Aditi Nayar

Chief Economist, ICRA

Excise and VAT cuts to soften inflation, stave off early policy normalisation

The average international crude oil price, in Indian basket terms, had surged to US$82.0/bbl in Oct 2021 from the low of US$20.5/barrel in Apr 2020, and recorded a 30% rise relative to US$63.3/bbl in April 2021, on the back of buoyant global demand and restrained supply. In view of the rising crude oil prices, the Government of India announced a welcome and much awaited cut in the Road and Infrastructure Cess (RIC) component of Central excise duty, by Rs. 5/litre on Motor Spirit (MS) and Rs. 10/litre on High Speed Diesel Oil w.e.f. Nov 4, 2021. Factoring in the impact of the excise duty cut and our expectations for mobility and the economic recovery with the rising Covid-19 vaccine coverage, we forecast the year-on-year (YoY) rise in the consumption of MS and HSD in FY2022 at 14% and 8%, respectively, on the low base of FY2021.

Abhishek Dafria

Vice President & Group Head, Structured Finance, ICRA

NBFC collections for securitised pools across asset classes remain steady; likely to remain healthy as possibility of another Covid wave wanes

The average collection efficiency in ICRA-rated securitised retail pools originated by Non-Banking Finance Companies (NBFC)s and Housing Finance Companies (HFC)s improved significantly during Q2 FY2022 on the back of continued decline in fresh Covid-19 infections during June to October 2021 period, a high share of vaccinated population and uninterrupted operational activities of these entities. Collection efficiency (including overdue collection) for the most affected asset classes, viz microfinance and SME loans, reached close to 100% for September 2021 from a low of 80% seen in May 2021. Collections in the housing loan segment continued to remain healthy during Q2 FY2022, post swiftly recovering to pre-second wave level in June 2021.

Rajeshwar Burla

Vice President & Group Head, Corporate Sector Ratings, ICRA

Indian airports lag significantly when compared to their global counterparts on nonaeronautical yields

The non-aeronautical revenue share for major private airports stood at 57% in FY2021. As against this, the revenue mix at Airport Authority of India (AAI) operated airports is dominated by aeronautical revenues which constitutes 78% of revenue mix as focus is less on non-aero yield due to low passenger throughput at majority of tier II and tier III airports, lower international traffic and relatively low spend by the travellers. The non-aeronautical yield per passenger at major private airports is low as compared to major private airports in the world. The average non-aero yield per pax for major private airports in India stood at US$ 3.8 (even lower at US$ 2.9 if AAI operated airports are included) during FY2018 – FY2020 (FY2021 not considered due to Covid impact) compared to yield per pax ranging between US$ 5.7 to US$ 16.4 for major airports across the world. Given the evolving consumer spending behaviour, Indian airports still have a significant room for improvement. The aeronautical revenues are regulated in nature, where returns are capped; therefore, to maximise the return on capital employed, airport operators need to improve their non-aero yields.

Sachin Sachdeva

Vice President & Sector Head, Financial Sector Ratings, ICRA

HFCs’ growth expected to revive in FY2022 despite headwinds in Q1 FY2022; weak asset quality to keep profitability subdued

The on-book portfolio of the non-banking financial companies-housing finance companies (NBFC-HFC) sector is expected to grow at 8-10% in FY2022. Growth will be driven by the improvement in demand for individual home loans (HLs). Although the collection efficiency (CE) declined because of the second wave of Covid-19 infections in Q1 FY2022, it started bouncing back by the end of June 2021 and is expected to have improved further in Q2 FY2022. The challenge posed by the second wave led to a deterioration in the asset quality metrics in Q1 FY2022; nevertheless, some recovery is expected by the end of FY2022. Though the portfolio growth is expected to drive an improvement in revenue, the expected elevated credit costs are likely to keep the profitability subdued in FY2022.