Experts optimistic about roads and highways sector; expect Rs 3 lakh crore boost

ICRA estimates that NHAI’s efforts to monetarily integrate might bring in about Rs 60,000 crore by FY25. According to India Ratings & Research, 53 projects with a combined value of Rs 2 lakh crore have been identified by the government and would go up for bid in the upcoming years. Build-operate-transfer (BOT) contracts, the guidelines for which were adjusted last year, will be used to solicit bids for these projects.

ICRA estimates that NHAI’s efforts to monetarily integrate might bring in about Rs 60,000 crore by FY25. Similarly, according to India Ratings & Research, 53 projects worth a combined Rs 2 lakh crore have been identified by the government and would go up for bid in the upcoming years. Build-operate-transfer (BOT) contracts, the guidelines for which were adjusted last year, will be used to solicit bids for these projects.

According to Rishabh Jain, Associate Director, India Ratings & Research, “the goal behind bringing in revised norms for BOT projects was to increase the level of private participation in the sector and keep NHAI’s debt level in check.”

He also stated that the percentage of BOT in the total project mix will climb during the current fiscal year and continue to rise throughout the ensuing years.

The industry’s large corporations’ withdrawal due to unsatisfactory returns on investment (ROI), inflexible concessionaire agreements, and legal conflicts with the government was the impetus for modifying the BOT guidelines.

The sale of the 33 road assets through the toll-operate-transfer (TOT) and Infrastructure Investment Trust (InvIT) modes is expected to generate a monetisation potential of around Rs 53,00–60,000 crore, according to ICRA. This could result in a lending opportunity worth Rs 38,000–43,000 crore for banks and capital markets.

Furthermore, by the end of FY2025, MoRTH might reach up to 71% of its Rs 1.6 lakh crore monetisation objective under the National Monetization Pipeline (NMP), according to ICRA.

“Over the last six years, the NHAI has monetised 29 assets across 10 TOT bundles with valuation multiples ranging between 0.44 times and 0.93 times, realising Rs 42,334 crore so far,” stated Ashish Modani, Vice President and Co-Group Head, Corporate Ratings, ICRA.

Road sector monetisation was projected to account for Rs 1.6 lakh crore, or 27% of overall monetisation between FY2022-FY2025, under the National Monetisation Pipeline (NMP). Industry experts express optimism about India’s roads and highways sector, anticipating approximately ₹3 lakh crore worth of projects to be offered in the near future. This surge is driven by strategic government initiatives and enhanced investment frameworks.

Monetisation and Investment Initiatives

The National Highways Authority of India (NHAI) is expected to generate around ₹60,000 crore in the fiscal year 2024-25 through its monetisation drive. This includes the sale of 33 road assets via Toll-Operate-Transfer (TOT) and Infrastructure Investment Trust (InvIT) models, potentially leading to a ₹38,000-43,000 crore lending opportunity for banks and capital markets. Additionally, the Ministry of Road Transport and Highways (MoRTH) aims to achieve up to 71% of its ₹1.6 lakh crore monetisation target under the National Monetisation Pipeline (NMP) by the end of FY2025.

Project Approvals and Future Plans

Within the first 100 days of its third term, the government approved infrastructure projects worth ₹3 lakh crore, focusing on enhancing connectivity and economic growth. Notable initiatives include the development of a major port in Maharashtra, extensive road construction under the Pradhan Mantri Gram Sadak Yojana (PMGSY-IV), high-speed road corridors, new railway lines, and airport upgrades in Varanasi, Bagdogra, and Bihta.

Furthermore, the Ministry of Road Transport and Highways plans to award road contracts exceeding ₹3 lakh crore within three months, aiming to conclude the current financial year with contracts totaling ₹5 lakh crore. This ambitious agenda underscores the government’s commitment to accelerating infrastructure development.

To boost private sector participation and manage NHAI’s debt levels, the government has revised norms for Build-Operate-Transfer (BOT) contracts. This policy shift is expected to increase the share of BOT projects in the overall project mix during the current financial year, promoting sustainable growth in the sector.

Investments in highway infrastructure have demonstrated a significant multiplier effect on the economy. A recent study indicates that each rupee invested in India’s highways contributes to a ₹3 increase in Gross Domestic Product (GDP), highlighting the sector’s vital role in national economic development

In summary, the convergence of substantial project approvals, strategic monetisation efforts, and revised investment frameworks has fostered a positive outlook for India’s roads and highways sector, positioning it as a cornerstone for the country’s infrastructure and economic advancement.

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