to spend, can be a positive as well. For Larsen & Toubro, the impact is limited to temporary disruption in near term and slower execution of real estate contracts. We estimate L&T has about Rs 350 bn backlog from real estate (including residential, commercial, etc.). Revenue line contribution impact of this slower execution may be about 2-4% of EPC revenue.
Private sector investment may be marginally negative for industrial companies. Amongst asset owners, regulated utilities remain safest. The impact on ports is likely to be modest, but roads can have a significant impact from weaker domestic demand.
Read more: Financial Express
