Construction sector sentiment may improve in Q3 FY'15: ICRA

MUMBAI: Investment cycle in the construction sector is likely to improve in the third quarter of the current fiscal if a stable government comes to power at the Centre after the general elections, according to a report.

However, until September, execution challenges are expected to persist and the revenue growth of construction companies could continue to remain muted on the back of poor performance of companies in the infrastructure sector, credit rating agency ICRA said in a report.

"We expect revenue pressure to continue in the first half of the fiscal after which improvement in the investment cycle could be closely linked to the election outcome and perceived stability of a new government," ICRA said.

Companies engaged in sectors like roads, airports and power have not been able to achieve their set business targets, the rating agency said.

Inordinate delays in environmental clearances, high land acquisition cost, fuel supply shortages, precarious financial health of distribution utilities, tariff-related impediments for port sector and dwindling interest from private players have put the construction sector in a tight spot, it said.

"In fact, companies in the construction and infrastructure sectors form the highest proportion of CDR cases approved in FY13 and first half of FY14," the report said.

According to ICRA, NHAI was able to award just 15 per cent of its targeted 7,500 km amid dwindling interest from private players coupled with increasing difficulties in achieving financial closure; relatively less remunerative stretches in the offering and delays in environmental clearances and land acquisition.