Easy funding, flexible qualification criteria help unlisted road companies gain market share

ET Intelligence Group: The prominence of unlisted road construction companies has increased over the past five years as they have grabbed a major share of the hybrid annuity projects awarded by the National Highway Authority of India (NHAI) during the period. According to an analysis by the domestic brokerage Edelweiss Securities, the market share of listed road construction companies in the NHAI hybrid projects declined to nearly 21% at present from close to 61% in the FY16-18 period.

There are two key factors which have contributed to this trend. Unlike build, operate and transfer (BOT) projects, which require high capital, hybrid annuity construction projects are asset light as 40% of the project cost is borne by the government. Due to this, banks have been funding construction projects of unlisted companies. The second factor is flexible pre-qualification norms to secure projects.

These factors have intensified competition in the sector. The number of bidders for construction projects has increased to as high as 15 in the present fiscal year from 5-10 in FY20.

In the coming quarters, if unlisted players are unable to seek financial closure of their projects, NHAI may tighten norms for pre-qualification. This will help companies such as , , and gain market share given their good financials and balance sheet.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.