Sector Update | 8
Infrastructure
Sector Update |
August 2024
Infrastructure
Technology
Muted NHAI project awarding amid elections
Key Indicators
FY23 FY24
Daily
average
1.5 1.8
FASTag toll
(INR b)
Tenders
awarded
6,003 2,500
by NHAI (km)
FY25
1.9
47
Road
construction 4,882 6,644 1,135
by NHAI (km)
NHAI’s awarding activity in the first four months of FY25 was limited to 47km due to
general elections in Jun’24. In FY24, NHAI awarded ~2,500km and completed 6,644km
of construction. Muted awarding by NHAI affected FY24 order inflows for several road
construction companies.
FASTag toll collections grew ~6% YoY in volume and ~10% YoY in value terms in
1QFY25, aiding asset monetization.
NHAI has set a monetization target of INR540b for FY25 with a new asset monetization
cell. After exceeding its FY24 target with four ToT bundles worth INR159b, NHAI plans
to offer a dozen bundles in FY25, aiming for a higher target than the INR400b achieved
in FY24.
DFCCIL has commissioned 2,734km of the planned 2,843km for both the Eastern and
Western Dedicated Freight Corridors (DFCs). The completion deadline is extended to
Dec’24 due to land acquisition delays.
NHAI awarding disappoints in YTDFY25 amid general election
NHAI's awarding activity in the initial four months of FY25 was muted, with only
47km of projects awarded during Apr-Jul’24, primarily due to the general elections
in Jun’24. In FY24, NHAI awarded ~2,500km of projects, with construction reaching
6,644km. Subdued awarding affected order inflows for road construction
companies. Construction during Apr-Jul’24 was 1,135km, with activity expected to
increase in 2HFY25.
FASTag toll collections witnessing consistent improvement
FASTag toll collections improved (volume) ~6% YoY during 1QFY25, while collection
value increased by ~10% YoY. Higher toll collections play a crucial role in expediting
the monetization process of road assets by the Ministry. Additionally, toll collections
are beneficial to companies seeking to monetize their existing toll assets.
Asset monetization in focus for NHAI
NHAI sets up an asset monetization cell and has a monetization target of INR540b in
FY25. The cell will advise on planning, conduct market analysis, and identify high-
revenue assets.
In FY24, NHAI exceeded its target by awarding four ToT bundles worth INR159b. For
FY25, NHAI plans to offer a dozen bundles for private bids, aiming to achieve
significantly higher monetization than the INR400b reached in FY24.
Declining input prices to improve margins for contractors
Steel and aluminium prices have decreased by ~30% from their highs in Apr’22.
Cement prices have increased by ~8% from their highs in Oct’23. With higher
construction activities and stability in commodity prices, road contractors anticipate
some improvement in profitability and margins in 2HFY25.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Alok Deora - Research analyst
(Alok.Deora@MotilalOswal.com)
Saurabh Dugar - Research analyst
(Saurabh.Dugar@MotilalOswal.com)