The Hindu Business Line : Fitch assigns stable to negative rating to construction sector

MUMBAI: Fitch Ratings has assigned a stable to negative rating to the Indian construction sector. Fitch Ratings expects the credit profile of Indian construction-sector companies focused on contracting work to be largely stable in calendar year 2009, al though the agency anticipates that there could be negative surprises on account of project delays and a consequent build-up of receivables, Fitch said in its Indian Construction Sector 2009 report.

Fitch notes that the present order-book positions of most companies provide comfort on the revenue growth front, although delays in funding and reassessment of project viability could potentially result in lower growth rates during the year. The reports pointed out that there would be a likely slowdown in new orders, especially from the private sector, but Government orders are likely to be robust-based on the planned outlays as well as economic stimulus packages announced in December 2008 and January 2009, though deteriorating state finances could potentially increase receivable risks in this segment as well.

Consequently, Fitch expects an increase in the overall working capital cycle of most construction companies, while the impact will vary based on end consumer segments. Companies which have embarked on Build Own Transfer (BOT) and Build Own Operate Trans fer (BOOT) saw an increase in the construction cost of the projects during first half of 2008, especially due to the high rise in the prices of cement, steel and other construction materials. - PTI

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