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Union Budget 2012-13: Analyst Views on Infrastructure Sector

  • To encourage investment in the infrastructure sector, financial institutions have been allowed to raise about Rs 60,000 crore from tax-free bonds in 2012-13. "For the year 2011-12, tax-free bonds for Rs 30,000 crore were announced for financing infrastructure projects. I propose to double it to raise Rs 60,000 crore in 2012-13," Finance Minister Pranab Mukherjee said, while presenting the Union Budget 2012-13 in Parliament.

  • "This includes Rs 10,000 crore for NHAI, Rs 10,000 crore for IRFC, Rs 10,000 crore for IIFCL, Rs 5,000 crore for HUDCO, Rs 5,000 crore for National Housing Bank, Rs 5,000 crore for SIDBI, Rs 5,000 crore for ports and Rs 10,000 crore for power sector," he added. Mukherjee said he expected the Indian economy to grow by 7.6 percent in the next fiscal year, up from an expected 6.9 percent in the current year but below the 8.4 percent growth of the previous fiscal year

  • Focusing on domestic demand-driven growth recovery, he said, "we need to emphasize on infrastructure and industrial development of the country." "Lack of adequate infrastructure is a major constraint on our growth. The strategy we have followed so far is to increase investment in infrastructure through a combination of public investment and public private partnerships ( PPP)," he added. Mukherjee further said that during the 12th five Year Plan, infrastructure investment will go up to Rs 50 lakh crore with half of this expected from private sector.

  • Infrastructure finance companies such as Infrastructure Development Finance Co, L&T Finance and Rural Electrification Corp will benefit after the budget proposed to double the issue of tax-free bonds for financing infrastructure projects to Rs 60,000 crores. We have complied analytical views from various market experts on Union Budget 2012-13 affect on infrastructure space.

  • Nilesh Shah, Axis Direct The steps taken on the infrastructure side is positive for the sector. Although, there has been some doubts about the performance of infrastructure sector and availability of ECB financing. All those things will help infrastructure much better so that stress which was coming on to the banking sector will also kind of get reduced.

  • We have two major issues related to infrastructure sector; one is related to execution other is related to availability of finance. In the past even though the interest rates were high and liquidity was tight, I do not think so infrastructure was getting constrained by availability of finance.

  • Raamdeo Agrawal, Joint Managing Director, Motilal Oswal Financial Services It is possible that infrastructure sector might outperform FMCG and consumption oriented space atleast in the short run as far as the stock market is concerned. It might outperform because they have been beaten down out of shape and consumer stocks are at almost like an all-time high. However, I still don't see the earnings model of a lot of these infrastructure stocks, which have broken down in last 1-2 years because of uncertainty about the fuel and uncertainty about the government giving them funding or a whole lot of issues.

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