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March 01, 2019

Sector Report: Roads and Highways

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • National highways
  • State roads
  • Rural roads
  • Public funding
  • Private funding
  • Profitability
  • Competition

 

Slowdown in project awarding, delayed appointed dates to pare execution

 

Awarding expected at 4,000-4,500 km this fiscal

 

CRISIL Research expects overall project awarding in the roads and highways sector in fiscal 2019 to be in the range of 4,000-4,500 km. The National Highways Authority of India (NHAI), the nodal agency, had awarded ~7,400 km in fiscal 2018, with most of the projects awarded in March. In the first half of fiscal 2019, the NHAI awarded about 300 km, most of which was via HAM (hybrid annuity model). As of mid-January 2019, tenders for about 6,000 km have been floated by the NHAI. While for a few the bids have already been submitted, the bids for the balance are expected to be made before the modal code of conduct for general elections kicks in in March. However, our interactions with the market participants suggest there may be some slippage to the next year because of an extension for bid submission for some projects. The pace of awarding of the tendered projects in the remaining few days before the modal code of conduct comes into force will be a key monitorable for the industry.

 

In fiscal 2020, based on the balance of share of tenders that will remain unawarded in fiscal 2019 and additional tenders floated by the NHAI in the next fiscal, the awarding is expected to improve marginally to 4,500-5,000 km. We expect average annual awarding to be higher over fiscals 2019-2023 compared with the past five years on account of strong pipeline of projects, backed by the Bharatmala Pariyojana, and delegation of increased autonomy to the NHAI.

 

Currently, most HAM players are looking to sell their equity stake in operational as well as under-construction projects, including newly awarded HAM projects. If this trend of selling their equity stake in under-construction projects continues, giving eligibile players the bandwidth to bid for new projects, the share of HAM projects in future could increase. This could increase the total awarding by the NHAI.