Fitch Ratings Positive on Indian Construction Sector Outlook
MUMBAI – Fitch Ratings has expressed a positive outlook for the Indian construction sector in 2007-08. This optimism stems from the anticipated rise in investments targeted towards infrastructure projects and the real estate domain.
Growth Expected from 2009
The ratings agency observes that Indian construction companies have experienced substantial expansion in their order books and revenue streams. This growth aligns with the projected investment surge over the coming five years. However, Fitch Ratings anticipates that the most significant profit accumulation, both in revenue and earnings, will commence from fiscal year 2009.
Negative Cash Flow Predicted
Fitch Ratings also foresees the industry experiencing negative cash flow from operations. This is attributed to the escalating working capital demands. They elaborate that substantial investments in real estate will further strain the industry's credit profile.
Long-Term Improvement Expected
The agency cautions that credit profiles are susceptible to deterioration due to the elevated debt requirements during the project mobilization phase. This elevated debt is necessary for the completion of large-scale endeavors. However, Fitch projects a considerable long-term improvement in credit profiles once these projects transition into a stable revenue generation phase. They emphasized that the long-term prospects remain positive despite the short-term pressures. This long-term optimism contrasts with the more cautious short-term outlook.