Stimulus packages may not lift infrastructure sector

MUMBAI: The back-to-back stimulus packages by the government may not help the infrastructure sector getting out of the doldrums, feel market analysts. They say that jump-starting private infrastructure investments will be unsuccessful in injecting life into the sector because of the private sector's reduced appetite for risk. Further, the measures lack speed and efficacy and lack of project planning, which deters private capital.

���In the current scenario, where inadequate project planning may keep economic risks high and flexibility low in concession agreements, we prefer EPC companies over developers. However, most of the EPC companies have become part developer. Hence, we prefer EPC companies with a large proportion of cash contracts in their order books, minimal equity investment needs in infra SPVs/subsidiaries and low leverage," says analyst Nitin Bhasin, infrastructure analyst with UK-based Noble Group.

The report added that firms that meet these criteria are IVRCL, Punj Lloyd and Simplex Infrastructure. The report adds that amongst the developers, it prefers companies with operating assets and assets with the least dependence on external real estate. "We prefer roads under operation and regulated assets such as utilities to airports and toll roads under development. Developers owning operating toll-roads like GVK and IRB should be preferred to Greenfield toll-road developers with toll-roads under development like Nagarjuna, Madhucon and HCC," said the report.

In order to improve debt and long-term funding availability and concurrently increase private participation in the infrastructure sector, analysts say that government needs to push for structural changes in the financial system, increase participation of financial investors and follow a life-cycle approach to planning infrastructure projects.