Infra, construction sector growth may remain stressed in FY15

Growth of infrastructure and construction as well as metals and mining sectors is likely to remain stressed in FY15 as high leverage levels may constrain the ability of some corporates to access credit, India Ratings and Research, a Fitch Group company, said in a report today.
Sectors such an infrastructure and construction as well as metals and mining may remain stressed in FY15. Only substantial improvements at the operational level would cause a meaningful improvement in their credit profile, given the high leverage levels and negligible cash generation ability of corporates in these sectors.
The high leverage levels may constrain the ability of some corporates to access credit, it said.

This could prevent some of these corporates from tapping growth opportunities that a domestic economic revival may present. These sectors may require significant equity capital infusions or large-scale asset sales to pursue growth, India Ratings said.
Sectors like construction and infrastructure, as well as metals and mining, besides power have also been forced to tighten their working capital management, since the availability of credit has been constrained by the weak investor sentiment associated with these sectors, it said.
However, it said that a number of financial indicators suggest a bottoming out of the credit profile of BSE 500 corporates.
FY14 was the first year since FY11 when the corporates' (excluding banking and financial services) y-o-y growth rate of aggregated EBITDA (14.1 per cent) and funds from operation (FFO; 18.4 per cent) exceeded the growth rate of balance sheet debt (13.8 per cent) and interest expense (10.2 per cent), the report said.

As such, the number of sectors (nine) showing directional deterioration in operating performance as well as credit metrics is lower than in 2013, the report said.