Outlook negative for infra sector for 2014-15: India Ratings

India Ratings, a Fitch group company, has kept the outlook negative for India's infrastructure sector for the coming fiscal, 2014-15, due to weak credit profiles for most project companies.
The credit rating agency does not expect a sharp movement, especially in the short term, in the fortunes of the sector following the Lok Sabha elections in first half of 2014-15, it said in a statement today.
However, it believes that policy support from the government will help somewhat the beleaguered sector recover from some of its issues elaborated in the report.
The outlook for the sub-sectors sector have a split outlook, it said, adding that outlook for power projects, barring renewables, remains negative while certain pockets in the transportation sector have a stable outlook.

"Prolonged uncertainty surrounding economic conditions, over-ambitious traffic estimates and enhanced construction risks (to name a few) have plagued the road sector for some time now," the rating agency said.
The expected continuance of the current situation in the near term will continue to be a drag on the project cash flows of toll road assets, it added.

On the positive side, aspects like stable and assured revenue streams from highly rated counter-parties and standard maintenance requirements are the dominant reasons for the stable outlook on annuity road projects, it further said.
Notwithstanding the measures taken by the government to improve the ailing power sector, India Ratings believes that "it will take some time, say post FY15, before the full benefits of these measures actually trickle down to power-generating project assets".

The thermal power sector is simultaneously tackling (or at least trying to tackle) a bundle of problems such as lack of adequate provisions in fuel supply agreements, volatility in coal prices, high interest costs, financial health of off- takers and depreciating rupee, it added.
It said however that there is a silver lining in the renewable energy sector due to reduced construction risk, stable operating performance and remunerative tariffs.
The airport sector has a stable outlook for the coming fiscal, the rating agency said, adding that it has been revised from negative due to the progress on completion of expansion plans, regulatory clarity on tariff fixation and sustained growth in international traffic.

Though minor sea ports are likely to remain largely stable, non-major private ports, which are still in ramp-up stages, are on a stable to negative outlook, it said.