Hiked infra capital outlays in Budget to prop up construction sector order book: ICRA

Construction companies are expected to get a significant push from the increased capital outlay and execution targets set for key infrastructure sectors in Budget 2018-19, ratings agency ICRA said today.

With funding support from increased budgetary allocation, and higher Internal and Extra Budgetary Resources(IEBR) including debt funding from institutions like LIC, EPFO, most of the infrastructure segments are expected to witness the increased pace of contract awarding and execution in 2018-19, it said in a statement.

It said this will improve order inflows and revenues of construction companies. It added that the proposal to lower the rating threshold for investment in corporate bonds will channelise much needed long-term capital from pension and insurance funds into the infrastructure sector.

Shubham Jain, Vice-President and Sector-Head, Corporate Ratings, ICRA said: “A significant part of this capex will be related to the construction sector business. As per our estimates, the proposed infrastructure capital outlay plan could result in a construction business of up to Rs 3.3 lakh crore in 2018-19 – and will be a key driver for construction activities in the country.”

According to ICRA, a major push from the government on infrastructure sector has helped construction companies improve their order book position.

It said the Budget 2018-19 continued on this track with the infrastructure capital outlay by Central government bodies and Central Public Sector Enterprises (CPSE) planned to increase to Rs 5.97 lakh crore in 2018-19 — an increase of 21 per cent from 2017-18.

A majority of infrastructure capex by the Central government entities is to be implemented by five ministries/ departments — railways, road transport and highways, petroleum and natural gas, power, and housing and urban affairs — which together account for over 80 per cent of the planned capex.moneycontrol

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