Indian Road Sector – posed for a smoother drive ahead

Nation’s roads and railways are like arteries and veins of a human-body, these are its lifelines.
After years of roller-coaster, its now on path of sustainable growth trajectory.

Government of India Budget 2022-23  allocated INR 2 trillion (US$ 26.04 billion) approx. to the Ministry of Road Transport and Highways.
Despite Covid-19 related disruptions, FY21 clocked all time high of 37 km/day i.e. 13,327 km of highways were constructed.
Expect the momentum of awarding projects to continue and cross 18,000 km p.a.
Daily execution to improve to near-term target level of 50 km/day.

Private sector, investors and lenders have bestowed confidence on the Hybrid-Annuity Model (HAM) model as it seems to perform well. During 9-months, upto 31-Dec-2021, NHAI awarded 34% of the total projects as HAM with rest as EPC.  
Expect positive credit outlook on road operators and EPC players.

Multiple players are contemplating to launch InvITs for their operating road asset portfolio. Non-institutional and institutional investors are re-warmed up for this asset-class.

Several opportunities for M&A, both for operating assets and uncompleted projects. Further growing visibility of investors’ interest for stressed road projects and under-performing road asset, subject to establishing its viability.

Asset monetization by NHAI, via Toll-Operate-Transfer (TOT), Infrastructure Investment Trusts (InvITs) and others, is critical for sustainable high-growth trajectory.