Left Menu
Development News Edition

Rise in fiscal deficit of central, state govts likely to impact construction sector this yr: IndRa

Even as construction activities in the country have resumed since July, increase in fiscal deficit of central and state governments is likely to impact the sector this financial year, according to India Ratings (IndRa). "Players with focus on road, building and metro registered significant growth in their order book during FY16-FY19," India Rating said.

PTI | Mumbai | Updated: 14-08-2020 15:00 IST | Created: 14-08-2020 14:53 IST
Rise in fiscal deficit of central, state govts likely to impact construction sector this yr: IndRa
Representative Image Image Credit: Pixabay

Even as construction activities in the country have resumed since July, increase in fiscal deficit of central and state governments is likely to impact the sector this financial year, according to India Ratings (IndRa). The agency had recently noted that the fiscal deficit of central and state governments will come at 12.1 per cent with the states contributing 4.5 per cent of it. "An increase in central and state government fiscal deficit in FY21 can impact both order inflow and collection in the sector," India Ratings said in a release. After almost three months of the COVID-19 pandemic-induced lockdown, the country entered the unlock mode from June 1, with the government lifting restrictions gradually and almost all economic activities resuming from July. The agency said revenue and earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins of engineering, procurement and construction (EPC) companies would decline around 15 per cent and 200 basis points, respectively, this fiscal as against FY2020, as the lockdowns would reduce the project execution pace. "However, the demand drivers seem to be healthy, with medium-term revenue visibility at end-FY2020," it noted.

The order book of the top 18 EPC players declined six per cent year-on-year in FY20, after registering extraordinary growth during FY16-FY19, in which it almost doubled to Rs 2.1 lakh crore from Rs 1.2 lakh crore. "Players with focus on road, building and metro registered significant growth in their order book during FY16-FY19," India Rating said. The agency noted that while growth in the road segment was supported by government plans to increase the pace of road construction in the country to 30 km per day in FY19 from 15-16 km per day in FY16, the building and housing segment was supported by Pradhan Mantri Awaas Yojana (PMAY) scheme. "Players with focus on housing and metro projects registered significant growth in FY20. Overall, the order book or revenue, though declined to 2.6x in FY20 from the peak of 3.28x in FY18, remained healthy," it said.

The agency further said that debtor days increased slightly in FY20 to around 113 days from 107 days in FY19. "However, the overall working capital requirement in the industry, exacerbated due to the lockdown in March 2020, increased which was mainly funded by debt," it said. According to IndRa, flattish EBITDA and higher debt resulted in return on capital employed for the sector declining to 14.2 per cent from 16.9 per cent in the same period, while also deteriorating the credit metrics slightly..


TRENDING

OPINION / BLOG / INTERVIEW

Post-COVID-19 Nigeria needs a robust Health Management Information System to handle high disease burden

Nigeria is among a few countries that conceptualised a health management information system HMIS in the early 90s but implementation has been a challenge till date. Besides COVID-19, the country has a huge burden of communicable and non-com...

Morocco COVID-19 response: A fragile health system and the deteriorating situation

Learning from its European neighbors, Morocco imposed drastic measures from the initial stages of the COVID-19 outbreak to try to contain its spread. The strategy worked for a few months but the cases have surged after mid-June. In this sit...

COVID-19: Argentina’s health system inefficiencies exaggerate flaws of health information system

You can recover from a drop in the GDP, but you cant recover from death, was the straightforward mindset of Argentinas President Alberto Fernndez and defined the countrys response to COVID-19. The South American nation imposed a strict...

Rwanda’s COVID-19 response commendable but health information system needs improvement

Rwanda is consistently working to improve its health information system from many years. However, it is primarily dependent on the collection and reporting of health data on a monthly basis. Besides, evaluation studies on Rwandas HIS publis...

Videos

Latest News

Mental and physical after-effects closely linked in case of childhood abuse

The psychological and physical effects of childhood sexual abuse are closely tied, reveals a new Canadian study. The finding could help healthcare professionals develop more effective interventions and ultimately improve mental and physical...

Rugby-Racing strike late to dump holders Saracens out of Champions Cup

Racing 92s Juan Imhoff capped a flowing break to score the only try in the dying minutes as they came from behind to beat holders Saracens 19-15 in their European Champions Cup semi-final at the Paris La Defense Arena on Saturday.The win se...

Lance Naik Manjeet Singh honoured posthumously for saving life of boy who fell into well

Lance Naik Manjeet Singh was honoured with Sarvottam Jeevan Raksha Padak posthumous, almost two years after he saved the life of an 18-year-old boy who had accidentally fallen into an unused well. However, he succumbed because of the effect...

Italy's former PM Berlusconi tested COVID-19 positive again

Rome Italy, Sept 26 ANISputnik Former Italian Prime Minister Silvio Berlusconi has tested positive for the coronavirus again, Italys Corriere della Sera newspaper reported on Saturday. Berlusconi was hospitalized in Milan with early phase b...

Give Feedback