Jefferies has highlighted potential implications for the Indian industrials sector following media reports suggesting that India could ease restrictions on Chinese companies bidding for government contracts, restrictions that have largely been in place since 2020. The brokerage said that while the development could alter competitive dynamics in select segments, the impact would vary meaningfully across sub-sectors and companies.
According to Jefferies, the defence segment is likely to see the lowest impact, given the strategic and security-sensitive nature of defence procurement. The brokerage added that companies such as Cummins India could also face relatively limited disruption, as their positioning and customer relationships provide some insulation.
In contrast, Jefferies believes that engineering and EPC-heavy players such as Larsen & Toubro, Afcons Infrastructure and BHEL are likely to see the highest impact if Chinese participation is relaxed, due to increased competition in government-led infrastructure and power projects. This could exert pressure on pricing and order inflows in certain project categories.
The brokerage also flagged potential impact on equipment manufacturers such as ABB India and CG Power, which could face stiffer competition in select tenders.
However, Jefferies noted that the transmission and distribution (T&D) segment may see only limited impact, citing national security priorities attached to the power grid. Companies such as Siemens Energy and Hitachi Energy are expected to remain relatively insulated, given the strategic importance of grid infrastructure.
Overall, Jefferies said that while the possible easing of restrictions introduces an element of uncertainty, the actual impact will depend on the scope, conditions and pace of any policy change.
Disclaimer: The views and recommendations above are those of Jefferies. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.