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Ind-Ra maintains stable outlook for India’s infrastructure sector in FY25

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Ind-Ra maintains stable outlook for India’s infrastructure sector in FY25
India’s infrastructure sector is expected to remain stable in FY25, according to Ind-Ra.

Ind-Ra emphasises the importance of internal liquidity and timely payments from counterparties for all sectors

For FY25, India Ratings and Research (Ind-Ra) has kept the rating outlook for the infrastructure industry as a whole stable.

Ind-Ra has updated the rating outlook for thermal assets to “Stable” from “Positive” and wind assets to “Stable” from “Negative” for FY25, while keeping a “Positive” rating outlook on airports.

The infrastructure sector’s stable rating outlook takes into account the possibility of most projects having steady operating performance, long-term revenue visibility under power purchase agreements (PPAs) and concession agreements, and anticipated increases in freight and traffic volumes.

The rating agency noted that enhanced thermal asset utilisation and improved airport traffic volumes are benefits of growing power consumption. Sufficient internal funds and prompt payments from partners continue to be important metrics to track.

Moreover, for projects with thin debt coverages, it is still possible to track the effect of a possible increase in interest rates due to the suggested modification of provisioning requirements on the cost of borrowing for infrastructure projects.

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Energy Infrastructure Ind-Ra anticipates that power demand will continue to be high in FY25 due to increased economic activity and higher-than-average summer temperatures. In FY25, the agency anticipates the same to be roughly 7% year over year or yoy.

The nation increased its total capacity in FY24 by about 26 GW, the most since FY16, mostly as a result of solar and thermal energy.

Receivables in Ind-Ra’s portfolio of solar, wind, and thermal facilities have decreased dramatically since the implementation of the LPS (late payment fee) Rules 2022; most discoms are now paying their current invoices within ninety days.

Improved liquidity, evidence of LPS Rules 2022 adoption, and consistent on-time payment receipts are positives for the energy sector ratings, according to Ind-Ra. Internal liquidity is a crucial rating element for all generation assets, especially when weighed against counterparties’ robustness and diversification.

Toll Roads: The agency took note of the expected economic growth and sufficient coverage for toll roads.

Though the impact of traffic from new roads is an important monitorable, it expects toll collection growth to decline to 6-7 per cent in FY25, down from double-digit growth observed in FY23 and FY24.

For FY25, Annuity Roads Ind-Ra has kept its Stable rating outlook for projects using a hybrid annuity model. This is due to ongoing intense competition, a sizable portion of projects awarded to new sponsors in the pre-appointment date or under-construction stages, enduring land-related problems, and decreased awarding activity in FY24 and 1HFY25.

A build-up of tension in the industry could result from developers bidding aggressively for projects due to all these variables.

Airports Ind-Ra stated that consistent traffic growth and rising non-aero revenue are the foundations of their ongoing positive outlook.

The agency anticipates that, following the implementation of a new tariff order, the current high leverage ratio for rated operational airports will begin to taper down in the next two to three years.

Additionally, it projects that overall passenger traffic will increase by 10% to 12%, mostly due to strong passenger growth in metro airports and improved regional connections in India following the implementation of the UDAN scheme.

The government’s emphasis on building greenfield airports, according to the agency, has become a catalyst for expansion and has made it possible to add sizable capacity.

Thus far, the government has given its approval in principle for the establishment of 21 greenfield airports, of which

Because of a moderate demand for sea ports in external commerce, Sea Ports Ind-Ra has maintained a Stable rating outlook for sea ports for FY25.

The Red Sea crisis, it continued, had no appreciable effect on Indian trade between November 2023 and March 2024 since other routes, including the Cape of Good Hope, and even land routes, were investigated as a means of avoiding the affected transit route.

The organisation anticipates steady development in both item imports and exports in FY25.

It projects that the rise in cargo volume at major and minor ports will stay around 7% year over year, with a cumulative throughput of 1,645 MTPA (million tonnes per annum) at Indian sea ports predicted in FY25.

Buses that run on electricity
For electric buses, a stable grade is contingent upon satisfactory delivery, sponsor assistance, and operational performance following commissioning.

For firms with an Ind-Ra rating, debtor days are comfortable, albeit there are occasionally brief delays.

The ratings will be determined by the counterparty profile and counterparty payment profile. Idiosyncratic risk in the electric bus industry, according to the agency, may be problematic.

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