All the infrastructure companies are upbeat on the immense opportunities available in the segment. Reliance Infrastructure, for instance, plans to bid for more road projects. As highlighted in our pre-conference note, private sector involvement in infrastructure development has expanded to ‘non-traditional’ areas such as metro, airports and even power transmission. Lanco plans to ramp up its generation capacity to benefit from the prevailing high merchant power tariffs.
Private sector involvement in infrastructure creation faces risks that include the lack of public sector execution capacity and ‘arbitrary’ policy changes. Reliance Infrastructure is still waiting for land, which is to be acquired by a public agency, to complete the development of Mumbai Metro I project. IRB Infrastructure was hurt by the sudden policy change prohibiting further bids for BOT projects until other, previously awarded projects have completed financial closure.
Infrastructure build out will create demand in other sectors, such as real estate, EPC and/or cement. Many companies, particularly Reliance Infrastructure, plan forward or backward integration to capture these opportunities. BOT projects boost private-sector credit demand. The Bank of India expects corporate capex to boost credit demand, leading to loan growth of 18-20% in FY11.