Bernstein has assessed recent media reports suggesting that India may ease restrictions on Chinese companies bidding for government contracts and believes that any such move is unlikely to be unconditional or across the board. The brokerage said it would be surprised if the government were to fully remove Rule 144 without safeguards, although some form of relaxation appears increasingly likely.
According to Bernstein’s industry checks, any easing of restrictions is more likely to be segment-specific or accompanied by eligibility requirements for Chinese firms, rather than a blanket removal. The brokerage added that the push for change may be coming not only from the Ministry of Power, but also from other departments such as the Ministry of Steel, reflecting cost pressures and execution challenges in large infrastructure projects.
Bernstein believes that if the policy change materialises, equipment manufacturers—particularly multinational players—are likely to be more affected than construction-heavy EPC companies. Increased competition in equipment supply could put pressure on pricing and margins, especially in commoditised categories.
In the case of Larsen & Toubro, Bernstein expects the impact to be negative but limited, given the company’s diversified business mix, execution capabilities and strong balance sheet. The brokerage emphasised that construction-led players are better positioned to absorb incremental competition than pure-play equipment suppliers.
Importantly, Bernstein pointed out that the key beneficiaries of any relaxation would be asset owners, particularly state-owned utilities such as Power Grid Corporation of India and NTPC. Greater competition could help expedite project execution and lower costs, especially for competitively bid projects.
Bernstein concluded that while the policy shift could alter sector dynamics, the net benefit may accrue more to project owners than to contractors, with equipment suppliers facing the most pressure if competition intensifies.
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