The government is already under financial stress and is now allocating funds for relief measures, which in turn, may limit its ability to fund future infrastructure projects. “The government’s ability to spend on the infrastructure in next 1-2 years will get impacted,” says an analyst at a domestic brokerage.
Lower input costs with a decline in commodity prices may be among the few relief measures for players.
In this backdrop, analysts say the impact of COVID-19 stress on infrastructure capex
may be worse than that seen during 2008. During the financial crisis in 2008 and onwards, the heat was felt by players on export income, while domestic revenues largely remained intact and government spending was good. Only private capex
took a hit and players like ABB, Siemens, and Thermax had seen some pressure. However, with the pressure on government capex, the current slowdown is likely to get worse for the infra sector.
Thus, analysts at Emkay Global say that even after the recent correction, investors should wait before dabbling in the sector, given the continued uncertainty on infra capex
growth, which is further worsened by the COVID-19 impact.
Analysts prefer companies
with a strong balance sheet. While Emkay prefers KNR Constructions, Cummins India, and PNC Infratech, HDFC Securities feels KEC International, Kalptaru Power Transmission with global operations are less impacted on the execution front.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.