June Newsletter
June 2024

From Chief Ratings Officer’s Desk

Welcome to our latest edition of the company newsletter, where we delve into the key economic and industrial developments that are shaping the business environment as we progress through FY2025.

The energy sector has witnessed significant fluctuations over the past year. The average price of crude oil (Indian basket) surged by 18.6% year-on-year to $93.5 per barrel in FY2023, driven primarily by supply disruptions due to the Russia-Ukraine conflict. This increase, coupled with a 7.0% rise in import volumes to a record 306.1 million tonnes, has pushed India’s total petroleum imports up by 29.1% to $209.3 billion. Notably, higher crude imports from Russia at discounted rates have been a pivotal factor in this scenario. The volatility in crude oil prices underscores the importance of strategic planning and diversification in energy sourcing to mitigate future risks.

The critical minerals sector is another area of focus, given its importance for India's green transition. India's complete dependence on imports for minerals like lithium, cobalt, and nickel poses a significant challenge. To address this, the Government of India has initiated the auction of 38 blocks of critical minerals, aiming to attract specialized overseas mining companies through a new ‘Exploration Licence’ model. However, the commercial benefits of these initiatives are not expected to fully materialize within this decade, exposing the downstream manufacturing sector to potential supply shocks in the interim. This highlights the need for robust policies and international collaborations to ensure a stable supply chain for critical minerals.

In infrastructure, the National Highways Authority of India (NHAI) has outlined an ambitious plan to monetise 33 road assets in FY2025 through toll-operate-transfer (TOT) and Infrastructure Investment Trust (InvIT) modes. These assets span nearly 2,750 km and generate annual toll collections of Rs. 4,931 crore. ICRA estimates a monetisation potential of Rs. 53,000 – 60,000 crore from these assets, translating to a substantial lending opportunity of Rs. 38,000-43,000 crore for banks and capital markets. This move is part of the broader National Monetisation Pipeline (NMP), with the Ministry of Road Transport and Highways (MoRTH) aiming to achieve up to 71% of its Rs. 1.6 lakh crore target by the end of FY2025.

In the realm of corporate governance, the National Company Law Tribunal (NCLT) has set a new record by approving 269 resolution plans under the Insolvency and Bankruptcy Code (IBC) in FY2024, up from 189 in FY2023. This increase follows a surge in corporate debtors admitted under IBC in FY2023 due to the lingering effects of the Covid-19 pandemic. With fresh admissions declining to 987 in FY2024, the NCLT has managed to reduce the number of ongoing corporate insolvency resolution processes (CIRPs) to 1,920 by the end of March 2024, reflecting improved efficiency and resolution pace.

These developments highlight the dynamic nature of the economic landscape and the critical need for businesses to stay informed and adaptive. Our newsletter aims to provide you with the insights and analyses necessary to navigate these changes effectively. We hope you find this edition both informative and engaging.

Best Regards

K. Ravichandran
Chief Ratings Officer, ICRA Ltd.

Vinay kumar G

Vinay Kumar

Vice President and Sector Head at ICRA Limited

ICRA predicts strong growth in India's airport passenger traffic, reaching 474-518 million in FY2025

Madhura Nejjur

Madhura Nejjur

Assistant Vice President—Research & Outreach at ICRA Limited

Technology Transition Risk: Critical Insights and Policy Interventions

ICRA Research Updates
June 2024
Cement Sector: Cement industry going through a wave of consolidation
Securitisation Market: Securitisation volumes for FY2024 reach pre-pandemic levels; expected to cross Rs. 2 lakh crore in FY2025
Steel Sector: Earnings of domestic steel mills to sequentially increase in Q1 FY2025 as input costs moderate and steel prices go up

Please click here to check out the video on the ICRA's Research Offerings.

ICRA in News
June 2024
The Hindu, | 28th May

General insurers GDPI may rise 32% by FY26:ICRA

Business Standard, | 23rd May

Reliance on minerals imports risks green tech progress: ICRA

The Financial Express, | 17th May

Indian airport operators to record revenue growth of 15-17% in FY25; passenger traffic to increase by 8-11% YoY, says ICRA

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Aditi Nayar

Aditi Nayar

Chief Economist, Head-Research & Outreach, ICRA

Monetary easing unlikely in the near term

The average price of crude oil (Indian basket) had increased by a sharp 18.6% year-on-year (YoY) to $93.5/bbl in FY2023 ($78.8/bbl in FY2022), with prices surpassing the $100/bbl mark in the early part of the fiscal following the supply disruptions triggered by the Russia-Ukraine conflict. The import volumes of crude petroleum and products had risen by 7.0% YoY to a record 306.1 million tonne in FY2023, which included higher crude imports from Russia at discounted prices. As a result, India’s aggregate imports of petroleum crude and products had surged by 29.1% YoY to $209.3 billion in FY2023 from $162.1 billion in FY2022.

Ashish Modani

Ashish Modani

Roads & Highway Sector
Vice President and Co-Group Head, Corporate Ratings, ICRA

NHAI’s targeted asset monetisation could fetch up to Rs. 60,000 crore in FY2025

ICRA estimates a monetisation potential of Rs. 53,000 – 60,000 crore from the sale of the 33 road assets through the toll-operate-transfer (TOT1)/ Infrastructure Investment Trust (InvIT2) mode, which could translate into a Rs. 38,000-43,000 crore lending opportunity for banks/ capital markets. Moreover, ICRA expects that MoRTH could achieve up to 71% of its monetisation target of Rs. 1.6 lakh crore under the National Monetisation Pipeline (NMP) by end FY2025.

Girishkumar Kadam

Girishkumar Kadam

Critical Minerals Sector
Senior Vice-President & Group Head, Corporate Sector Ratings, ICRA

India’s efforts to step up domestic production of critical minerals remain crucial for our energy security

According to ICRA’s three-part series on the critical minerals sector, the preliminary stage of exploration for most of the domestic blocks that are currently being auctioned, suggests that their commercialisation and associated benefits are unlikely to fully accrue in the current decade ending 2030. Therefore, India’s downstream manufacturing facilities are likely to remain exposed to potential future supply shocks of critical minerals in the intervening years.

Abhishek Dafria

Abhishek Dafria

Structured Finance Sector
Senior Vice President and Group Head, Structured Finance Ratings, at ICRA

Record high number of resolution plans approved under IBC in FY2024; increase in average duration of the resolution process though remains a worry

In FY2024, the National Company Law Tribunal (NCLT) approved a record number of 269 resolution plans under the Insolvency and Bankruptcy Code (IBC), surpassing the previous high of 189 cases in FY2023. The notable increase can be attributed to a sharp rise in corporate debtors admitted under IBC in FY2023 (i.e. 1,263 cases) following the impact of the Covid-19 pandemic. In FY2024, the fresh admissions under IBC declined to 987 corporate debtors. The NCLT has thus been able to bring down the number of ongoing corporate insolvency resolution processes (CIRPs) to 1,920 as on March 31, 2024 from 1,953 as on March 31, 2023.

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