Page 40 - Construction_Opportunities_March_2023

TICKER TAPE
INFRASTRUCTURE government official noted. The state will constitute ‘Inves¬tment agency, focus on the infrastructure space has increased with

investments in roads and railways, which is expected to grow 21
Implementation Units’ in every government department and
per cent and 15 per cent on year, respectively, supported by the
headed by a secretary level official to ensure that projects were
Centre’s as well as states’ capital outlay. This, along with healthy
launched without inordinate delays and red tape.
The CM has directed to set up a call centre to facilitate the
execution, will lead to higher revenue growth of 17-20 per cent for
implementation of projects of foreign investors. The state will also
players in the sector next fiscal. Roads and railways will continue
draft a policy for the revival of sick units. Ahead of the GIS, the Yogi
to outperform other EPC segments. With infrastructure investments
government had organised roadshows in 16 countries, which was
(NIP) through investments in roads (contributing 23 per cent of NIP),
followed up by domestic roadshows in 10 top Indian cities over the
last few months. Meanwhile, 34 industrial proposals worth `3.90 continuing to grow and focus on the National Infrastructure Pipeline
railways (16 per cent), power (22 per cent), irrigation (9 per cent),
trillion will be operationalised in a phased manner in the next two EPC firms are seeing healthy order inflows. As a result, their order
years. Similarly, 782 investment proposals worth `4.11 trillion have book-to-revenue ratio is expected to remain healthy at 3.5-4 times
been received from big industrial groups in varied sectors. over the medium term, leading to better revenue visibility.
According to Gautam Shahi, a director with the agency, higher
ADANI ENTERPRISES INVESTMENTS IN NEW ROAD PROJECTS revenue growth and softening commodity prices will help operating
Adani Enterprises (AEL) will focus on completing its existing portfolio profitability recover to the pre-pandemic level next fiscal. Prices of
of road projects before committing any fresh capital expenditure. key inputs such as steel, which have fallen 22 per cent from their
It is putting on hold any fresh investment commitments in new road peak in March 2022, and should decline another 9-11 per cent next
projects. Majority of its ongoing road projects are on schedule with fiscal. This will support recovery in operating profitability, especially
no revision in the commissioning dates. AEL had won the contract for fixed-price contracts that account for 25-30 per cent of the
for 464-km Meerut-Prayagraj stretch of the Ganga Expressway in sample companies’ revenue.
Uttar Pradesh, wherein it will build three clusters of the expressway
at a cost of Rs 23,000 crore. Adani Road Transport, a subsidiary of ROAD PROJECTS TO SEE 2-5 PER CENT HIKE IN INFLATION-LINKED
AEL, had made a capital infusion of `6,826 crore. TOLL RATES IN FY24
The company has 14 similar projects with construction and Inflation-linked toll rates of various road projects will see a moderate
maintenance of roads of 5,000 plus lane km and its under- hike of 2-5 per cent in the next fiscal year due to falling wholesale
construction projects are on schedule to meet the timelines. In price index, a report said on Monday. Rating agency Icra has
2022, the company had acquired four toll roads in Gujarat and revised down the outlook on the toll road sector to stable from
Andhra Pradesh from Macquarie Asia Infrastructure Fund for `3,110 positive for FY24, citing the easing wholesale price inflation which
crore to operate these traffic corridors. fell to 4.95 per cent in December 2022. The wholesale price index
(WPI) based inflation is expected to fall further and is likely to settle
HIGHER GOVT CAPEX TO HELP INFRA COS CLOCK 17-20% at sub-2 per cent in March 2023. Accordingly, the inflation-linked
REVENUE GROWTH hike in toll rate will be relatively modest at 2-5 per cent in FY24
Higher government spending on infrastructure in FY24 will propel compared to the 8.7-14.6 per cent hike in FY23, the agency said in
engineering, procurement, and construction companies to hit its latest note. On the change in the outlook to stable from positive,
revenue growth of 17-20 per cent, taking their profit to the pre- it said the revision primarily reflects the expected moderation in toll
Covid level, a report said on Tuesday. In the Budget 2023-24, the collection growth to 6-9 per cent in FY24, compared to a stellar
government has increased the outlay for capital expenditure 17-20 per cent growth in FY23, which was driven by a healthy toll
(capex) on infrastructure sector by 33 per cent from `7.5 lakh crore rate increase on the back of high inflation as well as improved
to `10 lakh crore. Forecasting higher revenue and thicker bottom- economic activity. Number of road users or traffic volume and toll
line, rating agency Crisil in a report also placed their credit outlook rates are the major factors that affect toll collection in the country.
positive citing improving debt metrics. The optimism is supported Traffic volume has a strong correlation with the gross value added
by the expected strong order inflows due to the government thrust of construction, mining and manufacturing, as around 65 per cent
on infrastructure in the latest budget. Profitability of large EPC of the freight traffic is dependent on these sectors. Growth in these
(engineering, procurement, and construction) companies is seen sectors is estimated to be 5-7 per cent in FY24 and is likely to result
improving and reaching pre-pandemic levels of 10-10.5 per cent in 4-5 per cent growth in the overall traffic volume, the agency said.
next fiscal compared to 9-9.5 per cent this fiscal, with commodity Vinay Kumar G, sector head of corporate ratings at Icra, said toll
prices easing. With healthy order books and recovery in profitability, rates linked to the December WPI will see a 5 per cent growth
debt metrics will also improve next fiscal as higher order inflows while those linked to March WPI will see only sub-2 per cent growth.
will boost their top-line to the tune of 17-20 per cent in fiscal 2024, Consequently, toll collection growth in FY24 is estimated at 6-9 per
up from 13-15 per cent estimated this fiscal, said the report which cent, primarily supported by 4-5 per cent growth in traffic.
is based on an analysis of 80 EPC companies with aggregate Despite a moderation in toll collection growth, lower outflow
revenue of `2.33 lakh crore. The revenue growth of most of the EPC towards operation & management and major maintenance
players is driven by the rise in capital outlay by the Centre, public expense on account of the recent moderation in key commodity
sector undertakings and states for the infrastructure segment and prices, especially bitumen and steel, should support debt
the corresponding construction intensity in each of the infrastructure coverage metrics of toll road assets, he added.
segments. According to Mohit Makhija, a senior director with the There is a 25 per cent jump in gross budgetary support for the road

40 CONSTRUCTION OPPORTUNITIES|MARCH 2023