Indian infra sector faces negative outlook due to macroeconomic challenges, sector-specific stresses: Fitch

MUMBAI: Indian infrastructure industry faces a negative outlook due to the factors like increase in macroeconomic challenges and sector-specific stresses, according to global rating agency Fitch.

In its recent report titled '2012 Mid-Year Outlook: Indian Infrastructure', Fitch Ratings said, “Fitch expects the ratings of project companies to remain under pressure from equity capital constraints, high interest rates, slowing GDP growth, currency depreciation, fuel shortages, weak off-takers, execution delays and prospects of slowing traffic growth for transportation.”

As per the predictions, the rating agency hopes that other factors like equity capital constraints, high interest rates, slowing GDP growth, currency depreciation, fuel shortages, weak off-takers, execution delays for power and prospects of slowing traffic growth for transportation will also hit the ratings of project companies in the future.

According to Fitch, the sponsors with extended balance sheets will struggle to raise funds for a growing number of construction projects and to support under-performing assets due to the weak and volatile stock market.

There are also possibilities that developers may be asked to selectively support projects with a long-term economic value as opposed to their earlier strategy of preserving bank relationships by strengthening the projects.