Infra players set for a year of consolidation

Pinning hopes on the reforms being undertaken by the Narendra Modi-led Government, infrastructure companies expect 2015 to be a year of consolidation.

The last 12 quarters have been tough for the sector, which is grappling with several problems such as rising debt, high interest rates and policy bottlenecks. Several profit-making companies have turned red during this time.

However, the sector is now confident of the tide turning in the new year, provided the Government brings about positive changes, say industry representatives.

“The recent moves by the RBI to permit refinance projects would trigger the next phase of growth for infrastructure companies,” T Adi Babu, Chief Operating Officer, Finance, Lanco Infratech, told

Added Isaac A George, Group CFO, GVK Power: “A number of assurances have been made, but these need to be implemented to put back the sector on track. The industry has been affected by delays in policy issues and problems of fuel supplies to stranded power projects. We hope issues such as coal supplies and gas pooling would get addressed soon.”

According to M Goutham Reddy, Executive Director of Ramky Infratech, the Modi Government has to take steps to accelerate infra growth.

Though sentiments have improved, overseas investors are still in a wait-and-watch mode, expecting more reforms. As new initiatives get implemented, there could be more stake sale deals and even private equity interest, he added.

High interest rate is a major concern for most infra companies. With wholesale price inflation touching zero, industry expects the RBI to ease its monetary policy in the next policy review.

“The expected softening of interest rates has not happened. The reduction of interest rates would have an extremely positive impact on the sector and various businesses,” said R Balarami Reddy, Group Chief Financial Officer, IVRCL.

Last year has also seen a number of deals in the infra space. GMR Infrastructure concluded several deals in the areas of road, power and airport in India and abroad. Lanco Infra sold its Udupi power plant in Karnataka to the Adani Group, while Ramky Infra has struck a deal with Tata-promoted TRIL for a highway project.

Some companies turned to selling stakes in completed projects to pare debt as well as raising capital. The momentum in the deal space is likely to continue in the new year, say industry officials.

Given the requirement of funds, several companies are looking to come up with preferential/rights offers and have also taken members’ nod for qualified institutional placement issues. Some firms are also seeking to list their power entities on bourses.