Amid several factors like subdued funding climate, economic growth-led deceleration in traffic volumes and uncertainty on the bidding model, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has revised the outlook for road sector to stable-to-negative from stable for the remainder of FY20.
The rating agency also underlined that the weakening of financing sentiments and a sharp rise in land acquisition costs exert stress on the central budget and could compel the government to rethink the bidding model. Besides, it also made an outlook revision on toll road projects to Stable-to-Negative from Stable for the remainder of FY20, on the back of heightened risk in prediction of traffic growth due to deceleration in economic growth.
However, Ind-Ra maintained stable outlook for annuity-based and hybrid annuity model (HAM) projects for the remaining FY20. The rating agency is expecting that timely and steady annuities support annuity projects, however, increased tax obligations due to the application of Indian Accounting Standards created ambiguity in exact assessment of cash flow for certain projects, impacting debt service coverage ratio.
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