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The country’s infrastructure sector players are still not out of the woods despite the Government’s many reform initiatives.
Ahead of the first quarter numbers a tough liquidity situation, slower order flow and relatively slower pace of implementation — a carryover from the previous quarter — are once again at the forefront.
The monsoon has only added to their cup of woes. As construction work slows during the rainy season, , the second quarter too is likely to be tough.
Analysts and industry veterans say the sector is likely to see some traction only in the third quarter.
R. Balarami Reddy, Executive Director, Finance, IVRCL said, “The first quarter carried forward issues faced last year. However, the Government has initiated several steps, including improvements to the highways sector. These will have an impact as we go along.”
M. Gautham Reddy, Executive Director of Ramky Infrastructure, said, “Liquidity is still a matter of concern for most infra companies. The environment is still tough. The initiatives taken by the Prime Minister, NHAI and RBI will take time to impact the sector.”
Biju Kurian, Vice-President of JRG Securities, said, “The sector is passing through a turbulent phase and is still not out of the woods. It is facing delays in receipt of order and even execution, impacting cash flows.”
“L&T’s results today are an example of what the sector is passing through. Its numbers have been below expectations and its outlook provides some insights into the overall economic scenario impacting the sector. The core infra sector growth of about 2.3 per cent in May shows it is lower than the previous month. All these point towards a tough quarterly outlook for the sector players,” Kurian explained.
Core reforms
Amish Shah of Credit Suisse India, in his report on the utilities sector, maintains that reforms required to solve the core issues of domestic coal deficits and augmentation of rail infra for coal movement are missing and its implementation lacks shine.
Fuel scarcity, which directly impacts earnings and valuations of developers, would improve only marginally, making it difficult to be positive on the sector, he says .
Several companies such as Gammon India and Soma Enterprises are restructuring their already high debts.
>rishikumar.vundi@thehindu.co.in
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