Outlook on infra projects negative, says India Ratings

It has also maintained negative outlook for power projects, while maintaining a stable outlook for certain pockets in the transportation sector, it said.

"Though recent policy initiatives by the government are encouraging and have kindled a sense of optimism among market participants, the process of addressing fundamental risks through concrete and sustained on-the-ground actions to repair damaged credit quality is likely to be protracted," it said in a report.

The agency also said it expects a number of projects defaulting on their bank debt obligations this year.

"Alternatively, lenders might be compelled to approve forced debt restructuring packages in view of their weak financial structures and multiple risks including construction delays, plant stabilisation issues and fuel supply constraints in the power sector and traffic under-performance in the transportation sector," the report said.

Reduced sponsor capacity to extend support would also likely contribute to this phenomenon, the report added.