India Ratings says outlook negative for infra sector

The infrastructure sector outlook for 2016-2017 has been rated negative with diverse outlook for sub-sectors of roads, power etc.

India Ratings & Research, a Fitch Group company, in its report released today in Hyderabad, said the sector continues to grapple with a high concentration of poorly performing assets, and negative outlook on toll roads and thermal power sectors continue to weigh down the overall sector outlook.

Government policy interventions across the sub-sectors aim to resolve several teething problems, however, the results are likely to be overhauled over the intermediate term.

While policy actions from the government cannot be underplayed, performance of assets is a crucial recovery driver.

Referring to outlook sensitivities, the rating agency has said a reduction in interest rates and the stability of the India rupee can help ease the overall pressure on projects' cash flow while a pick up in economic activity will have a salutary effect on traffic volumes and energy demand, leading to portfolio-wide increases in coverage metrics.

The increase in refinancing transactions, accommodating elongated repayment schedules and reduced interest cost, is visible in numerous assets and is likely to continue in the near term.