The infrastructure sector is limping back to normalcy. A handful of measures that were put in place over the past year are beginning to take shape. Thanks to the euphoria prior to the formation of the new government, the sector’s stocks have soared. But apart from roads and railways, other segments are awaiting fresh project orders. Measures to address the funding troubles are yet to yield results and most companies have stressed balance sheets. The jubilation, therefore, has waned. Over the past year, the CNX Infrastructure Index has been flat.

Roads and highways is one segment that is seeing reasonable improvement in fresh orders, thanks to a slew of initiatives. One, projects were bid out on the simple construction basis (EPC) instead of the PPP model which had found few takers. The NHAI’s awarding activity has gathered steam, with the October-March period for this fiscal seeing the road kilometres awarded double, primarily through the EPC route. Two, the government allowed deferring of premiums that road developers had to pay, freeing up cash flows.

Three, exit clauses in road PPP projects were recently modified to allow developers of roads awarded before 2009 to fully exit the projects. . Four, to increase the funds available to the NHAI to award projects, the Budget rerouted part of the excise duty collected on petrol and diesel to the road cess pool.

Railways is another segment that is improving. Apart from budgetary allocations moving up, 100 per cent FDI in railways has been allowed. The interim Budget also focused on ports, with 16 new projects set to take off.

Small measures include web-based bidding and environmental clearances which shorten project timelines and costs. Talks are also on to review PPP agreements. On the funding side, lending rules to infra projects were eased. Tax-free bonds were also reinstated in the 2015-16 Budget. Prospects are good for companies engaged in road and railway projects, since ports and airports are still sluggish.

But most companies sport weak balance sheets and face execution hiccups. Companies that are best-placed to grow well include Larsen & Toubro, IRB Infrastructure Developers, Sadbhav Engineering, and Adani Ports and SEZ.

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