Construction equip sector growth hits bumper after liquidity crisis grips NBFCs

The growth of the construction equipment sector has hit a bumper after liquidity crisis gripped NBFCs following the IL&FS default, a construction equipment makers' body has said. "The construction equipment sector was growing around 20 per cent prior to the IL&FS crisis. The growth has now slowed down to 10 per cent," Indian Construction Equipment Manufacturers' Association president Arvind Garg told PTI.

The Infrastructure Leasing & Financial Services (IL&FS) and its subsidiaries have defaulted on many debt instruments in the past few months due to insufficient funds. "Almost 90-95 per cent of construction equipment are financed. NBFCs are the largest players in this sector with about 70-75 per cent share of financing," he said. He pointed out that lenders themselves were now facing liquidity challenges, so they have become cautious about lending.

Even for those who are getting finance, the cost has risen by at least 200 basis points. However, Garg said, all the stakeholders are working closely to overcome this crisis and the same will be eased by March if there is no stress in the system or other NBFCs. The construction equipment makers are working closely with the NBFCs to tailor products till confidence builds up.

(With inputs from agencies.)