PNC, IRB, Ashoka Buildcon, others to be in focus as ICRA expects FY25 road execution to rise 5-8% to 12,500-13,000 km

PNC Infratech ,  Ashok Buildcon , IRB Infrastructure Developers , G R Infraprojects, the road construction companies, among others have seen their share prices rise  37-144% in last one year. The gains have been led by strong order flows, helped by rise in government led  infrastructure spending. The same has led to regular improvement in revenues visibility .

While the order book remains strong for all infrastructure companies of the likes of PNC Infratech , Ashok Buildcon , IRB Infrastructure , G R Infraprojects and others, the outlook on execution front also remains strong as per rating Agency ICRA's outlook.

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ICRA anticipates that road execution would increase by 5-8% to 12,500–13,000 km, following a strong 20% rise already seen in FY2024.

The execution pace during FY25 as per ICRA is likely to be supported  by Government of India (GoI) increasing its capital outlay, and the Ministry of Road Transport and Highways (MoRTH) fcous on  prioritize project completion.

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The execution situation started improving from September 2023 with road construction witnessing a YoY surge of 30% in H2 FY2024, enabling an overall growth of ~20% in FY2024 (to 12,349 km from 10,331 km in FY2023), slightly higher than ICRA’s estimate of 12,000 km for that fiscal, said Vinay Kumar G, Vice President & Sector Head - Corporate Ratings, ICRA.

The Ministry’s project award pipeline has remained healthy  at above 45,000 km as of March 2024, despite having slowed down ahead of elections and the Cabinet's delayed approval of the updated Bharatmala Pariyojana Phase 1 (BMP) cost estimates.

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As all eyes are on order pick up post elections , however strong execution bodes well.

The EPC mode continues to be the mainstay of the ordering having accounted for 70-75% of the awards in FY2024, followed by BOT-HAM, accounting for 25-30% share as per ICRA.

BOT stands for Build operate and transfer while HAM for Hybrid Annuity Model. 

In FY2024, there were no awards made under BOT-Toll projects.

The Ministry however has recently made changes to the BOT-Toll model concession agreement in March 2024 in an effort to make it more appealing.

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