The Specialty Chemicals industry is expected to double by 2025, supported by both domestic and export markets. The drivers for the growth are rising disposable incomes, China Plus One strategy of global companies and ‘Aatma Nirbhar Bharat’ policy of GoI. The rise in disposable incomes is leading to a shift in consumer preferences towards more premium products. Accordingly, a key differentiator in the industry is the ability to move to more value-added products through R&D and process expertise.
One of the key impediments in the growth of the sector remains the dependence on imports for raw materials for several sub-segments. Keeping in mind the vast growth potential of the sector, some of the steps by GOI including - rationalisation of duty structure, trade protection measures for several petrochemicals, rules to avoid misuse of FTAs and revamping the plans for cluster based development of petrochemical units, should help in increasing domestic feedstock capacity in the medium term.
The investment prospects in the renewable energy sector are expected to remain strong, given the policy impetus with a target to reach 450 GW by FY2030 and competitive tariffs, as also reflected from the strong project pipeline of 40 GW providing visibility on capacity addition over the medium term. The key challenges constraining the growth remain on execution front, mainly associated with land and transmission infrastructure as well as the slow but improving progress in signing of PPAs/PSAs by intermediate procurers with state distribution utilities.
Electric buses are expected to be at the forefront of India’s electrification drive, with the segment expected to witness healthy traction going forward. The traction in the e-bus segment is already visible over recent months, despite the overall stress in the public transportation segment due to the pandemic. Among the various schemes for spurring electrification in the country, FAME II is the flagship one, offering a capital subsidy of Rs. 35-55 lakh for e-buses procured under the Gross Cost Contract (GCC) model of operations. Accordingly, the GCC model has witnessed increased traction over the past two years, with many SRTUs opting for this route in order to reduce capital burden and technology risks. The model is currently evolving, and operators are looking at various measures in order to mitigate the risks prevalent in the model. Nevertheless, as the model matures, electric buses are expected to witness increased adoption going forward, aided by the favorable cost economics.
ICRA estimates that 20 state governments have substantial aggregate unutilised borrowings of Rs. 2.6 trillion for FY2021, that have been carried forward to FY2022. For the current fiscal, out of the normal net borrowing ceiling (NBC) of 4.0% of gross state domestic product (GSDP) set by the Government of India (GoI) for the 28 state governments (Rs. 8.5 trillion), 3.5% of GSDP may be considered unconditional. The permission for the balance 0.5% of GSDP (Rs. 1.1 trillion) has been earmarked by the GoI towards incremental capital expenditure by the state governments in FY2022, making it effectively conditional in nature. The size of the unutilised borrowing of FY2021 as a proportion of the FY2022 GSDP exceeds 0.5% of GSDP for 15 states, reducing their likely dependence on the conditional borrowing of 0.5% of GSDP. This will help those states that need to incur a larger revenue deficit in FY2022 but are unable to step up their capital spending by the required magnitude of 0.5% of GSDP
Covid-19 hit the hospitals hard in Q1 FY2021, with almost all hospitals reporting operating losses. Nonetheless, with the easing of lockdown restrictions and decline in Covid infections, the occupancies recovered subsequently and almost reached pre-Covid levels by Q4 FY2021. Higher number of infections during Covid 2.0 led to high occupancies in Q1 FY2022 for most hospitals. For FY2022, ICRA expects the industry occupancy to increase to 62-65%, against 52% in FY2021, translating to a 20-22% revenue growth. Operating profit margins are expected to improve to 15%+ in FY2022 from 12.5% in FY2021. Along with healthy cash flow generation and stable liquidity profile, this will ensure that the capital expenditure outflows are met from internal accruals with limited need to raise external borrowings. With the Covid-19 vaccination pace picking up, the outlook for the Indian hospitals industry is Stable; however, the impact of a potential third wave remains a key monitorable.
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