Overall awards of Ministry of Road Transport and Highways (MoRTH) declined marginally by 2.8% to 12,375 km during FY2023 from 12,731 km in FY2022. ICRA expects the awards to decline further to 9,000-9,500 km in FY2024 owing to low approvals expected in Q4FY2024 as sizeable awarding happens in the last quarter and bidding activity slows down before the General Elections, which are due around May2024.
Hybrid Annuity Model (HAM) followed by the Engineering Procurement and Construction (EPC) emerged as the preferred modes of project awards by the NHAI over the past three years. Almost 55% of the road projects awarded by the NHAI in FY2023 were through the HAM route and the trend is likely to continue in FY2024 as well. Project awards under BOT-Toll will continue to remain subdued, with its share likely to remain below 5% over the medium term.
In FY2023, execution eased marginally to 28.3 km/day from 28.6 km/day in FY2022, owing to high cost of raw materials as well as extended monsoons in certain geographies. However, road construction is expected to increase by 16-21% to 12,000-12,500 km in FY2024 on the back of 25% increase in outlay to MoRTH and a healthy unexecuted order book.
Owing to lower order additions along with expected increase in road execution on the back of increased outlay to MoRTH, the order book of road developers may witness a marginal decline in the current fiscal to around 3-3.2 times. Nonetheless, it remains comfortable and provides adequate medium term revenue visibility.
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