The outlook for the capacity addition in the renewable energy (RE) sector remains strong with a large project pipeline of over 55 GW and the highly competitive tariffs offered by these projects. The commitment to climate change goals announced by the Prime Minister at the recent COP26 summit, further strengthen the investment prospects in the renewable energy sector. The capacity addition witnessed a strong recovery in the first eight months of FY2022 and is expected to increase from 7.4 GW reported in FY2021 to 12.5 GW in FY2022 and further to 16.0 GW in FY2023. The easing of challenges related to land acquisition and transmission infrastructure, improving the distribution segment finances and availability of adequate funding avenues are critical to achieve the non-fossil power generation capacity target of 500 GW by 2030
The WPI for December 2021 is expected to be around 13.0% (as against 2.0% in December 2020) translating into a toll rate increase of ~8.2% during FY2023 for the projects which are linked to 3% fixed rate plus 40% of the change in WPI. For projects awarded prior to 2008, ICRA expects March WPI to be around 9.3%. In both the cases, decadal high toll rate revision is expected to result in 14-15% growth in toll collections for FY2023 on the back of 5%-6% traffic growth. The healthy growth in toll collections far outweigh the increase in maintenance costs resulting in a good improvement in cumulative DSCR numbers for BOT toll road assets which otherwise got moderated to an extent due to Covid impact
Post the second wave of Covid-19, the domestic dairy industry exhibited a healthy revival, supported by steady demand in liquid milk and growth in value-added products. However, inflationary cost trends on the back of firm procurement costs and rise in operating costs are likely to moderate the margins over the next 1-2 quarters. As the inventory levels of skimmed milk products (SMP) continue to remain elevated, the earnings and working capital debt levels shall also depend on the extent and timeliness of liquidation of SMP stocks.
The fast recovery in trading values post the peak of second wave of Covid-19 pandemic supported by higher spend per footfall is likely to drive the retail malls rental recovery up to 75% of pre-Covid levels in FY2022. This is considering minimal impact of any future pandemic wave. While the footfalls remain significantly lower than the pre-Covid levels, the average spend per footfall has improved drastically indicating the fact that only serious buyers are visiting the malls now. The recovery is supported by pent-up demand, high vaccination coverage, resumption of multiplexes which also coincided with the festive season. However, resurgence in fresh infections with any future waves leading to restrictions by state and central governments could hinder the expected recovery.
Bank brokerages demonstrated a strong performance in FY2021, with a healthy growth in transaction volumes and strong uptick in earnings, supported by favourable capital markets and growing retail investor participation. This notwithstanding, bank brokerages witnessed a decline in market share, in terms of transaction volumes or active clients, primarily on account of faster growth of discount brokerages which are fast emerging as broker-of-choice for new accounts. That said, bank brokerages enjoy better brand recall, credibility and financial flexibility, by virtue of being a part of banking groups, and this would continue to support their retail franchise. Their ability to effectively ramp up digital initiatives, attract younger demographics and expand to newer geographies (such as tier II and tier III cities), however, would remain critical. ICRA expects bank brokerages to continue to report healthy earnings with 20-25% growth in NOI and 17-20% growth in profit in FY2022
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