ICRA maintains stable year-end outlook for Construction sector

ICRA has given a stable outlook for the construction sector, in its year-end assessment of the sector. The order inflow for construction sector has been robust over the last few years, supported largely by increased Government spending towards infrastructure. However, H1-FY2020, has witnessed lower new order inflows and cancellations of some orders in the state of Andhra Pradesh, which has resulted in a decline in order book for some players. Nevertheless, the order-book position of most of the construction players is currently adequate to provide medium term revenue visibility.

As the Government plans to more than double the investment in Infrastructure to about Rs100 trillion over the next five years, the construction companies are likely to witness significant opportunities with key segments being highways, railways, ports, urban infrastructure and airport. In the Railways segment, besides the core railway capex (doubling, new lines, signalling, electrification, etc), the station redevelopment, is expected to provide significant opportunities to the construction companies. Similarly, in the highways sector, adequate pipeline of projects for development/upgradation of the national highways and state highways exists. The Bharatmala Pariyojana project itself is expected to provide large opportunities for the construction sector as the programme is the largest road development programme in India.

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