India Ratings and Research
is of the view that the lockdown imposed by the state governments of some of the large Indian cities to contain the COVID-19 outbreak would obstruct the execution of infrastructure construction in them. This would impact the revenue growth of construction companies in the near term.
Even if the lockdown is lifted, the work would take a long time to commence as the workers would not be available and there will be restrictions at the construction sites, he said.
Around 75 major cities/districts in India are under a lockdown, at least till 31 March 2020. Furthermore, a large chunk of construction workers who consequently are heading to their home towns in the interiors of the country are likely to return only after the situation normalises, which can even be a month from now or even later. Consequently, the revenue trajectory is likely to be affected. In addition, continued expenditure in the form of overheads and finance charges is also likely to affect the profitability of construction companies, owing to a lower base for absorption of these overheads, the ratings agency said.
It has revised the outlook on the construction sector
to negative from stable for FY21, on account of the expectations of muted order inflows in a few sub-sectors and significant risks emerging from the exposure of certain construction companies to the state governments of Andhra Pradesh, Telangana, Tamil Nadu and Uttar Pradesh.
Furthermore, with the funding woes of the banking sector and the overall fragile economic scenario, the agency expects the disbursements and sanction of additional limits to construction companies over the next few months to happen at a sluggish pace.
According to the Economic Survey 2019-2020, the pace at which roads have been constructed grew significantly from 17 km per day in 2015-16 to 29.7 km in 2018-19. However, the pace seems to have moderated in 2019-20 to 12.7 km per day till September 2019.