Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  Competition in road projects moderates
BackBack

Competition in road projects moderates

Competition in road projects moderates

A file photo of a highway being constructedPremium

A file photo of a highway being constructed

The Indian roads sector has seen aggressive bidding from companies in the past couple of quarters, primarily due to lack of orders and projects in other sectors; so much so that IL&FS Transportation Networks Ltd (ITNL), a leading road developer in India, has not secured any order from the National Highways Authority of India (NHAI) in the last few quarters.

That does not appear to be a concern for ITNL so far, given that the firm had a robust order book of 8,900 crore when the September quarter results were announced.

A file photo of a highway being constructed

Brokerages point out that an analysis of recent bids indicates that competitive intensity has moderated. “This is evident in the lesser number of bidders (10-15 in most cases, and in single digits for some projects opposed to 18-20 firms earlier)," wrote analysts from Edelweiss Securities Ltd in a note to clients last week. This augurs well for the sector.

One reason for the moderation in competition is that once a company has got the orders it wants, it may not want to bid aggressively for further projects. Secondly, firms would be finding it challenging to raise funds in the current environment to meet equity needs of the projects.

Watch Video

Mint’s Pallavi Pengonda says that with benchmark Singapore gross refining margins expected to fall sequentially this month, Indian oil firms could take a hit

Loading Video

However, some analysts say competition is still keen and the improvement has not been all that much. According to Sharekhan Ltd, though the number of bidders has reduced and the difference between the two lowest bidders is coming down, the bids are still aggressive compared with what NHAI expects.

Of course, the aggressive bidding scenario could improve further if some companies find it tough to achieve financial closure. Also, if other sectors (irrigation, power, etc.) start awarding more projects, it will offer some relief for those who are bidding in the roads sector.

Also See | Bumpy ride (PDF)

It’s known that infrastructure stocks have not performed well of late. Since the beginning of this fiscal, stocks of two key companies in the roads space, IRB Infrastructure Developers Ltd and ITNL, have underperformed the BSE benchmark Sensex. That may change if the competitive intensity in road bids reduces even more.

Graphics by Sandeep Bhatnagar/Mint.

We welcome your comments at marktomarket@livemint.com

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 06 Dec 2011, 12:56 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App