Crisil Ratings bats for bond market investments in infrastructure

MUMBAI: Infrastructure assets are becoming strong contenders for investment by the bond market because of their improving credit risk profile and long-term nature, Crisil Ratings said in a note on Thursday.

The improvement in credit risk profile of the infrastructure sector, it said, reflects the raft of policy facilitations that have helped shore up the attractiveness of Indian infrastructure sector as an investment destination by several notches. These include more equitable risk sharing between the concessioning authorities and private developers; enhanced role of central counterparties leading to predictable payment cycles, among others.

Entities rated AAA and AA comprised 46% of the Crisil Ratings’ infra portfolio last fiscal, compared with 22% in fiscal 2017. The rating agency said this also reflected in the median ratings in its portfolio of infrastructure assets improving from BBB in fiscal 2017 to A+ in the last fiscal.

In the last five financial years, domestic infrastructure sectors have been able to attract over $74 billion foreign direct investments as per the Reserve Bank of India (RBI). These include marquee global investors such as Blackstone, Brookfield, KKR, Macquarie, CDPQ and Canadian Pension Plan Investment Board, it said.

Gurpreet Chhatwal, managing director, Crisil Ratings, said the government has taken a slew of measures to address legacy issues in the infrastructure sector.

“Risk sharing in contracts has improved with the concessioning authorities assuming their fair share of risks, and concession agreements revised to remove bottlenecks. Now, central counterparties are playing a greater role, and the introduction of InvITs has boosted investor confidence,” said Chhatwal.

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