Q1FY13E:Higher interest rates, slow execution to dent infra

UR Associates has come out with its report on infra sector.

The first quarter FY13 result is round the corner and the infrastructure sector yet again is expected to report sluggish numbers. High interest rates and slow execution will again play spoilsport for the sector in the 1QFY13 results. As the core issues are yet to be solved, the sector may take time to again become favourite for investors. The slowdown in the economic activity, especially in the infrastructure space, has resulted in poor financial performance and scarce order book for most of the companies in this sector. Also, investments across the board have taken a backseat with corporate capex activity still looking some time away, resulting in low investor confidence. Thus, despite of the sector being available at attractive valuations, investors today are staying away from this sector. However, a fresh impetus by the government along with expectation of interest rates peaking out and pick-up in execution, the sector may not be affected much by a sluggish quarter. The India infrastructure space holds substantial promise, due to significant demand and a supply mismatch. India’s infrastructure need is the backbone of economic development of the country; hence, it will be on the priority list for the government at the centre.

Key highlights:
3i invests Rs 2 bn in Supreme Infrastructure's road projects: 3i India Infrastructure Fund has put in Rs 2 bn for a minority stake in Supreme Infra’s portfolio of road BOT (Build-Operate-Transfer) companies. However, neither the size of the road BOT companies nor the percentage of stake that it has given to 3i fund for raising funds has been disclosed.

GVK plans to raise Rs 35 bn from airport biz stake sale: GVK Power is in discussions with a few private equity players in an effort to dilute stake in GVK Airport Holdings. According to sources, discussions are on with a few PE majors such as Macquarie SBI Infrastructure Fund (MSIF), Morgan Stanley Infrastructure Partners and JPMorgan Asian Infrastructure Fund. Kotak Mahindra Bank and Macquarie are jointly advising GVK on the sale process.

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