 "OECD: India to see relatively robust growth at 7.2% in FY16")
In its outlook report released here on Monday, the ratings firm said toll roads and thermal power sector continued to weigh down the overall sector outlook as they still have high loan exposure among other issues.
The ratings agency has given a stable outlook on ports, airports and renewables, saying that they are broadly governed by improved throughput levels and favourable policies.
"The infra sector continues to grapple with the high concentration of poorly performing assets resulting in not only fragile coverage metrics but also lower-than-expected equity returns to the sponsors," Venkataraman Rajaraman, director, infrastructure and project finance of India Ratings and Research said.
Toll roads' negative outlook reflects the absence of a strong widespread traffic recovery, toll rates contraction and stressed credit profile of the sponsors. Even though there has been a mild pick-up in BOT projects awards as the government was able to find takers in recent times, the proportion of EPC contracts continued to be higher in the year 2016, according to him.
Ind-Ra, a Fitch Group company, also warned of a possible strain on finances of developers in the light of continued aggressive bidding for the road projects. Protracted contraction in inflation is also a major risk given the fragile traffic recovery for many roads. "Although Ind-Ra has factored moderate deflation into its rating, a persistent deflation due to macroeconomic shocks will have an adverse impact on the concessionaire and will derail debt service coverages," the report stated.
On thermal power projects, the report said despite policy interventions and improved fuel supply position, the tepid demand curtailed plant load factors(PLF) and many plants are operating at sub-optimal levels.
The report cited the Central Electricity Authority's (CEA) demand forecast , according to which the energy requirement growth was just 2.2 per cent in nine months of the financial year 2016 as compared with 8.8 per cent in the same period in 2014-15.
Maintaining a positive outlook for airports, and ports, the ratings firm said increasing air travel demand continues to drive the sector outlook while it also expects a continued growth in ports throughput volumes driven by economic growth. Going by the current traffic trends the total passenger volume could cross 220 million in the current year, according to Ind-Ra.
On the other hand, the contraction in volume handled in non-major ports until first six months of the financial year could impact the prospects, it said.
Ind-Ra estimates that 5,000 Mw out of 8,000 wind capacities commissioned across Maharashtra, Karnataka, Gujarat and Andhra Pradesh has the potential to tap capital markets. Similarly, 1,000 Mw of solar capacities could also access capital markets, with credit enhancements, according to the firm.
