The revival though is in very early stages.
Though many infrastructure players are struggling with their highly leveraged balance sheets, still for others there’s improvement in financial profile of infrastructure companies, says latest ICRA report.
However, revival of infrastructure sector is still in the early stages.
Those companies with exposure to the airport and the highway sectors have started witnessing an improvement in their operational and financial performance, thereby, improving their standing. The improved balance sheet, an improvement in operational performance will certainly help in improving credit metrics of these companies.
ICRA had done a sample study of infrastructure companies across segments. The outcome of the study was that the aggregate debt at a standalone level as of March 2017 had increased only marginally from March 2016, while at the consolidated level there was a 12% year-on-year decline in debt from Rs 1.58 lakh crores to Rs 1.39 lakh crores. This dip is primarily due to divestment of stake in subsidiaries or projects.
Thanks to government’s focus area on roads and urban infrastructure, particularly engineering, procurements and construction based contracts, it has helped construction companies improve their order book position. Currently, the order book position of most construction companies stands at over three times their last reported annual revenues.
“According to the three-year action agenda devised by the NITI Aayog, the total capital development expenditure is projected to increase to Rs 2,42,700 crore in 2018-19 (up by 19%) and further to Rs 3,58,500 crore in 2019-20 (up by 48%). This will further help strengthen the order inflow for the construction sector,” read ICRA’s report.
On the subject, Shubham Jain, Vice-President and Sector-Head, Corporate Ratings, ICRA said, “While it is still early to comment on whether the tough phase for infrastructure companies is over, things have certainly started improving. We have seen deleveraging, and focus on execution as the drivers of this improvement. Infrastructure segments like airports and highways have been outperforming with improved operational performance supported by healthy traffic growth in both the segments.”
Finding funding continues to be a challenge as banks are still grappling with high Non-Performing Assets woes. But, on the other hand banking credit to infrastructure and construction sectors has been on a gradual decline.
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