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India's Leading Infrastructur Companies 2013


Infrastructure Pulse Survey

Dun & Bradstreet (D&B) has attempted to capture the pulse of the Indian Infrastructure sector through a study involving key areas related to challenges, initiatives and financing among others. This section lays out an aggregate analysis of the survey responses received from approximately 140 infrastructure companies. Around 54% of the companies were from the construction sector, 22% from the telecom sector, 20% from the power sector and 4% were from ports.

Improvement in quality of infrastructure:

A critical element to boost India’s appeal as a key investment hub India emerged as one of the few countries that led the recovery from the global financial crisis of 2008-09. India’s resilience and progress over the last decade can be measured by the fact that the compounded annual growth rate (CAGR) for the GDP (gross domestic product) at factor cost, over the decade ending 2012-13 stood at 7.9% . Infrastructure development has played a key role in being the driving force for the overall socio-economic development of the country and continues to impact the growth of the nation. Nearly 50% of the respondents feel that improvement in quality of infrastructure is among one of the major changes that is required to boost India’s appeal as a key investment hub. Supporting government policies by working within the existing framework and building a stable economic environment emerged as two other significant changes required to promote India as an attractive investment destination. 

Project delays and cost overruns emerges as the most significant challenge faced by the sector in current times

Our survey investigated some of the key challenges emerging in the sector in the present scenario. Project delays and cost overruns emerged as the most significant challenge for 47% of the respondents followed by 39% respondents citing regulatory constraints as another significant roadblock. In the last fiscal several infrastructure projects were observed to be delayed due to multiple environmental clearances and land acquisition issues, which in our study emerged as the key reasons hampering the growth of the sector, especially for the timely completion of projects. Further, the study also revealed that slowdown in economic activity and rising inflation and interest rates are likely to hamper the growth of this sector in the short run. 

Respondents from the telecom sector were primarily concerned with regulatory bottlenecks, which they perceived to be the major factor hampering the sector. The last couple of years have seen this sector undergo its most turbulent phases due to issues such as license cancellations and litigations affecting the sector’s overall business dynamics. 

Investments in large infrastructure projects is the need of the hour to underpin the attractiveness of infrastructure in India

Nearly 44% of the respondents in the survey concurred on the need for investments, especially in large infrastructure projects, through additional avenues as the current infrastructure investments stand insufficient. More than one third (37%) of the respondents were also in favour of developing new industrial corridors to support the growth of this sector. Implementation of these two measures is largely dependent on large scale financing for a longer period considering the long gestation nature of infrastructure projects. 

Bridging the infrastructure financing gap emerged as one more significant measure to encourage and reinforce the attractiveness of this sector in the coming days. Prominent steps that were announced in 2013 include easing of external commercial borrowing norms for infrastructure companies; encouraging foreign institutional investors, qualified foreign investors and other foreign investment in infrastructure bonds and other securities. 

Greater state government’s participation required for bridging infrastructure financing gap

India has made considerable progress in the overall infrastructure, as seen over the years. However, avenues for financing infrastructure have seen a disproportionate growth. Large scale infrastructure projects are vital in a time of rapid urbanization and these again call for massive investments. Uncertainty in credit markets and supply side constraints impact projects at several stages. Infrastructure funding in India has been hampered by the absence of well developed markets and the highly regulated investment norms, as suggested by nearly 71% of respondents to the survey. 

Infrastructure companies expect that the participation of state governments at various levels would mitigate the gap in infrastructure financing. Nearly 44% of the respondents cited state government’s participation as a crucial measure for trimming the gap in infrastructure funding. Apart from this, reducing complexities in present procedures and simplifying legal formalities emerged as the second most crucial step towards infrastructure financing. 

Tax incentives needed to encourage private participation

Keeping in mind the critical role of the infrastructure sector in the Indian economy, the government has been investing heavily in it and forming conducive policies to encourage participation of private players. The Twelfth Five Year Plan appears to show some promising investments with key participation from private players. For the Twelfth Five Year Plan (2012-2017), the government has planned nearly Rs 55.75 trillion as target investments which also highlights to a large extent, the importance of the private sector in achieving these investment targets. Contribution of private sector is projected to grow from about 36.6% as achieved in the Eleventh Five Year Plan to about 48% by the end of the Twelfth Five Year Plan. 

Private participation has seen a steady growth across the past several five-year plans and would require further streamlining in order to bridge the financing gap. Tax incentives, with a 36% share, emerged as the most popular initiaitve to push private investment growth. Further, enhancing the scope of exemption received by an individual or HUF towards investment in long-term notified infrastructure bonds can provide the necessary phillip to private funding. 

Infrastructure sector expected to regain its growth trajectory in the long run 

The Indian economy dwells largely on the growth and development of the infrastructure sector. 

The government needs to cultivate an aggressive investment strategy in addition to creation of reforms across key focus areas like land acquisition, speedy clearances, streamlining the tender and bidding process. Setting up key monitoring arrangements at all crucial levels is required. An end-to-end growth is achievable only if the policies and reforms get rapidly applied and implemented. 

Despite the current set of challenges, most infrastructure companies surveyed appeared to be optimistic towards the growth prospects of the sector in the near future. This is underscored by the fact that nearly 39% of the companies have expansion plans in the near future and nearly 29% of the companies are looking forward for greenfield investments. The companies also seem to be confident about the sector regaining its growth trajectory in the long run, with nearly 50% of respondents stating that they expect substantial improvement in India’s infrastructure by the year 2020.