ICRA Assigns Stable Outlook For Construction Sector
New Delhi: Ratings agency ICRA has accorded stable outlook for the construction sector in the country in its year-end assessment of the sector.
The current order-book of majority of the construction firms is adequate to give medium-term revenue visibility. However, there have been lower inflows of orders in the second half of the current fiscal. Also, there have been some cancellations of orders in Andhra Pradesh.
The government’s focus on the infrastructure sector is going to be helpful to the construction sector and will provide significant opportunities to the construction companies in the near to medium term. The railways station redevelopment programme of the government is likely to provide lot of opportunities to the construction players in the country.
Upgradation and improvement of the national highways in the country is yet another major opportunity for the construction companies. The Bharat mala project itself is a huge one and will provide lot of opportunities to the construction players.
With big pipeline of projects to be awarded in the infrastructure sector, ICRA expects the order inflows for construction companies to get better in calendar year 2020. However, delays in land acquisition, funding issues, and State Government priorities remain the main risk factors to the new order inflows. The order inflows from non-infrastructure segments like industrial and real estate (excluding affordable housing segment) is expected to remain muted, with weak private sector capacity expansion growth.
On the execution front, ICRA expects the healthy order-book should support growth in operating income of construction companies in the first half of calendar year 2020, though it could witness moderation if the new order inflows weaken.