he struggling infrastructure companies will see a jump in their order book if the investment outlay, which is set to double in the Twelfth Plan period, is met. A combination of tax incentives for equipment and developing funding for infrastructure projects will also help boost performance.
Road projects benefit
Road projects were the special focus in this Budget, with 8,800 km of roads proposed to be awarded by the next fiscal. The previous fiscal's target, too, short by 40 per cent, could add to order flow.
Where road developers may also benefit is from allowing of External Commercial Borrowings for maintenance and operation of toll systems, provided they are a part of the original plan. Prominent road developers such as Ramky Infra, Sadbhav Engineering, Ashoka Buildon and IRB Infrastructure Developers have recently won large development projects.
Tax incentives
For specified infrastructure companies, the Budget proposals also allow just 5 per cent of tax to be withheld at the time of interest payments for the next three years on External Commercial Borrowings against the 20 per cent previously. However, few infrastructure companies actually have accessed the ECB route.
Larger companies such as IRB Infrastructure Developers and Sadbhav Engineering have not faced problems arranging financial closures, while those such as L&T already have low interest rates.
ECBs may also not necessarily be a cheaper or more viable option than domestic funding unless they command good credit ratings. Companies in most need of funds, or heavy debt include Gammon India, Patel Engineering, GMR, C&C Constructions and ARSS Infra, and they are unlikely to be able to get cheaper funds.
Customs duties are also exempt for specified equipment such as tunnel boring and road construction equipment, benefiting companies which undertake heavy investment in equipment. These include Pratibha Industries, IVRCL, MBL Infra, C&C Constructions and Gammon India, among others.