Brokerages say govt's Rs 100-lakh-cr infra spend target ambitious; 10 stocks in focus

The infrastructure sector is likely to get a boost after the finance minister Nirmala Sitharaman provided an outline for the Rs 100-lakh-crore National Infrastructure Pipeline (NIP) on December 31.

But, experts call it a slightly ambitious target and the execution of the said road map will be dependent on the fiscal position of the government which at the moment looks slightly fragile.

The announcement was in line with Prime Minister Narendra Modi’s vision of the $5-trillion economy by 2024. Sitharaman highlighted that a total of Rs 51 lakh crore has been spent on infrastructure in the last six years. And, a total of 63 percent of the total infrastructure project pipeline have been already firmed up.

The task force has come with a compilation of Rs 102-lakh-crore worth of projects which are to be added in the next two-three days. The finance minister said that another Rs 3 lakh crore worth of projects would be added in the next couple of weeks.

Reacting to the developments, experts said that the proposal is highly ambitious and would require support from multilateral funding.

“Highly ambitious target - about 3x of last decade infrastructure investment. Headwinds like (1) Lower than expected govt revenues and tight fiscal deficit target (2) Weak bank credit to the infra sector (3) Limited Pvt sector equity bandwidth and stretched Balance sheet of infra companies, will make it difficult for Govt to implement this programme on the ground,” Parikshit Kandpal of HDFC Securities told Moneycontrol.

“This requires strong support from Multilateral funding agencies and Equity investment at under-construction stage by Sovereign wealth funds (which looks difficult as SWFs prefer completed projects),” he said.

If we look at the data, almost 70 percent of the estimated investment skewed toward 4 key sectors - that include Energy (24%), Urban Infrastructure (16%), Railways (13%) and Roads (19%).

“The key beneficiaries are expected to be Railways (13% v/s earlier 10%) and Urban Infrastructure (16% v/s earlier 13%). The focus should continue on Railways, Roads and Urban Infrastructure (led by metro projects), which were the key focus areas over the past 3-5 years,” according to a report by Motilal Oswal.

The new plan will be a long-term positive only if there is a revamp in the long-term fiscal target, improvement in the economy and increase in tax revenues. Markets may wait and understand the roadmap & position of the government balance sheet in the Union Budget, suggest experts.

Parikshit Kandpal of HDFC Securities prefer companies that have a lean balance sheet like L&T, Siemens, ABB Ltd. In Infra space, Kandpal like PNC, KNR Construction, HG Infra, Capacite Infraprojects, and Ashok Buildcon.

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