Elaborating further on the trend, Pavethra Ponniah, Vice President and Sector Head, ICRA says, ?Demand growth was a robust 24-27 per cent during CY2018 (as against ICRA?s July 2018 expectation of ~20 per cent growth), supported by road work throughout the country. Growth stayed strong through the initial nine months of CY2018, barring seasonal lows. However, growth started tapering off in Q4 CY2018 and has been relatively muted in January-February 2019, impacted partly by the NBFC liquidity crisis, and the consequent impact on loan-to-value (LTV) ratio and interest rates during Q4CY2018. Further, the ensuing general elections will have a bearing on growth and the stability of subsequent government thereof will determine growth trends in the medium term.?

Within the MCE industry, the construction equipment (CE) segment has been growing at a rapid pace over the past three years (CAGR of 17 per cent CY16-18E), while the mining equipment (ME) growth has been relatively muted, between 5-10 per cent. The outlook for ME from late CY19 onwards is expected to be positive but will be largely contingent on Coal India?s massive equipment ordering plans. With Coal India has already floated tenders and factoring in a 9-12 month period for delivery of these large capacity equipment, demand for mining equipment should increase in CY2020. This demand spike also includes pent-up demand of the past three-four years, when Coal India?s ordering was delayed due to some procurement hurdles. The mining equipment manufacturers, whom ICRA interacted with, have also corroborated this improving outlook for mining equipment with demand coming from coal; and quarrying and aggregate demand for roads.

As for CE demand, for a large part of the current up-cycle, which started in CY2016, road work has largely been a single legged demand driver, followed by railways which also supported growth briefly during CY2017.

Notwithstanding the general slowdown in public/private infrastructure work during the election period, the road sector has an adequate pipeline of projects for development/up-gradation in national highways and state highways which can keep execution high during CY2019. Nevertheless, ICRA expects a brief period of decline in execution and demand for new equipment during mid CY2019. Recovery post elections will be contingent on the stability of the elected government.