Infrastructure

The infrastructure sector has been in doldrums for past two years, plagued by the economic slowdown. Project execution was severely impacted on account of delay in land acquisitions and environment clearances. The order inflow remains muted due to slowdown in announcement of new projects across all the sectors.

Political bottleneck, heavy interest co... more »

The infrastructure sector has been in doldrums for past two years, plagued by the economic slowdown. Project execution was severely impacted on account of delay in land acquisitions and environment clearances. The order inflow remains muted due to slowdown in announcement of new projects across all the sectors.

Political bottleneck, heavy interest cost burden and working capital crunch added to the woes of infrastructure companies.

As per Care report, order backlog to sales multiple stood at 3 times by the end of FY12. Despite the order backlog to sales multiple looks comfortable, execution of projects remains the key.

Rating agency Fitch also downgraded the sector outlook to negative. The construction companies are finding it extremely hard to raise equity. Some of the companies are now opting to borrow from parental companies to meet funding obligations of BOT projects.

The construction companies apart from Build-Operate-Transfer projects will be in a superior position and can survive working capital pressures in this gloomy environment.

The key issues plaguing the port sector are delays in getting clearances, strained finances, poor draft and regulated tariff by Tariff Authority for Major Ports (TAMP) However, there are some positives for the sector. An expected recovery in industrial capex cycle coupled with an equity market revival making fund raising viable and lower interest cost post CRR cut will help to re-boost the ailing sector. hide «