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Budget eases lending to infrastructure; shares tumble

Mon Jul 6, 2009 6:16pm IST
 
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MUMBAI (Reuters) - Infrastructure developers sought more clarity on fund allocations mentioned in the federal budget, but their shares tumbled more than the broader market as the announcements fell short of expectations.

On Monday, Finance Minister Pranab Mukherjee asked state governments to remove hurdles to speed-up infrastructure implementation and tried to bring liquidity back to the cash-strapped builders.

He also set a goal to increase the investment in infrastructure to more than 9 percent of GDP by 2014.

"He has taken a very long-term view of investments...but the expectations were very high and he didn't deliver up to the extent of the expectations that one had," said Issac George, chief finance officer GVK Power and Infrastructure Ltd.

Construction firms were expecting significant benefits in the budget to boost slowing economic growth and officials said the sector plays a critical role in boosting growth.

"There is no other alternative but to increase infrastructure spends, to come out of all this mess," George said.

Shares of Simplex Infrastructure, Punj Lloyd and Larsen & Toubro Ltd closed down between 5 and 10 percent, while the 30-share BSE index ended down 5.83 percent at 14,043.40 points.

Still, companies cheered the government's move to put more funds into bankers' hands.

The budget proposes release of long-term funds by government-run Indian Infrastructure Finance Co (IIFC) for projects and refinance 60 percent of commercial bank loans for public-private partnership projects in critical sectors over 15- 18 months.  Continued...

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