Highway road construction firms to see 20% growth through 2020; buoyancy driven by govt spending, reveals Crisil

These firms account for more than 80 percent of the debt in over 300 companies that Crisil rates in this sector.

Press Trust of India July 24, 2018 11:16:09 IST
Highway road construction firms to see 20% growth through 2020; buoyancy driven by govt spending, reveals Crisil

New Delhi: Highways construction companies are set to clock a 20 percent compound annual growth rate in revenue till 2020, rating agency Crisil said on Monday. The findings are based on the study of 66 companies, it said.

"These companies account for more than 80 percent of the debt in over 300 companies that Crisil rates in this sector. The buoyancy in growth will be driven by the government focus and spending on road construction," the statement said.

Fiscal 2018 was particularly frenetic, with 17,000 km road projects, the highest ever in a year, being awarded by both the Ministry of Road Transport and Highways and NHAI, it said.

The pace of construction, at 27 km per day, was twice that of fiscal 2014, it said, adding that over 90 percent of these contracts were based on the hybrid annuity (HAM) and EPC models.

Construction is expected to accelerate to 32 km per day by 2020 given NHAI's sharp focus on the award of projects under the Bharatmala programme, it said, adding that more than half of these are expected to be under HAM.

Highway road construction firms to see 20 growth through 2020 buoyancy driven by govt spending reveals Crisil

Representational image. Reuters

"We expect topline growth for these companies to sustain at 20 percent in this fiscal and the next two, backed by strong order-books. Together, these companies are estimated to have an order book of Rs 1.3 lakh crore last fiscal, which, at over 3 times the revenues of these companies in fiscal 2018, provides high revenue visibility," Crisil Ratings Senior Director Sachin Gupta said.

Crisil's analysis shows HAM projects being awarded over the next two years will need about Rs 70,000 crore of funding through an optimal mix of debt and equity.

For this, players will have to raise an additional Rs 12,000 to 15,000 crore of equity to invest in new HAM projects, given the limited playing field and fast pace of project awards anticipated, the rating agency said.

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