The FM continued to play on the infrastructure theme in this budget as well. The most notable announcement was the proposal to set up the much awaited Development Financial Institution (DFI). The FM promised to infuse equity of ₹20,000 crore, into the DFI, and is expected to provide funding of ₹5-lakh crore , within three years. Besides, notified infrastructure debt funds will now be eligible to raise funds by issuing tax efficient zero coupon bonds.

These moves, aimed at increasing the funding sources for the projects lined up under the ambitious National Infrastructure Pipeline (now 7,400 projects), are a welcome move for the companies in this space. These measures, coupled with the 34 per cent increase in the capital expenditure outlay in FY22 (over the budgeted estimate of FY21) to ₹5.54-lakh crore, could imply significant order inflows for infrastructure companies such as Larsen & Toubro.

Besides, the Budget outlined the plans for various economic corridors, in Tamil Nadu, Kerala, West Bengal and Assam. This could augur well for road construction companies such as PNC Infratech, KNR Construction and Dilip Buildcon.

The Centre is also keen on monetising various assets of NHAI, GAIL, IOCL, HPCL, etc through the InvIT route (National Asset Monetisation Pipeline). Any fructifying efforts in this direction can on one hand ease the financial stress of debt laden institutions such as the NHAI (outstanding debt of over ₹2-lakh crore in FY20), and on the other attract investments in Indian InvITs. This can create more visibility for InvIT as a investment vehicle, which will be beneficial for private players such as Larsen & Toubro and Reliance, that are eyeing monetising their assets through this route as well.

Easing the debt burden

Besides, with state-run institutions raising money, the upcoming contracts can be awarded under the engineering procurement construction (EPC) model. This can in turn help ease the debt burden of companies in this space.

In the last Budget (FY21), the FM had proposed tax exemptions for foreign sovereign wealth funds and pension funds, for income earned on their investment in Indian infrastructure. However, the funds were required to adhere to some condition to avail such exemptions. The FM has now proposed to relax some of the conditions. While attempts to lure foreign investors continue, the Centre has ignored the subject of delays in project execution, which have for long hampered the investor confidence in the infrastructure space in the country.