Infrastructure sector hails stimulus push

The ₹7,00,000-crore stimulus push announced by Finance Minister Arun Jaitley is being hailed by various players in the infrastructure sector, as it will not only boost the economy but also pave the way for the creation of jobs.

Infrastructure players and rating agencies have given a thumbs up to the move. Inputs from various players show that this is extremely positive, which will boost the growth of the infrastructure sector, revive economic growth, while also playing a role in the logistics sector down the line.

R Venkataraman, Senior Director with Alvarez & Marsal, said: “The capital stimulus package for banks would definitely help in the revival of infrastructure projects, especially in the roads sector, where fundamental issues have been identified and solutions thought through.”

“New projects will definitely take off and many projects stranded for last-mile funding are also likely to see a revival. The results should be visible as early as next fiscal. The banks would need to bring in more rigor in project appraisal, and will also need to act swiftly to avoid delays and cost overruns as seen in the past,” said Venkataraman.

M Goutham Reddy, Director of Ramky Infrastructure, said: “The government is trying to catch up with the down trend in the economy by announcing the stimulus package. Having taken five major decisions – demonetisation, GST, RERA, Insolvency and Bankruptcy Code and the Benami Act in less than 12 months – it is now focussing on economic growth with this package.”

These decisions have had profound impact on the economy in the near-term and these measures will play a role in accelerating growth, said Reddy.

“However, it will take about four-five months for this to take final shape. This means its benefits would be felt during the 2019 financial year. The recapitalisation of banks, encouragement to EPC road contracts, will boost the construction sector and the economy, which has shown signs of some correction lately,” said Reddy. Vivek Kulkarni, Founder, Managing Director of ratings agency, Brickwork Ratings, said: “This is one of the biggest developments aimed at boosting the infrastructure and the economy, creating jobs and reviving the buzz in the banking sector.”

“The move is positive not only for the banking sector, which will be able to provide additional liquidity into the systems, but also to the infrastructure sector, which is poised for growth. They will also have new avenues to invest from the funds they have garnered after demonetisation. This will help in boosting the economic growth and possibly take it past the 8 per cent mark,” he said.

T Adibabu, Chief Operating Officer, Finance, Lanco Infratech Limited, said: “This announcement opens up a lot of business for the infrastructure sector, which is still passing through tough times. The acceleration of the sector may take some time as NHAI would have to finalise projects and award contracts.”

“Most companies still do not have many workable contracts and those who have do not have adequate funds as banks have been treading cautiously on lending. This means, the Top Tier I infra companies will be in focus initially. Thereafter, when these companies find it tough to handle the flow of projects, other players will come into play as Tier II and III contractors. That is when there will be rapid growth through EPC contracts,” said Adibabu.

Shubham Jain, Vice-President, Head, Corporate Ratings, ICRA, said: “The government’s target of developing 83,000 km, which includes 24,800 km of Bharatmala, is a major development for the country’s EPC players. This will be good for EPC players as the funding is by the government, and companies would only need working capital, which the banks are comfortable lending.”

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