Road Infrastructure - Party To Began Soon

[komal]

NHAI could bid out another 10 projects worth INR 100bn till Mar 12 which could result in them meeting 80% of their target ‐ a big achievement indeed. In addition to orders from the central agency  NHAI, individual states like MP, Rajasthan, Maharashtra, TN, Punjab and Karnataka are seeing award activity. These states could cumulative bid out INR 200‐300 bn of orders (over and above the INR 700bn from NHAI). Importantly
there is a likelihood that EPC opportunities of similar level could also come in once the draft agreement is finalized

Detailed analysis of listed as well as unlisted entities suggests India could probably work on 4000‐5000 kms of roads per year (provided other
activities are quite lean). Assuming that other contours of the capex  takes some time to pick up, the demand side is looking quite ripe. Like in previous upturn, we find that EPC orders for the next two years in running for roads would be at least 5,000kms

The good thing is we are finding the profitability in road sector improving from easing of competition. The difference between the top‐two bids is
now in the range of 2‐7%, and the number of bidders has also dropped from 25 to now less than 10.

L&T is the Favorite Pick in the Sector. IL&FS Transportation is also worth looking at.

[komal]

IL&FS Transportation Networks (ITNL) has emerged as L1 bidder in an INR 18 bn NHAI project on NH-21 under NHDP Phase III. 

The project is for four laning the stretch between Kiratpur to Ner-Chowk in the State of Himachal Pradesh (HP). This road starts from the Punjab - HP border at Kiratpur and stops short of Mandi (HP) at Ner-Chowk. The existing length of the road is 113 km which after realignment and construction would become 84 km. This project is on toll basis with a concession period of 28 years including construction period of 3 years. The estimated project cost of the project as per NHAI is ~ INR 18.2 bn.