NEW DELHI: Global rating agency Fitch has said many infrastructure projects in India have strong economic profile but the sector is not immune to the financial crisis.
Outlook on infrastructure credits is largely stable, Fitch said, "Many of the rated projects have favourable economic profiles including a strong-to-fair capacity to repay debt." However, it added many projects carry a heavy debt load and debt as a percentage of total project capitalisation has ranged from 48 per cent to 86 per cent.
"Demand for infrastructure in India will far exceed availability for the foreseeable future. Long-term economic value of many of these assets remains strong," Fitch said.
Fitch said the economic crisis is not over and the government and the central bank actions should help avoid the worst. Despite some risks attached to the infrastructure projects, it sees infrastructure spending as a tool to counter slowdown.
Risks such as delays in project completion, ability of equipment suppliers to meet deadlines and readiness of bank syndicates to increase lending for potential project cost overruns can result in selective downgrades, it said.
"Infrastructure sector is resilient but not immune to the financial crisis and the performance will continue to be impacted," Fitch said adding that there has been fall in air traffic and passenger numbers.
The agency said some migration is also likely to take place from commercial banks to the bond markets through the bundling, restructuring and securitisation of multiple project loans.
"While these prospective portfolios could include some projects under construction, the higher rated securitisations will be dominated by cash flows from operating projects," Fitch added.
Source:The Economic Times