ICRAs study of 120 defaults in BOT Road projects reveals that lower-than-estimated traffic was the primary reason for default in case of operational projects and deterioration in financial profile of sponsor along with delay in securing RoW are the primary reasons for defaults in under-construction projects. With availability of long-term traffic data patterns across the country, the stakeholders are now better placed to validate the traffic assumptions. Further, with the implementation of FASTag through which 97-98% of toll collections are made, the toll leakages got arrested to a significant extent. However, with the countrys transportation network still evolving, both alternate route and mode continue to remain a major risk. Alternate modes of transportation such as DFCC, waterways, new road alignments like economic corridors under Bharatmala as well as upgradations of existing state highways could pose a potent threat.
The growth prospects of electricity demand for FY2023 remain healthy at 6.5-7.0%, which is expected to improve the all-India thermal plant load factor to 61.5-62.0% from 58.9% in FY2022. Coal, as a fuel source, is expected to maintain a dominant share in electricity generation in the range of 55-60% by 2030, though declining from 72% at present. The higher demand growth translating into signing of new long-term/medium-term power purchase agreements by discoms with thermal independent power producers (IPPs) and the extent of improvement in discoms’ finances, remain key factors from the outlook perspective. These apart, upward pressure on power generation cost owing to rise in fuel prices, tighter environmental compliance requirements and investment for flexible operations remain other key challenges for thermal IPPs.
Over the past few years, the revenues from the US generics market have grown at a relatively modest pace, reflecting a confluence of challenges being faced by companies in the form of consistent pricing pressure, lack of major blockbuster product launches and increased regulatory scrutiny. The significant consolidation of the distribution-side of the supply chain and the commoditisation of generics is causing price erosion across products. The increased number of generic players along with increased pace of ANDA approvals from the USFDA has added to competition, especially in oral solids. ICRA expects mid to high single-digit price erosion to continue to exert pressure over the near term, resulting in a muted 1-3% revenue growth for the Indian pharmaceutical companies from the US generics market in FY2023.
While the business sentiment for steelmakers was quite upbeat six months ago, the scenario has changed quite perceptively since the war broke out in Ukraine, as high inflation following disruptions in global supply chains has made the global economic outlook more uncertain. This increases the chance of mean-reversion of steel spreads much earlier than anticipated, and the road ahead could be bumpier for steel companies in FY2023 than the year gone by. Domestic HRC prices have been on a downtrend since the imposition of the export duty, and with coking coal consumption costs poised to spike by around 30-35% quarter-on-quarter, the industry’s operating profits are expected to sequentially fall by as much as US$100/MT in the first quarter. While the margin pressure is likely to persist in the seasonally weak second quarter as well, the correction in coking coal spot prices by around 55% in the last two months augers well for steelmakers’ second half margins when demand conditions improve.
The steady rise in coking coal costs started nibbling at the margins of steelmakers even before the export duty was announced in May 2022. With domestic hot rolled coil prices correcting by around 9% since the imposition of the export duty, and with coking coal consumption costs poised to spike by around 30-35% quarter-on-quarter, the industry’s operating profits are expected to sequentially decline by US$ 80-90/MT in Q1 FY2023. However, margin pressures on blast furnace operators in the seasonally weak second quarter will be partially offset by a sharp correction in coking coal prices in the last one month.
Thermal Power Sector - Trends & Outlook
--By Mr. Sabyasachi Majumdar,Mr. Girishkumar Kadam,Mr. Vikram V
Changes in the methodology for assigning credit enhanced (CE) ratings
--By Jitin Makkar,Pratik Singhania
Moody's-ICRA Webinar on Global Pharmaceutical Industry
--By Mr. Shamsher Dewan,Ms. Kinjal Shah
India’s Steel Sector: Is the Cycle Turning for Steelmakers?
--By Jayanta Roy,Priyesh Ruparelia,Ritabrata Ghosh
Episode 3 Invite- "India Credit Outlook 2021"
Episode 2 Invite- "India Credit Outlook 2021"
Moody's- ICRA Joint India Credit Conclave, Feb 16th to 18th, 2021
Episode 1 Invite- "India Credit Outlook 2021"
ICRA Conference on Indian Corporate Sector
ICRA Conference on Indian Auto Component Industry (Chennai), 14 February 2019
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