Port Sector seeing an early sign of recovery but sustainability remains a concern, says ICRA
The outlook for the Indian port sector during the current financial year
2020-21 remains negative although there are early signs of recovery as
witnessed by the trends in July. But the sustainability of the recovery remains
to be seen during the course the of the year according to India's rating agency
ICRA reiterates its expectation that while general cargo throughput may
witness 6 to 8 per cent contraction for full year 2020-21, the container
segment may witness a decline of 12-15 per cent during the same period
The port sector
witnessed sharp contraction during the first quarter of the current financial
The port sector witnessed sharp contraction during the first quarter of the
current financial year 2020-21 due to the impact of the Covid-19 pandemic and
containment measures adopted by the government.
While the Major Ports witnessed a 20 per cent decline during the first
quarter of the current financial year 2020-21, the non-major ports declined by
24 per cent during the same period.
However, in July 2020, the rate of cargo decline decelerated with Major
Ports witnessing Y-o-Y decline of 13 per cent and non-major ports witnessing
sharper improvement with decline of just 4 per cent. As per ratings agency
ICRA, the FY2021 outlook for the port sector remains negative and although
there are early signs of recovery as witnessed by trends in July, the
sustainability remains to be seen, explained a release.
With the easing of containment measures and improved demand for petroleum
products and power, the POL and coal segment should witness recovery in the coming
days. However, the recovery in segments like containers may be more prolonged
due to dependence on both domestic economic activity and global demand trends.
The credit profile
of port sector players likely to remain under pressure
Commenting on the credit outlook, Mr K. Ravichandran, Senior VP and Group
Head, ICRA Ratings, said: “The credit profile of port sector players,
especially the companies which have incurred large debt-funded capex or have
commenced operations recently, is likely to remain under pressure in the near
to medium term. However, for majority of ICRA-rated entities in the port
sector, the credit profile is expected to remain stable due to strong sponsors,
high financial flexibility and comfortable coverage metrics enjoyed by them”.