Last Updated : Nov 23, 2020 06:35 PM IST | Source: Moneycontrol.com

S&P says credit risks for India infrastructure sector rising

Increasing debt, weakening counterparties and difficulty in refinancing could keep the infrastructure sector under pressure, according to the rating agency

Standard & Poor’s expects the country's infrastructure sector to continue to suffer the impact of COVID in 2021 with mounting debt, weakening counterparties and difficulty in refinancing.

A report by Business Standard quoted S&P presentation "India's Infrastructure Recovery Won't Be Quick" in which the rating agency states that refinancing for speculative grade-rated issuers remains difficult.

Within the sector, S&P believes the annuity road projects will be insulated from traffic risk. Considering the steep fall followed by the sharp recovery in the roads segment, it expects traffic risk to subside.

Recovery in the airports' segment is unlikely before 2024, according to S&P, with regulatory delays and high capital expenditure amplifying refinancing risks. The 'profitability will come under pressure, with limited operating levers and high fixed costs,' the report stated.

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In the power segment, significant overdue receivables are downside risks; however, it will be operationally resilient. S&P pointed out that demand recovery seems sustainable in the power sector with three consecutive months of demand growth.

For distribution companies (discoms), it said a massive increase in overdue receivables post-March indicates a severe impact on already weak companies. Though liquidity relief loan will alleviate some pressure, structural problems will not be fixed. States' weak support to discoms will add to the strain, the agency noted.

Recovery in ports is expected to be gradual and 'varied after a moderate deterioration'. S&P expects port cargo to fall moderately, while the recovery may be in tandem with gross domestic product.
First Published on Nov 23, 2020 06:35 pm