Jan 21, 2025 | Infrastructure
Road Sector Fundamentals Remain Comfortable, Opportunities to Cater to Investors with Different Type of Risk Appetite in FY26
India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the road sector for FY26, due to the softened Wholesale Price Index level and intermodal shift in traffic and in view of the likely modest toll collections, shifting of preference from the highly preferred hybrid annuity mode (HAM) to the build-operate-transfer (BOT) model wherein bidding trends and award quantum need to be seen, and land availability issues. Ind-Ra opines the roads sector continues to be a focus area for the government with 22% of the capex allocation towards the Ministry of Road Transport and Highways (MoRTH). Growth in capex during FY26 is likely to be slower than that seen during FY18-FY24. Project awards are likely to improve in FY26 across BOT, HAM, toll-operate-transfer (TOT). Resolving land-related issues in HAM projects, completing the planned BOT awards and a road map for road connectivity are required to increase the construction momentum compared to the lull witnessed during FY25, majorly due to the elections and unseasonal/excess rains. Furthermore, the government’s aim to increase the focus on the quality of construction and maintenance, including the introduction of performance assessment rating system, evaluated bi-annually and monitored digitally, augurs well for the sector.