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India's Leading Infrastructur Companies 2013

 
 

Domestic Investment Landscape Infrastructure Development at the forefront of priorities

Infrastructure development and funding remains the top most agenda for the Indian government to help restore GDP growth rate to 8-9% from 5% as registered in 2013. The eleventh five-year plan (2007-2012) closed with an overall investment in infrastructure of about Rs 24.2 trillion (at current prices), marking a rise in infrastructure investment from 5.6% of GDP (as achieved in tenth five-year plan) to 7.2% (at current prices). Considering the enhanced focus on this sector, policy makers expect the infrastructure spend on an average to be around 8.18% of the GDP at the end of the twelfth five-year plan, targeting an overall investment of Rs 55.75 trillion over the duration. Moreover, the role of private sector investments has been further projected to enhance at 48% by the completion of twelfth five-year plan.

Private sector has been a key contributor towards investments in the infrastructure sector, showing an escalated share of 36.6% in total investments during the eleventh five-year plan as compared to 25.6% share in tenth five-year plan. A fair degree of success has been noted in inducting private participation (PPP) into the infrastructure sector. 

During the initial three years of the eleventh FYP, budgetary support accounted for a major chunk (45%) of the overall infrastructure investment, while majority of the debt financing arrived from commercial banks and NBFCs. While debt sources continue to play a major role in the funding pattern envisaged for the twelfth FYP, a funding gap estimated above nearly Rs 5.1 trillion needs to be materialised. 

Credit growth on the rise; but so is restructuring

Slow implementation and more or less stalled progress of projects coupled with rising input costs has put enormous pressure on the books of infrastructure companies. The sector is reeling under huge debts and is looking at ways to reduce costs in times of crunch. 

Bank credit to the infrastructure sector has observed a steady rise during the eleventh FYP. As per the RBI, bank credit to the infra sector stood at Rs 7,860.45 mn in 2013, showing an almost 40% CAGR since 2008. Credit growth to infrastructure sector has outpaced the total bank credit growth (CAGR 24.1% since 2008). The share of infrastructure in total bank credit to industry has grown from 23.9% in 2008 to 35.2% in 2012. The power sector continues to take nearly half of the overall bank credit to the infrastructure sector. 

However, with ongoing challenges around project clearances and macroeconomic slowdown, banks have adopted a conservative strategy towards incremental lending and they are increasingly focused on recovering outstanding dues. During the period ending Mar 2013, aggregate restructured advances to the infrastructure sector stood at Rs 1,255 bn, growing by more than 80% YoY. Apart from the ongoing macroeconomic concerns, infrastructure projects, which have usually long gestation periods, typically run on a prolonged cash cycle, posing challenges in meeting short-term obligations. Loan restructuring involves extension in repayment period, eased lending rates, and at times a repayment holiday helping companies materialize on delayed gains.