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Road execution by MoRTH to decline by 5% in FY26: Icra
Road execution declined by 5.8% to 5,853km in first nine months of FY25 compared to 6,216km in the year-ago period, the ratings agency said.
The execution of road construction by the ministry of road transport and highways (MoRTH) will decline by 5% in fiscal year 2026 (FY26) to 9,500-10,000km from the estimated road construction of 10,000-10,500km in FY25, ratings agency Icra said in a report.
The lower execution is on account of lower awarding by the ministry in the past two years, FY24 and FY25 (estimated), the report said.
The awarding during first nine months of FY25 was subdued at 3,100km, which is flattish on a year-on-year basis but significantly lower than the 5,835km project awarded during the same period in FY23.
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According to Icra, the road awards may range between 8,500km and 9,000km in FY25, similar to that of FY24; however, there has been some improvement in project awarding from November, which, if it sustains, should result in 9-11% growth in FY26.
“Road construction under the MoRTH is expected to decline from 12,349km in FY2024 to 10,000-10,500km in FY2025, owing to the shrinking order book of road developers along with an impact of the model code of conduct and the extended monsoons in H1FY25,” said Vinay Kumar G, sector head, corporate ratings, Icra.
This is further likely to decline by 5% to 9,500-10,000km in FY26 owing to slow awarding in the last two years. However, given the increasing focus on building expressways and high-speed corridors, the road construction growth in terms of lane-kilometre expansion will be relatively better.
With road awarding expected to improve only in FY26, the revenue growth of road developers is likely to remain subdued over the next 12-15 months, as it takes 6-9 months from project awarding to on-ground execution (first billing milestone). “Icra foresees competition to remain high as developers are expected to bid aggressively to build the shrinking order book,” Kumar added.
Road execution declined by 5.8% to 5,853km in first nine months of FY25 compared to 6,216km in the year-ago period, the ratings agency said.
The National Highways Authority of India (NHAI) has monetized ₹8,300 crore in the April-January period of FY25 through two toll-operate-transfer (TOT) bundles. While the actual monetization is expected to be lower than the National Monetisation Pipeline target of ₹534 billion for FY25, it expects to cross the FY24 amount of ₹31,600 crore after completing the fourth round of asset transfer to the NHAI InvIT (infrastructure investment trust) and the pending three TOT bids.
Also read | Highway construction targets to be lowered in FY25 in spite of post-election growth agenda
Commenting on toll collection growth, Kumar said with likely moderation in the construction, manufacturing and mining gross value added to 6.5-6.7% in FY25 (estimated), traffic growth is likely to decelerate to 2.0-3.5% in FY25, resulting in a moderation in toll collection growth to 5-7%.
The toll rate growth has remained subdued in FY25; however, the same is expected to rise by 3.5-4.2% in FY26. He added that this, coupled with 3-5% traffic growth, will likely grow toll collection by about 7-9% in FY26.
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Business NewsEconomyRoad execution by MoRTH to decline by 5% in FY26: Icra
First Published:13 Feb 2025, 04:16 PM IST
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