You are here: Home » PTI Stories » National » News
Business Standard

Road construction pace set to double by FY18: Crisil

Press Trust of India  |  Mumbai 

Various reforms initiated by the government to ensure speedy approvals and clearances aided the pace of construction of roads, which improved 40 per cent from an average 4.3 km per day in FY2014-15 to 6 km in FY2015-16 and is likely to reach 11 km by FY2018, says Crisil.

"The material improvement in the pace of execution can be attributed to policy reforms by the NHAI and facilitations by the government, which are also reducing delays. Given this, we expect the average construction per day for NHAI projects to nearly double to more than 11 km by fiscal 2018," Research Director Srinivasan said in a statement.



The key policy reforms include easing of the clearances process, ensuring 80 per cent land before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model.

"Given these reforms are largely aimed at reducing risk, private participation is set to pick up," he said.

According to Crisil's analysis of 85 under-construction and 104 operational BOT and annuity projects awarded by the NHAI, which together span around 16,600 km, shows there has been a 13 per cent reduction in high-risk projects over the past fiscal.

These risks pertain to completion of under-construction projects and debt servicing ability for operational ones.

As per the report, within the 85 under-construction BOT projects, there has been a 10 per cent reduction; however, as many as 4,600 km of projects are still in the high-risk category because delays in land and approvals have increased costs by 20 per cent or Rs 11,000 crore, and the financial health of sponsors remains weak.

These stuck projects were largely awarded during 2009-2012 and the mitigation options for them include a one-time fund infusion through NHAI loans, and a change in sponsor.

The 104 operational projects also shows a significant 18 per cent reduction in both length (to 2,700 km) and outstanding debt (to Rs 19,650 crore) of high-risk operational BOT projects compared with 2015, it said.

Consequently, 65 per cent of the operational portfolio has a debt service coverage ratio of over 1 times compared to 55 per cent a year back, said the report.
"This is largely due to healthy traffic growth, averaging

over 12 per cent, and reforms like the 100 per cent exit clause in projects and NHAI premium deferment.

Refinancing of debt by low-cost, longer tenure loans have also played a large role in credit improvement of these projects," its Director Sushmita Majumdar said.

According to Crisil, of the 4,600 km high-risk under-construction projects, 1,400 km have reached the provisional commercial operations date (PCOD) stage, but are still unviable due to cost overruns and weak sponsors.

"These projects need a whopping 60 per cent revenue growth to meet debt service requirements. Refinancing, debt restructuring, premium deferment or by a stronger sponsor are the only solutions," she said.

estimates that over the next two years, stronger developers will be able to raise funds for their under-construction portfolio through stake sales in their operational portfolio and from investment trusts.

However, weaker developers still face a funding gap of Rs 6,300 crore, equivalent to around three-fourth of funds required for their existing portfolio, said the report.

RECOMMENDED FOR YOU

Road construction pace set to double by FY18: Crisil

Various reforms initiated by the government to ensure speedy approvals and clearances aided the pace of construction of roads, which improved 40 per cent from an average 4.3 km per day in FY2014-15 to 6 km in FY2015-16 and is likely to reach 11 km by FY2018, says Crisil. "The material improvement in the pace of execution can be attributed to policy reforms by the NHAI and facilitations by the government, which are also reducing delays. Given this, we expect the average construction per day for NHAI projects to nearly double to more than 11 km by fiscal 2018," Crisil Research Director Ajay Srinivasan said in a statement. The key policy reforms include easing of the clearances process, ensuring 80 per cent land acquisition before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model. "Given these reforms are largely aimed at reducing risk, private participation is set to pick up," he ... Various reforms initiated by the government to ensure speedy approvals and clearances aided the pace of construction of roads, which improved 40 per cent from an average 4.3 km per day in FY2014-15 to 6 km in FY2015-16 and is likely to reach 11 km by FY2018, says Crisil.

"The material improvement in the pace of execution can be attributed to policy reforms by the NHAI and facilitations by the government, which are also reducing delays. Given this, we expect the average construction per day for NHAI projects to nearly double to more than 11 km by fiscal 2018," Research Director Srinivasan said in a statement.

The key policy reforms include easing of the clearances process, ensuring 80 per cent land before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model.

"Given these reforms are largely aimed at reducing risk, private participation is set to pick up," he said.

According to Crisil's analysis of 85 under-construction and 104 operational BOT and annuity projects awarded by the NHAI, which together span around 16,600 km, shows there has been a 13 per cent reduction in high-risk projects over the past fiscal.

These risks pertain to completion of under-construction projects and debt servicing ability for operational ones.

As per the report, within the 85 under-construction BOT projects, there has been a 10 per cent reduction; however, as many as 4,600 km of projects are still in the high-risk category because delays in land and approvals have increased costs by 20 per cent or Rs 11,000 crore, and the financial health of sponsors remains weak.

These stuck projects were largely awarded during 2009-2012 and the mitigation options for them include a one-time fund infusion through NHAI loans, and a change in sponsor.

The 104 operational projects also shows a significant 18 per cent reduction in both length (to 2,700 km) and outstanding debt (to Rs 19,650 crore) of high-risk operational BOT projects compared with 2015, it said.

Consequently, 65 per cent of the operational portfolio has a debt service coverage ratio of over 1 times compared to 55 per cent a year back, said the report.
"This is largely due to healthy traffic growth, averaging

over 12 per cent, and reforms like the 100 per cent exit clause in projects and NHAI premium deferment.

Refinancing of debt by low-cost, longer tenure loans have also played a large role in credit improvement of these projects," its Director Sushmita Majumdar said.

According to Crisil, of the 4,600 km high-risk under-construction projects, 1,400 km have reached the provisional commercial operations date (PCOD) stage, but are still unviable due to cost overruns and weak sponsors.

"These projects need a whopping 60 per cent revenue growth to meet debt service requirements. Refinancing, debt restructuring, premium deferment or by a stronger sponsor are the only solutions," she said.

estimates that over the next two years, stronger developers will be able to raise funds for their under-construction portfolio through stake sales in their operational portfolio and from investment trusts.

However, weaker developers still face a funding gap of Rs 6,300 crore, equivalent to around three-fourth of funds required for their existing portfolio, said the report.
image
Business Standard
177 22

Road construction pace set to double by FY18: Crisil

Various reforms initiated by the government to ensure speedy approvals and clearances aided the pace of construction of roads, which improved 40 per cent from an average 4.3 km per day in FY2014-15 to 6 km in FY2015-16 and is likely to reach 11 km by FY2018, says Crisil.

"The material improvement in the pace of execution can be attributed to policy reforms by the NHAI and facilitations by the government, which are also reducing delays. Given this, we expect the average construction per day for NHAI projects to nearly double to more than 11 km by fiscal 2018," Research Director Srinivasan said in a statement.

The key policy reforms include easing of the clearances process, ensuring 80 per cent land before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model.

"Given these reforms are largely aimed at reducing risk, private participation is set to pick up," he said.

According to Crisil's analysis of 85 under-construction and 104 operational BOT and annuity projects awarded by the NHAI, which together span around 16,600 km, shows there has been a 13 per cent reduction in high-risk projects over the past fiscal.

These risks pertain to completion of under-construction projects and debt servicing ability for operational ones.

As per the report, within the 85 under-construction BOT projects, there has been a 10 per cent reduction; however, as many as 4,600 km of projects are still in the high-risk category because delays in land and approvals have increased costs by 20 per cent or Rs 11,000 crore, and the financial health of sponsors remains weak.

These stuck projects were largely awarded during 2009-2012 and the mitigation options for them include a one-time fund infusion through NHAI loans, and a change in sponsor.

The 104 operational projects also shows a significant 18 per cent reduction in both length (to 2,700 km) and outstanding debt (to Rs 19,650 crore) of high-risk operational BOT projects compared with 2015, it said.

Consequently, 65 per cent of the operational portfolio has a debt service coverage ratio of over 1 times compared to 55 per cent a year back, said the report.
"This is largely due to healthy traffic growth, averaging

over 12 per cent, and reforms like the 100 per cent exit clause in projects and NHAI premium deferment.

Refinancing of debt by low-cost, longer tenure loans have also played a large role in credit improvement of these projects," its Director Sushmita Majumdar said.

According to Crisil, of the 4,600 km high-risk under-construction projects, 1,400 km have reached the provisional commercial operations date (PCOD) stage, but are still unviable due to cost overruns and weak sponsors.

"These projects need a whopping 60 per cent revenue growth to meet debt service requirements. Refinancing, debt restructuring, premium deferment or by a stronger sponsor are the only solutions," she said.

estimates that over the next two years, stronger developers will be able to raise funds for their under-construction portfolio through stake sales in their operational portfolio and from investment trusts.

However, weaker developers still face a funding gap of Rs 6,300 crore, equivalent to around three-fourth of funds required for their existing portfolio, said the report.

image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard