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Infra sector sees most CDR cases

No Comments Sub Category:Infrastructure Posted On: Apr 09, 2014

Of the cases approved in FY13 and first half of FY14, companies in the construction or infrastructure sectors form the highest proportion of Corporate Debt Restructuring, according to rating agency ICRA. Indian construction sector is in a tight spot due to delay in environmental clearances, high land acquisition costs and increased due diligence by lenders. Additional factors worsening the situation are mine development permissions, fuel supply shortages, precarious financial health of distribution utilities in case of the power sector, security clearances and tariff-related impediments for the port sector and dwindling interest from private sector participants, coupled with increasing difficulties in achieving financial closure for the road sector.

Report by ICRA points out that since Q1 FY11, private sector capex too has been witnessing a declining trend. Due to “issues faced in land acquisition and securing requisite approvals and clearances, deferral of capex plans and overall subdued business confidence”, new project announcements by the private sector shrank by 70 per cent year-on-year against 45 per cent year-on-year decline in FY13.

Rohit Inamdar, Senior Vice-President, ICRA says that the infrastructure sector will continue to face revenue pressures in the first half of FY 15, after which investment cycle will be linked to outcome of elections and stability of government.

The weak guidance is primarily due to poor performance of companies in the infrastructure sector and a lot of companies have missed the targets set in FY 13.

Source:  Hindu Business Line

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