The Indian port sector witnessed sharp contraction during Q1FY2021 due to the impact of Covid-19 pandemic and containment measures adopted by the Government While, the Major Ports witnessed ~20% decline in Q1 FY2021, the Non-Major Ports declined by 24% during the same period. However, in the month of July 2020, the rate of cargo decline decelerated with Major Ports witnessing yoy decline of 13% and Non Major ports witnessing sharper improvement with decline of just 4%. 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.
Regarding the developments, Sai Krishna, Assistant Vice President and Associate-Head, ICRA Ratings added: “The contraction in Port cargo was driven by sharp fall in POL and coal volumes, due to decline in domestic demand and economic activity, while container segment was also impacted by subdued exim trade. With the easing of containment measures and improved demand for petroleum products and power, the POL and coal segment should witness recovery. However, the recovery in segments like containers may be more prolonged due to dependence on both domestic economic activity and global demand trends. ICRA reiterates its expectation that while general cargo throughput may witness ~6-8% contraction for full year 2020-21, the container segment may witness a decline of 12-15% during the same period.”
ICRA also notes that while some of the measures announced by the Ministry of Shipping (MOS), in the wake of Covid-19 pandemic to support various stakeholders, should help the liquidity profile of entities like PPP terminals operating at Major Ports during the period of lockdown, however sustained slowdown in cargo volumes will put pressure on their liquidity profile.
Commenting on the credit outlook, K. Ravichandran, Senior VP and Group Head, ICRA Ratings, mentioned: “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”.
Source: India Infoline News Service