Moody’s on impression of Covid-led disruptions on India’s infrastructure corporations

A container ship has docked in the Indian Adani Port Special Economic Zone (APSEZ) in Mundra, India.

Sam Panthaky | AFP | Getty Images

India’s second wave of the coronavirus outbreak will affect the country’s infrastructure companies to varying degrees, according to Moody’s Investors Service.

Energy companies and ports are expected to withstand the effects of pandemic disruption compared to airports and toll road operators, the rating agency said in a recently released report.

The South Asian country suffered a devastating second wave as reported coronavirus cases rose sharply between February and early May. As a result, the hospitals were overwhelmed and medical supplies such as oxygen and medication were scarce.

While the central government was reluctant to issue another nationwide lockdown, as it did last year, state authorities tightened local restrictions – including regional lockdowns – to curb the spread of the virus.

“The lockdowns, along with changes in public behavior, are holding back economic activity and mobility, which will affect infrastructure companies in different ways,” said Abhishek Tyagi, vice president and senior credit officer at Moody’s, in a statement.

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India’s regional lockdowns resulted in lower electricity demand as well as lower traffic for transportation companies. However, the availability of labor has not yet been significantly affected.

Here’s what Moody’s says about the country’s infrastructure companies:


The business models of rated utility companies enable them to handle the current decline in demand and withstand a moderate increase in the cash conversion cycle, which refers to the number of days it takes a company to convert its investments into cash flows from sales. This is because Indian power companies are dependent on state distribution companies, which are likely to find themselves in financial distress due to lower demand.

In the event that demand remains low for longer and there is a subsequent liquidity bottleneck, the electricity companies have good access to liquidity and support, according to Moody’s.

Airports and toll road operators

Moody’s believes that the recovery of Indian airports, some of which are undergoing debt-financed expansion plans, will be further dampened by the second wave and subsequent regional lockdowns. International travel is expected to take even longer to recover due to border closings.

Although domestic and international traffic will increase between October this year and March 2022 – the second half of India’s current fiscal year – Moody’s said the disruption caused by the second wave “will likely result in lower traffic and revenue in fiscal 2022, and potentially for fiscal 2023 compared to our previous projections. “

The rating agency downgraded Delhi International Airport to a B1 rating this month – which is viewed as speculative and high credit risk – and said the airport is likely to need additional debt to complete its expansion due to lower operating cash flow .

An increase in Covid vaccination rates in India could be an important driver for an airport recovery, according to Moody’s.

Prolonged restrictions on movement or repeated blocks will continue to have a negative impact on toll road operators and put their credit quality under pressure, according to the rating agency.


India’s rated ports performed well in the past financial year despite the economic downturn due to the pandemic and, according to Moody’s, were able to improve their market shares.

Port operators have remained largely unaffected by the regional lockdowns as “goods traffic has remained normal across the country and both ports also have sufficient buffers in their financial profiles to accommodate temporary disruptions,” Moody’s said.

Road to economic recovery

The daily reported Covid-19 cases in India have been on a downward trend since their peak in early May. As the situation gradually improves, many states are easing restrictions to reopen the economy, but experts are warning of an inevitable third wave of infections.

Moody’s pointed out that if vaccination rates are still relatively low, the risk of subsequent waves of infection remains open, which could lead states to introduce further bans.

“The government’s ability to contain the spread of the virus and significantly step up its vaccination campaign will have a direct impact on economic recovery,” the rating agency said.

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