The National Highways Authority of India has significantly slowed down awarding of projects over the last two years, leading to an impact on the order book growth of major road construction companies.
Muted activity over the past two fiscals has raised sector-wide concerns about revenue visibility as a disruption in order flows would impact potential recovery seen on the horizon.
"Road awards remained tepid for a second year in a row in FY25. Further, no increase in the budgeted outlay for roads and railways in the FY26 budget makes us cautious on infra at large," according to Nuvama.
Road Awards Remain Tepid For Second Straight Year
As per the Nuvama report, the market share of listed developers plunged from 61% over FY16–18 to 31% over FY19–21 in the NHAI awards.
The share further declined to 25% over FY22–24, and stood at 24% at the end of FY25.
Key Concerns In Road Sector
Government halted project awards under the Bharatmala project
The government's decision to halt projects under the Bharatmala scheme was the primary driver of sluggishness in road awarding.
This was because the estimated cost of the Bharatmala programme had doubled since 2017 due to an increase in land acquisition costs and a change in the composition and configuration cost of the project due to economic corridors and expressways.
Muted road capex budget in Union Budget 2025 may lead to muted inflows
The road sector capex in the FY26 budget was flat at Rs 2.87 lakh crore, up 2.5% YoY over the revised FY25 budget.
Increased competition led to tenders at 20-25% below expected rates
Aggressive bidding is a major concern for road players, impacting margin profile of the businesses.
Order Book To Bill Has Narrowed
Revenue Growth Slowed Down Vs 3-Year CAGR
Outlook Forward:
Companies see signs of recovery on order awarding from fourth quarter onwards
FY26 highway construction target set at 10,000 km
NHAI plans Rs 30,000 crore from monetising road assets
NHAI aims to secure Rs 35,000 crore in private investment for highway projects
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