GLANCE AT INFRA STOCKS

Infrastructure and construction sector remain top in the segment that performs well in industrial growth in October. The growth in these two segments has remained in the range of 5-8 per cent from October 2017. This momentum of strong growth is likely to be intact, because the order book of companies is strong and the implementation is improving. From March to the quarter, the record levels of the existing and upcoming orders for major companies have become positive for Infrastructure shares. But still the stock prices are down. Financial arrangements by the companies for the projects achieved have remained consistently challenging, as loan offers by banks remained strict. Especially due to their trapped debt, the situation for public sector banks is risky. With the return of interest rate cycle, market concerns have increased due to project cost and working capital.

Allara Capital's analysts say that due to the recent fall in infrastructure shares, strict cash position and limited debt allocation for projects, some companies have a good opportunity to invest. Companies with good quality balance sheets have been successful in raising loans for new projects. Regardless of the relatively weak quarter of the season, many companies have performed better than the projections. Analysts say that the initial signs of improvement in capital expenditure and the comments of management suggest that the speed of execution will remain intact. Elara's favorite shares include PNC Infratech, Ashoka Buildcon, NCC and PSP Projects. 

Although the flow of order flows may slow down, but analysts say that after a huge drop in share prices, many concerns are added to the stock. Strong implementation is likely to maintain the pace while strong order book will also provide great relief. Road contracts contracts reached new height (17,000 kilometers) in 2017-18. Indian National Highway Authority (NHAI) has so far issued contracts of 7400 km (1.2 million), which means that the revenue potential for construction companies remains strong. The implementation of trust is also shown with the latest figures of ICRA. According to the rating agency, implementation in the financial year 2018 increased with an annual rate of 27 percent, 017 km which was 1500 kilometers in FY15. The actual implementation of NHAI during the first half of this financial year is estimated at 1300-1400 kilometers. Since the implementation in the first half is often weak due to monsoon, but ICRA has estimated 3800-4000 km of implementation in the context of the whole year, which is 33-37% less than the target of 6,000 km of FY2019. 

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