India Ratings & Research has revised the overall outlook for the infrastructure sector from negative to stable for 2015-16 fiscal in spite of mixed outlook for sub-sectors.
The ongoing measures by the government and regulators to address fundamental shortcomings on the policy side could gradually rebuild dwindling stakeholders’ confidence in the sector. Although these measures will steer the sector in the right direction, a substantial shift from the current path is unlikely in 2016-17, according to the agency.
Fuel Sector Risks:
While government actions for addressing fuel-related risks through the re-auction of coal blocks, facilitating approvals and clearances and the marginal improvements in the counterparty credit profile are encouraging, the thermal power sector is yet to completely clear out the excess baggage of the past.
The fuel supply position at many thermal plants has remained ‘lower than comfortable’. This could lead to more expensive power. Given the stressed liquidity position of the sponsors, it could be tough to augment funds.
Negative for Toll Roads:
During FY 2016, there is negative outlook for toll roads reflecting the anaemic growth-driven traffic. While airport segment outlook is seen to be stable, for ports it has been revised to stable from negative.
While there is potential for consolidation, a buoyant economy would be conducive to raising the much-needed equity and for asset sales.
Further, if the economic fundamentals and policy interventions play out favorably, the infrastructure sector is poised to witness renewed investor interest.