ICRA revises toll roads sector FY23 outlook to ‘Positive' from ‘Stable', supported by strong growth expected in toll collections

28 Apr 2022 , 12:25 PM

ICRA has revised the outlook on toll roads sector to ‘Positive’ from ‘Stable’, for FY2023. The change in outlook primarily factors in the expected healthy increase in toll collections in FY2023, supported by healthy toll rate increase on the back of high inflation and improved economic activity. The latter are a function of traffic volumes which in turn is correlated with gross value added (GVA) of construction, mining and manufacturing (CMM) as around 65% of the freight traffic is dependent on these sectors. The growth in CMM is estimated to be 6-8% for FY2023 and is expected to result in 5-6% growth in overall traffic volumes.

Giving more insights, Mr. Vinay Kumar G, ICRA says, “Toll rates for projects which were linked to December WPI to witness 8.4% growth while the toll rates for projects linked to March WPI will witness growth of 14.5%. As regards toll collections, they are expected to increase by 17-20% during FY2023 owing to sharp rise in toll rates, traffic growth and adjustment of 3-4% revenues which were lost due to second wave of Covid in Q1FY2022. Further, increase in toll collection is likely to far outweigh the expected increase in O&M costs due to high WPI and is expected to result in better coverage metrics. ICRA expects cumulative DSCR to improve by at least 10 bps for most of the road projects.”

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