Govt’s plan to expand highway network could revive builders1 min read . Updated: 28 Jul 2016, 10:32 AM IST
The nation will aim to add 41 kilometers of roads daily from March next year, up from 20 kilometers a day currently, said transport minister Nitin Gadkari
New Delhi/Mumbai: Transport minister Nitin Gadkari’s plan to expand the highway network in the world’s fastest-growing major economy could help revive struggling construction stocks.
The nation will aim to add 41 kilometers of roads daily from March next year, up from 20 kilometers a day currently, Gadkari said in an interview. A project logjam had slowed the pace to about 3 kilometers when Prime Minister Narendra Modi’s government took office just over two years ago.
“The situation has changed," Gadkari, 59, said in his office in New Delhi on 20 July. “We’re working fast and taking decisions. Now land acquisition isn’t a problem. Forest clearance isn’t a problem."
An eight-member index of builders including Ashoka Buildcon Ltd. and Sadbhav Engineering Ltd. compiled by Bloomberg News has tumbled 11% in 2016. The gauge had surged after Modi took office amid optimism about his focus on improving infrastructure. Its decline this year bucks a 7% advance in the benchmark S&P BSE Sensex.
The Sensex trades at 21 times reported earnings, data compiled by Bloomberg show. The valuations for the eight-member index range from 6.3 times for MBL Infrastructures Ltd and 13 times for KNR Constructions Ltd to 80 times for Man Infraconstruction Ltd.
“Cement, road construction as well as tollway companies will benefit from an acceleration in road building," said Chinmay Madgulkar, an analyst at Taurus Asset Management Co. in Mumbai.
Click here to read about Gadkari’s ₹ 5 trillion plan for road projects.
Road construction has the potential to create millions of jobs, Gadkari said. Boosting employment is critical for the government ahead of key state polls next year and a general election that’s due by 2019.
As many as 95% of stalled road projects are back on track now, the minister said. He plans to double the length of national highways to 200,000 kilometers, but didn’t give a time-frame. Gadkari added that the government plans to sign 25,000 kilometers of road deals in the year through March 2017.
His ambitions contrast with India’s mixed history on executing infrastructure upgrades. About 60% of the $2 trillion economy’s roads are paved, compared with 87% in China, according to Bloomberg Intelligence.
“Things are moving fast," Gadkari said. “As a minister, it’s my duty that by hook or crook I should manage it." Bloomberg