Capital Goods, Defence Results Preview - Structural Shift In How Businesses Operate: Dolat Capital
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Dolat Capital Report
Following a sharp demand recovery in Q4FY21, Q1FY22 was expected to begin on a positive note; however, growth was disrupted due to the second wave of the pandemic.
Despite this, the downturn was relatively well managed because companies had prior experience managing labour migration, supply chain disruption, and inventory management.
Consequently, new projects fell 13.4% sequentially for the quarter, to Rs 1.55 trillion, according to CMIE. Furthermore, the increase in commodity prices (which is now normalising) has undoubtedly impacted margins; as a result, companies are focusing on automation and digitalisation to increase efficiencies and mitigate the impact.
Notably, there has been a structural shift in how businesses operate, with customers willing to pay a premium for greater energy efficiency/better quality.
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