Maintaining a stable outlook across the infrastructure sector, India Ratings and Research (Ind-Ra) sees coal-based thermal power having negative outlook for the remaining part of FY19.

Providing its research insights for the first half of 2019, the ratings agency has maintained a stable outlook on the overall transport infrastructure sector including toll roads, annuity roads, hybrid annuity model projects and airports.

It expects an increase in traffic volumes and inflation-led toll, driven by steady economic growth, which can elevate revenue growth by about 9 per cent y-o-y for toll road projects.

The outlook on airports reflects limited upward rating movements, although the agency expects continued growth in passenger volumes despite capacity constraints. It also reflects the increasing non-aeronautical revenue for airports.

While HAM projects have enabled revival of private participation, there is some pressure on the financial closure front, as lenders—especially public sector banks—are going slow on financing these projects on account of lack of appetite and a lending freeze on many of these lenders.

For toll roads, Ind-Ra expects revenue to grow at around 9 per cent y-o-y in FY19, supported by toll rate growth of about 4.2 per cent. The agency believes that there would be sufficient flexibility for mature roads to manoeuvre moderate downturns in traffic growth, while speculative-grade assets’ coverages hinge on double-digit traffic growth.

Regarding annuity roads, the National Highways Authority of India has demonstrated its stable payment trackrecord across the Ind-Ra rated projects over the years. The impact of the implementation of Ind-AS will be a key monitorable, because the incidence of tax could be advanced and may squeeze the coverages during the initial years.

For coal-based thermal power, non-pit head plants are facing irregular coal supply, leading to a high risk of declaring availability lower-than-required/normative level. The agency maintains a stable outlook on the wind power and solar power sector.

Interstate transmission projects exhibit stable receivable period. On the transactions front, the agency expects under construction HAM projects to garner a reasonable share in the acquisition market.

Rising domestic interest rates and falling rupee are dampening the interest of infrastructure companies in the bond market. The tendency to continue with bank loans is likely to persist until interest rates move favourably.

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