Highways: Strong government focus on execution

30 Jun 2023 , 10:52 AM

6,000 km of contribution from NHAI projects would be supported by under-construction length of 20,000 km and 6,600k km of projects where work is yet to start. Beyond these, award pipeline under NHAI is strong and growing at 44,040 km spread across states. This provides healthy growth visibility for highway contractors even as competition has been worrisome. Analysts at IIFL Capital Services continue to prefer PNC Infra and HG Infra. Ashoka Buildcon is a dark horse with closure of monetization being the key trigger.

Strong execution focus for 20,996 km under-construction projects under NHAI

Central government is looking to construct national highways totalling ~14,000 (38km/day) km in FY24 versus 10,331km constructed in FY23. This would include 6,000 km contribution from NHAI projects and balance from MoRTH and NHIDCL projects. Given that NHAI has 20,258km of projects under execution as at end May 2023, 6,000 km construction is possible, if it maintains the pace of execution seen in FY23. Another 6,654km projects have been awarded where construction is yet to start. This includes 2,855km length, which has seen delays beyond 5 months, probably due to delays from NHAI but also from smaller concessionaires who have won contracts in FY22-23.

Growing project pipeline provides visibility

Total highway length pending for award by NHAI has steadily grown from 34,912km in FY22 to 42,530km in FY23 and to 44,040km as at end May 2023; led by planned upgrade of state highways to national highways. Within this, length of 21,605km has been identified in terms of mode of development (EPC/HAM/BOT) providing strong visibility of steady awards over the medium term. Beyond these, mode of development for further 22,435km is pending still. Opportunity is well spread across larger states.