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Execution of road projects dips 6% in first 8 months of FY25: ICRA report

The ratings agency has attributed the slowdown to the general elections in the first quarter of FY25 (Q1 FY25) and prolonged monsoon in certain geographies

Road, Leh, Ladakh

In the first eight months of FY25 (8M FY25), road execution declined by 6 per cent to 4,761 km compared to 5,248 km in 8M FY24. (Photo: Shutterstock)

Prachi Pisal Mumbai

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ICRA has revised its forecast of road execution by the Ministry of Road Transport and Highways (MoRTH) in the financial year 2025 (FY25) to 10,000-10,500 kilometres (km) from its earlier estimate of 12,500-13,000 km.
 
The ratings agency has attributed the slowdown to the general elections in the first quarter of FY25 (Q1 FY25) and prolonged monsoon in certain geographies, which affected productive days, resulting in a decline in execution during that period. 
 
In the first eight months of FY25 (8M FY25), road execution declined by 6 per cent to 4,761 km compared to 5,248 km in 8M FY24.
   
Vinay Kumar G, vice president and sector head — corporate ratings, ICRA, stated that despite an expectation of a healthy pick-up during the remainder of the year, the overall execution is likely to decline in FY25. “The fourth quarter accounts for sizeable execution. Historically, the last four months of the year accounted for 51-58 per cent of execution during the last four years. The same stood at 58 per cent in FY24. Assuming a similar trend during the last four months of the current year, execution is expected to touch 10,000-10,500 km in FY25,” he added.
 
Further, road awards are estimated to be in the range of 8,500-9,000 km in FY25, as per ICRA’s estimates, similar to the last year’s awarding of 8,581 km. In 8M FY25, road awards stood at around 2,250 km, down 20.1 per cent year on year (YoY), amid continued uncertainty on the mode of project awarding and the impact of general elections in the first half of FY25 (H1 FY25).
 
The agency stated that project awarding gained momentum from November 2024 following better clarity from MoRTH in Q2 FY25. The Ministry awarded 773 km in November 2024 compared to 221 km in November 2023. In 8M FY25, the average monthly awarding stood at 316 km.
 
“The order books of road-focused contractors have moderated in the recent 4-6 quarters as the awarding activity has slowed down, especially from MoRTH. Moreover, the competition continues to remain at an elevated level in the road sector as road developers bid aggressively to support their order book, which will have a bearing on the profitability metrics. As it takes 6-9 months from project awarding to on-ground execution (first billing milestone), the slowdown in awarding will also have a bearing on execution momentum and revenue growth of road developers in the near-to-medium term,” Kumar said.
 
Earlier, the agency forecast the revenue of the Indian construction companies for FY25 to grow at 8-10 per cent, slower in comparison to a growth of 12-15 per cent during previous years.
 
Additionally, spending by the Road Ministry also stood lower at 55 per cent of the FY25 budget allocation (BA) in 8M FY25 against 66 per cent of BA of the previous fiscal.

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First Published: Jan 16 2025 | 2:45 PM IST

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