Ind-Ra revises outlook for thermal and wind sectors, maintains stable forecast for infrastructure in FY25 – EQ

In Short : India Ratings and Research (Ind-Ra) has revised the outlook for the thermal and wind sectors, while maintaining a stable forecast for infrastructure in FY25. This assessment reflects the evolving dynamics and stability within these sectors as they adapt to changing market conditions and policy environments.

In Detail : The rating agency assigned a positive outlook on the airport segment which means there are high chances of rating upgrades in the near to medium term

India Ratings and Research (Ind-Ra) expects stable operating performance for most infrastructure projects in the current financial year.

The rating agency on Thursday maintained its stable outlook on the infrastructure sector, including the transport segment which signifies low chances of rating changes for the sector in the near to medium term.

The rating agency assigned a positive outlook on the airport segment which means there are high chances of rating upgrades in the near to medium term.

Ind-Ra stated that the stable outlook on the infrastructure sector factors in the likelihood of a stable operating performance for most projects, long-term revenue visibility under concession agreements and power purchase pacts and expected improved cargo and traffic volumes.

On the power sector, the rating agency said it expects total capacity installed to reach about 476 GW in FY25 against 440 GW as of March 2024.

In a virtual press meet, Bharat Kumar Reddy, Associate Director at India Ratings and Research, said, “On the energy front, we have seen peak demand growing by almost 13 per cent during the last fiscal. However, the deficit has reduced to 1.5 per cent compared to 4 per cent which we have seen in FY23 that is largely because of better coal supply.”

The overall peak demand was 243 GW in FY24 and the total capacity installed was about 440 GW as of March 2024.

“This is incremental of about 26 GW largely driven by solar of about 15 GW,” Reddy said.

Maintaining its stable outlook on toll roads, the rating agency said it expects a moderation in toll collection growth in the range of 6-7 per cent in the current fiscal compared to double-digit growth seen in FY23 and last fiscal.

“Over 5-7 per cent is the revenue growth which is expected with toll revisions happening post elections,” Rishabh Jain, Associate Director at Ind-Ra, said.

The rating agency has maintained a stable rating outlook on projects based on the hybrid annuity model for FY25. This is because of sustained high competition, a significant chunk of projects won by a new sponsor in either the under-construction or pre-appointment date stage, persisting land-related issues and lower awarding activity in FY24 and so far in FY25.

All these factors could cause developers to aggressively bid for projects leading to a build-up of stress in the sector.

Ports, Jain said, continue to be stable and will be growing at around 6-7 per cent. The continued positive outlook for airports is based on steady traffic growth and improving non-aero revenues.

“Airport traffic has been very robust post-COVID. More importantly, non-aeronautical income has also been going up which means passengers are spending more at the airport leading to more non-aeronautical income at the airports which is leading them to a positive outlook.

“In addition to the spends and passenger movement, from a regulatory framework perspective, you will see there were a lot of delays which used to happen in terms of implementation of tariff orders in the past.

“Those delays have come down significantly which probably makes us believe that from regulatory perspective we are getting into a far stable regime which is again a positive outlook for the airport,” he explained.