Sector Update
| Infrastructure
Sector Update
| 8 April 2025
Infrastructure
Technology
Key Indicators
FY23 FY24
FY25
NHAI awarding picks up in 4Q, ends below target in FY25
Daily average
FASTag toll
1.5 1.8
2.0
collections
(INR b)
Tenders
awarded
6,003 2,500 4,080
by NHAI (km)
Road
construction 4,882 6,644 5,614
by NHAI (km)
NHAI’s project awarding in FY25 stood at 4,080km, below the 5,000km target, mainly
due to general elections in 1QFY25 and subdued activity until 3QFY25. Awarding
picked up in 4QFY25, with ~2,600km awarded during the quarter. The overall muted
awarding has impacted order inflows for several road construction companies. NHAI
exceeded its highway construction target of 5,150km and built 5,614km in FY25.
FASTag toll collections grew ~15% YoY in terms of volume and ~17% YoY in terms of
value in 4QFY25, supporting asset monetization plans.
In FY25, NHAI monetized assets worth INR287b, below the INR390b target, due to
MoRTH’s directive to pause ToT (toll-operate-transfer)-based monetization. However, it
raised a record INR177b through the fourth round of NHAI InVIT. For FY26, NHAI targets
INR300b in monetization, with 24 road assets (1,472km) identified for the process.
The Dedicated Freight Corridor Corporation of India (DFCCIL) has commissioned 2,741km
of the planned 2,843km for both the Eastern and Western Dedicated Freight Corridors
(DFCs). The completion deadline is extended to Dec’25 due to delays in land acquisition.
NHAI awarding remains subdued in FY25; construction activity exceeds
target
In FY25, NHAI awarded road projects totaling 4,080km, falling short of its initial
target of 5,000km. There were no project awards in 1QFY25 due to the general
elections, followed by subdued awarding activity in 2Q and 3Q. On a YoY basis,
project awards rose by 63%, largely due to the low base in FY24. Muted awarding
over the past two fiscals has significantly impacted order inflows for many road
construction companies. On the construction front, NHAI exceeded its highway
construction target of 5,150km by completing 5,614km in FY25. However, this still
marked a 15% YoY decline YoY.
FASTag toll collections showing consistent improvement
FASTag toll collection volume improved ~15% YoY in 4QFY25, while the collection
value increased ~17% YoY. During FY25, FAStag toll collections increased 13% YoY.
Higher toll collections play a crucial role in expediting the monetization process of
road assets by the Ministry. Additionally, toll collections benefit companies that aim to
monetize their existing toll assets.
Declining input prices to boost margins for contractors
Steel and aluminum prices have decreased ~25% and ~18%, respectively, from their
highs seen in Apr’22. Cement prices have decreased ~8% from their highs seen in
Oct’23. With higher construction activities and stability in commodity prices, road
contractors anticipate some improvement in profitability and margins in FY26.
Players with robust order books, strong balance sheets, and diversified
operations well placed
Although there has been a slowdown in project awarding in FY24 and FY25, the
tender pipeline is currently robust. Entities with significant order backlogs, strong
financial standings, and involvement across diverse sectors are well-positioned to
benefit.
Alok Deora - Research analyst
(Alok.Deora@MotilalOswal.com)
Saurabh Dugar - Research analyst
(Saurabh.Dugar@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.