The equity internal rate of return (IRR) for the first set of highways which are being auctioned under the toll-operate-transfer (TOT) model is likely to be 12-13 per cent, says a report.
This is based on the National Highways Authority of Indias (NHAI) initial estimated concession value.
The bundle comprises nine highway stretches in Andhra Pradesh, Odisha and Gujarat.
A cluster of manufacturing industries and ports in Vishakhapatnam, Kakinada, Kandla and Mundra are expected to be the drivers of transportation demand, Crisil said in a report today.
The economic corridor in the east coast is also expected to improve traffic potential in Andhra Pradesh.
"But the highway stretches in Gujarat are more attractive than those in Andhra Pradesh because of the presence of industrial clusters and consumption centres in the periphery," the rating agency's senior director, Prasad Koparkar, said.
The report, however, said the key risks to the bundle are the impact of goods and services tax and alternate routes.
"The four-laning of Gundugolanu-Kovur Road in Andhra Pradesh would divert considerable freight traffic from Gundugolanu to Diwancheruvu," the rating agency's director Binaifer Jehani said.
Factors such as latent defects and severe economic slowdown, which are difficult to anticipate, can increase the maintenance cost and substantially reduce traffic, he said.
The report said the dedicated freight corridor in Gujarat does not pose a threat to any of the three stretches in the state.
Overall, the bundle of nine highway stretches has good inbuilt hedges in terms of geography, traffic mix and returns.
Some stretches are more attractive because of reduced risk from alternative routes, better support originating from industrial corridors, and complementary, planned infrastructure, the report added.
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