Domestic rating agency, India Ratings and Research (Ind-Ra) has maintained a negative outlook for the infrastructure sector for the next financial year, and said that the negative outlook on the three heavyweight sub-sectors that include toll roads, thermal and wind continues to pull the overall sector outlook down.
As per its special report on FY18 Infrastructure Sector Credit Outlook, among the individual sectors, the negative rating continued for the third consecutive year for toll roads on the expectation of sluggish traffic growth. For the thermal power sector also it has maintained negative outlook, mainly due to suboptimal plant load factors, lack of interest for long-term power purchase agreements which has been compounded by low priority in power scheduling.
The ratings agency has maintained a stable outlook on solar and seaports due to the reasonably established payment profile of state utilities (barring a few) and growth-led cargo throughput volumes. Further, it has revised the outlook for airports to positive for FY18 from stable in FY17, based on the solid fundamentals of air passenger volumes, underpinned by moderate fuel prices (although higher than 2016 levels) and favorable policy actions. However, the outlook for wind energy turned negative from a stable rating in the last two years.
Ind-Ra added that a reduction in interest rates and the stability of the Indian 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.