Ind-Ra maintains negative outlook on Infra for FY17

The agency has also given a negative outlook on thermal power on account of sluggish demand conditions

India Ratings (Ind-Ra) has maintained a negative outlook for infrastructure sector for the next fiscal as it sees a high concentration of poorly performing assets.

"We continue to maintain a negative outlook on infra sector for FY17 with diverse outlooks on sub-sectors," Ind-Ra said in its latest report.

"The sector continues to grapple with a high concentration of poorly performing assets and the negative outlooks on toll roads and thermal power sectors continue to weigh down the overall sector outlook," it said.

According to the rating agency, government's policy interventions across the sub-sectors aim to resolve several teething problems but the results of the same are likely to be harvested over the intermediate term.

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

Ind-Ra said that toll roads, as a sub-sector, continues to reel under the burden of negative wholesale price index coupled with traffic under-performance in general, sizable cost overruns, and potential higher gearing to meet scheduled life cycle costs.

"The slight improvement in the projects awarded until in the 10 months of the current fiscal and increasing number of projects tapping the capital markets indicate signs of recovery," it said.

The agency has given a negative outlook on thermal power on account of sluggish demand conditions, continued resistance by distribution companies (discoms) to enter into long-term power purchase agreements and transmission-related constraints, among others.

It observed that despite improved coal supply and low imported coal prices, new projects commencing operations in the next fiscal could "further pressurise the sub-optimal plant load factors".