Mumbai (Maharashtra) [India], February 25 (ANI): India Ratings and Research (Ind-Ra) on Thursday revised its infrastructure sector outlook to stable for FY22 from negative while maintaining a negative outlook on airports and wind power projects.
The stable outlook factors in contracted revenue visibility, long tenor contracts enabling financial flexibility to an extent, and improving people traffic and cargo volumes on the back of a strong economic recovery expectation.
Despite the doom and gloom beginning mid-March 2020, most sub-verticals of the infra sector have shown resilience and are above pre-Covid levels. However, internal liquidity continues to be critically monitorable compared to the business or counterparty stress expected in FY22.
Ind-Ra said any wide-ranging Covid-19 resurgence will change the expectations on counterparty behaviour or traffic recovery. Though infrastructure projects have a long operating period, stressed liquidity can lead to downgrades -- especially in airports, metro rail and wind sectors.
"Pooling of assets is favoured in Indian and foreign markets as diversification has emerged as a dominant method of addressing counterparty risk in renewable projects and traffic risk in toll projects," said Associate Director Vishal Kotecha.
"The traction in InvITs and pooled structures is expected to rise by about Rs 85,000 crore in roads and Rs one lakh crore in energy space over the next one to two years," he said.
InvITs have proved to be effective for pooling the assets and attractive for investors, given their governing regulatory structures. Besides, infrastructure projects with a stable credit profile are taking advantage of a low interest regime to refinance their loans.
Sponsors are also using this opportunity to upsize debt and release funds for further growth, said Ind-Ra. (ANI)