India's Leading Infrastructure Companies

India's Leading Infrastructure Companies 2015

STEEL

Infrastructure is one of the key factors that drive countries economy and steel serves as backbone of the infrastructure industry, hence playing an important role in the countries development. India is fourth largest producer of steel in the world, after China, Japan and USA. In FY14 the steel imports of India showed a decline of about 28 % which is due to weakening rupee and boost in domestic production. According to ministry of steel, production India’s steel production for FY14 has reached 87.67 MT and has been on the rise for the past few years.

Future Outlook:
The new industrial policy adopted by government opened up Indian steel and iron sector to private layers by removing it from list of reserved for public sector and exempting it from compulsory licensing. Also import of foreign technology is allowed freely under certain limits under an automatic route.

The estimated rise in infrastructure development and also various projects for which are bringing up rural market for steel such as Bharat Nirman, Rajiv Gandhi Awaas Yojana give the steel industry a positive outlook for the future.

CEMENT

Cement industry plays an important role in construction and development of infrastructure. India is currently the second largest producer of cement in the world and it is also one of the eight core industries in India. The cement industry has been facing challenges due to rising prices for logistics due to rise in freight cost, railway transportations, extended monsoon etc. also due to sudden increase in production capacity the gap between supply and demand and hence there was a reduction in the capacity utilization in the industry. According to RBI the growth rate of cement sector slipped from 9% in previous year to 3% in this year.

In the 12th five year plan the government has allocated US $ 1 trillion for investment in infrastructure which can also be seen in the union budget 2014-15 government as allocated lot of funds for development of rural and urban projects which will provide huge potential for cement industry.

INFRASTRUCTURE FINANCING

While majority of the investment is made by the public sector, private sector is emerging as a key player. In the past few years, private investment in infrastructure is on the rise while public investment is falling as a % of total investment. As indicated by the Union Budget FY15, the government of India plans to encourage private investment significantly.

Public-Private partnerships (PPP)
In order to build world-class infrastructure, India has followed the route of Public- Private Partnerships. Among all forms of infrastructure financing, the PPP model is emerging as the most favored and dominant form of investment. Sectors that have benefited significantly through PPP projects are Aviation, Railways, Ports, Power and Roads. As per the Union Budget FY15, the government is attempting to make farming competitive and profitable by encouraging both public and private investment in agro-technology development and creation and modernisation of existing agri-business infrastructure. Moreover, as per the Union Budget FY15, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring and are permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending.

According to a report by the Working Committee on infrastructure financing, an investment of ` 55 tn is targeted over the duration of the 12th Five Year Plan. As proposed by the Union Budget FY15, there will be an extension of a liberalised facility of 5% withholding tax to all bonds issued by Indian corporate abroad, extending validity up to June 30, 2017. Moreover, to augment low cost long term foreign borrowings for Indian companies, the eligible date of borrowing in foreign currency has been extended from Mar-16 to Mar-17 for a concessional tax rate of 5% on interest payments.

The rapidly rising demand for credit by infrastructure companies was supported significantly by commercial banks by unwinding their excess investments in government securities maintained as SLR. Hence, it is estimated that banks were able to provide about half the debt finance needs of infrastructure investment. Non-bank finance companies (NBFCs) also increased their lending sharply as the credit demand for power, telecom and roads expanded. Moreover, Infrastructure Development Funds (IDFs) have been set up for channelising long-term debt from domestic and foreign pension and insurance funds. As proposed in the Union Budget FY15, there would be a tax efficient pass through status, for PPP and other infrastructure projects. Other forms of investment include Shyama Prasad Mukherji Rurban Mission which would be initiated through PPP and aims to improve civic infrastructure.