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Metro rail projects to offer 80,000 cr opportunity for construction cos: Icra

In India, 15 cities have operational metro networks of about 746 km (many of which are undertaking network expansion), while another seven cities of about 640 km have under-implementation metro projects.. Photo: PTIPremium
In India, 15 cities have operational metro networks of about 746 km (many of which are undertaking network expansion), while another seven cities of about 640 km have under-implementation metro projects.. Photo: PTI

  • Given the government’s thrust for infrastructure development, the metro rail network is likely to witness 2.7 times expansion in the next five years, Icra said

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Metro rail projects will generate 800 billion of opportunities for construction companies over the next five years, Icra said in a research report on Tuesday.

In India, 15 cities have operational metro networks of about 746 km (many of which are undertaking network expansion), while another seven cities of about 640 km have under-implementation metro projects. This apart, 1,400 km of metro rail projects worth 2 trillion are in the approval/proposal stage. Of these, a 352-km of new metro network has been approved, with the balance being in the proposal stage.

“Given the Government’s thrust for infrastructure development, the metro rail network is likely to witness 2.7 times expansion in the next five years. Typically, the metro rail development cost ranges between 280 and 320 crore/km for elevated metro and the cost could be much higher in the case of an underground metro network. Civil construction forms ~35%-45% of the overall cost. Given the large size of the metro projects, this is likely to offer sizeable opportunities for construction companies over the next five years," said Abhishek Gupta, sector head & assistant vice president, corporate ratings, ICRA.

Due to the presence of a limited number of players in the sector, the competitive intensity has so far remained moderate with no signs of aggressive bidding as witnessed in other infrastructure segments like roads, railways, etc.

As per Icra’s analysis, about 58% of the projects (by value) were awarded at a premium over the base price, with 14% of the projects awarded at a premium of over 20%. While 42% of the bids were awarded at a discount; majority of these were at a nominal discount and only 7% of winning bids were at adiscount of over 25%.

Gupta added, “Competitive intensity is expected to remain moderate in the near to medium term, with the incumbents expected to benefit the most. Given that majority of the orders are funded by multilateral agencies as well as Central Government allocations, the cash conversion cycle of the industry participants will remain comfortable."

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