While infrastructure stocks continue to remain out of favour with investors, ET Now talks to Parag Parikh, CFO, Gammon Infra to understand what's really ailing the sector and what can be expected from Budget 2011
As per Parag Parikh interview to Economic Times:
First really let start off with a whole lot of buzz is created around as to what really is going to come about in this times budget for infrastructure whether the funds are going to challenged or rather channelised into the sector or not on the street though what is your expectations?
Parag Parikh :
All along we recognise the importance of infrastructure as a industry or the 12th year 5 year plan again has put up a target of about a trillion dollar investments into the infrastructure sector and this is really possible when we allocate just about close to 10% of a GDP as investments into the infrastructure industry. The bulk of these investments is primarily between the power sector which covers close to nearly about one-third of overall investments as well as the road transportation sector and amongst these two we are nearly 45% to 50% as investments into the infrastructure sector.
So we all recognise the importance of the sector and yes for the upcoming budget whilst I do not expect any major policy initiatives being taken up during the course of this budget I do expect some remedial corrective measures to be taken as well as an incentive towards directing funds into the infrastructure industry.
So what do you think in specific is going to come about when it comes to infra financing norms?
Parag Parikh: There are 3 or 4 clear expectations that are likely to happen in the budget and we all expect that will be taken up soon. One of the major initiatives that is likely to happen is the much talked about the infrastructure debt fund which enables and opens up a large pool of funds for investments and refinancing into infrastructure projects. This is the fund which initially was being recommended by the committee headed by Mr. Deepak Parekh and we are expecting this close to a $10 billion fund being announced during the budget. This entails and enables us to channelise a lot more funds as allocation into the infrastructure sector besides that there are 2 or 3 further expectations that are likely to happen from the budget.
There are lot of representations on tweaking the withholding tax on the ECBs which in the current scenario makes it that much a little unattractive towards sourcing funds from the international side. Further there are expectations that with this multi tier sector of companies where we have infrastructure holding company, sector holding companies some sort of rationalisation of set offs on dividend distribution. Currently it has already been done as a single tier set off as from the sector companies to the holding companies as long as the holding companies or publicly held entity and there are representations that with the multi tier structure has arising in the industry to have a further set off for more than just one tier.
So that is being expected in this budget then we have the infrastructure tax free bonds on the public investment side which today for a year has been announced with a limitation of Rs.20,000. We are expecting this to continue and potentially with a larger cap which further brings resources into our industry so that is one of the other primary expectations of the budget. Beyond channelising the funds across through these means there could be some smaller corrective remedial measures for example the 80 IA tax holiday on the power sector has a sunset clause in 2011.
As per Parag Parikh interview to Economic Times:
Parag Parikh :
All along we recognise the importance of infrastructure as a industry or the 12th year 5 year plan again has put up a target of about a trillion dollar investments into the infrastructure sector and this is really possible when we allocate just about close to 10% of a GDP as investments into the infrastructure industry. The bulk of these investments is primarily between the power sector which covers close to nearly about one-third of overall investments as well as the road transportation sector and amongst these two we are nearly 45% to 50% as investments into the infrastructure sector.
So we all recognise the importance of the sector and yes for the upcoming budget whilst I do not expect any major policy initiatives being taken up during the course of this budget I do expect some remedial corrective measures to be taken as well as an incentive towards directing funds into the infrastructure industry.
So what do you think in specific is going to come about when it comes to infra financing norms?
Parag Parikh: There are 3 or 4 clear expectations that are likely to happen in the budget and we all expect that will be taken up soon. One of the major initiatives that is likely to happen is the much talked about the infrastructure debt fund which enables and opens up a large pool of funds for investments and refinancing into infrastructure projects. This is the fund which initially was being recommended by the committee headed by Mr. Deepak Parekh and we are expecting this close to a $10 billion fund being announced during the budget. This entails and enables us to channelise a lot more funds as allocation into the infrastructure sector besides that there are 2 or 3 further expectations that are likely to happen from the budget.
There are lot of representations on tweaking the withholding tax on the ECBs which in the current scenario makes it that much a little unattractive towards sourcing funds from the international side. Further there are expectations that with this multi tier sector of companies where we have infrastructure holding company, sector holding companies some sort of rationalisation of set offs on dividend distribution. Currently it has already been done as a single tier set off as from the sector companies to the holding companies as long as the holding companies or publicly held entity and there are representations that with the multi tier structure has arising in the industry to have a further set off for more than just one tier.
So that is being expected in this budget then we have the infrastructure tax free bonds on the public investment side which today for a year has been announced with a limitation of Rs.20,000. We are expecting this to continue and potentially with a larger cap which further brings resources into our industry so that is one of the other primary expectations of the budget. Beyond channelising the funds across through these means there could be some smaller corrective remedial measures for example the 80 IA tax holiday on the power sector has a sunset clause in 2011.
