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Large companies feel the crunch hard
By siliconindia
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Tuesday, 23 December 2008, 18:11 IST
Mumbai: Global economic downturn has hit hardly on big companies with international presence than on small domestic companies. It is large enterprises face issues like project postponing more than small companies, reported The economic Times.
Crompton Greaves, one of the largest engineering companies in India, expect its international business, which accounts for around 55 percent of its total revenue to decline due to the recession in U.S., UK and many other European countries."We were growing at 20 percent internationally and this could now come down to 15-17 percent. There is a lot of room for improving margins though," said Sudhir Trehan, Managing Director, Crompton Greaves. The company is also looking to shift design centers and low-end component making into India.
Due to the decline of demand for its products, Crompton Greaves has reviewed its investment plan also. The company will now invest only 
130 crore against the proposed Rs 200-crore capital expenditure. Though there was a little fall in the demand for industrial products, the decline was high in the demand for consumer products as customers delay purchases.
According to analysts financial crunch is forcing companies to review their projects. "While the rate of new order inflow is likely to lower in the coming months, there is also a risk of deferment and cancellation of some existing orders," CLSA India analyst Rajesh Panjwani recently wrote to his clients. He added that companies with higher exposure to the private sector, especially commodity-linked capex, are more vulnerable.
Trehan further opined that with commodity prices declining, it has created a situation where companies are not withholding orders on the hope that prices will correct further. This has created an uncertain environment.
The infrastructure sector is the most affected. The government had counted on the private sector contributing to around a third of the total infrastructure spend of $150 billion in the Eleventh Five Year Plan, with a majority of this coming from new equity issues. "This looks difficult in the current environment," Panjwani pointed out.
The uncertainty has impacted the infrastructure sector the most. The government had counted on the private sector contributing to around a third of the total infrastructure spend of $150 billion in the Eleventh Five Year Plan, with a majority of this coming from new equity issues. "This looks difficult in the current environment," said CLSA's Panjwani.
130 crore against the proposed Rs 200-crore capital expenditure. Though there was a little fall in the demand for industrial products, the decline was high in the demand for consumer products as customers delay purchases.
According to analysts financial crunch is forcing companies to review their projects. "While the rate of new order inflow is likely to lower in the coming months, there is also a risk of deferment and cancellation of some existing orders," CLSA India analyst Rajesh Panjwani recently wrote to his clients. He added that companies with higher exposure to the private sector, especially commodity-linked capex, are more vulnerable.
Trehan further opined that with commodity prices declining, it has created a situation where companies are not withholding orders on the hope that prices will correct further. This has created an uncertain environment.
The infrastructure sector is the most affected. The government had counted on the private sector contributing to around a third of the total infrastructure spend of $150 billion in the Eleventh Five Year Plan, with a majority of this coming from new equity issues. "This looks difficult in the current environment," Panjwani pointed out.
The uncertainty has impacted the infrastructure sector the most. The government had counted on the private sector contributing to around a third of the total infrastructure spend of $150 billion in the Eleventh Five Year Plan, with a majority of this coming from new equity issues. "This looks difficult in the current environment," said CLSA's Panjwani.