India's infrastructure sector is struggling with stressed balance-sheets, but there has been an indication in the revival of the sector.
India’s infrastructure sector is struggling with stressed balance-sheets, but there has been an indication in the revival of the sector. Financial profiles of firms having exposure to airport and highways projects have shown improvement in their operational and financial performance, according to a report by ICRA. A major push from the government on roads and urban infrastructure segments has helped construction companies improve their order book position, the report said.
“Early signs of a revival of the infrastructure sector are evident with the improvement in the financial profile of players,” the rating agency said. The consolidated debt of the infrastructure sector was down 12% y-o-y from Rs 1.58 lakh crore to Rs1.39 lakh crore, primarily due to disvestment of stakes in subsidiaries or projects. Currently, the order book position of most construction companies stands at over three times their last reported annual revenues, the report said.
ICRA Vice-President and Sector-Head, Corporate Ratings Shubham Jain said, Infrastructure segments like airports and highways have been outperforming with improved operational performance supported by healthy traffic growth in both the segments. ICRA said there has been an improvement in order inflows over the last couple of years with a major push coming from segments like roads, metro and urban infrastructure.
With the infrastructure sector showing signs of improvement, it is estimated that India will be required to spend at least Rs 50 lakh crore in next five years through the year 2022 to develop infrastructure, rating agency CRISIL has said. CRISIL, in its Infrastructure Yearbook 2017 report, said that the investment between 2018 and 2022 will be 56% more than the Rs 37 lakh crore projected spend between 2013 and 2017, and the major part of the investment is likely to come from private players. The power transmission sector in India is the most attractive area in the infrastructure sector to invest, according to CRISIL. Roads & highways and renewable energy follow next.