Aggressive bids for road projects leading to a build-up of stress in the sector

livemint.com:

Highway construction targets to be lowered in FY25 in spite of post-election growth agenda“In the last couple of years, about 8-10 awarded highway projects faced substitution as original sponsors could not get financial closure. But most of the projects facing stress have been bid on HAM model where risks are lower for developers as payment is guaranteed over a period in the form of annuity.

This should not impact bids for BoT projects as reasonable traffic projections and toll earnings would decide interest from developers," said Rishabh Jain, associate director at India Ratings and Research.NHAI has identified 53 BOT (Toll) projects for a length of 5200 km worth Rs. 2.1 trillion for bidding over the next few years starting FY25.

As these project complete depend on risk appetite of investors and projections of toll revenues, stable conditions in the sector in a pre-requisite.While a small component of the road sector faces stress like conditions, India Ratings and Research (Ind-Ra) has maintained a stable rating outlook for the overall infrastructure sector for FY25. It has maintained a positive rating outlook on airports.