Infra, construction sector growth may remain stressed in FY15

Mumbai: Growth of infrastructure and construction as well as metals and mining sectors is likely toremain stressed in FY15 as high leverage levels may constrain the ability of some corporates to access credit, India Ratingsand Research, a Fitch Group company, said in a report today.

Sectors such an infrastructure and construction as well as metals and mining may remain stressed in FY15. Only substantial improvements at the operational level would cause a meaningful improvement in their credit profile, given the high leverage levels and negligible cash generation ability of corporates in these sectors.

The high leverage levels may constrain the ability of some corporates to access credit, it said.

This could prevent some of these corporates from tapping growth opportunities that a domestic economic revival may present. These sectors may require significant equity capital infusions or large-scale asset sales to pursue growth, India Ratings said.

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Sectors like construction and infrastructure, as well as metals and mining, besides power have also been forced to tighten their working capital management, since the availability of credit has been constrained by the weakinvestor sentiment associated with these sectors, it said.

However, it said that a number of financial indicatorssuggest a bottoming out of the credit profile of BSE 500corporates.

FY14 was the first year since FY11 when the corporates'(excluding banking and financial services) y-o-y growth rateof aggregated EBITDA (14.1 per cent) and funds from operation(FFO; 18.4 per cent) exceeded the growth rate of balance sheetdebt (13.8 per cent) and interest expense (10.2 per cent), thereport said.

As such, the number of sectors (nine) showing directionaldeterioration in operating performance as well as creditmetrics is lower than in 2013, the report said.

PTI