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MOSL: INFRASTRUCTURE-NHAI to miss FY17 targets, momentum to pick up in FY18

​Infrastructure: NHAI to miss FY17 targets, momentum to pick up in FY18; Large opportunity pie for incumbents

We recently met the National Highway Authority of India (NHAI) officials and a few road consultants to understand their broader perspective on the road sector in FY18.

NHAI to miss FY17 targets; channel checks suggest momentum to pick up in FY18: In FY17, the NHAI has awarded road projects for 3,000km (8.2km/day) and constructed 2,350km (6.5km per day). This is well below its initial target of awarding 15,000km and constructing 8,000km. However, our channel checks suggest that momentum should pick up significantly in FY18. From the current rate of 8.2km/day, awarding activity is expected to reach 15km/day in FY18 (5,475km). Construction too is expected to increase from 6.5km/day to 10km/day in FY18 (3,650km). Construction activity in 11MFY17 rose 18% YoY given the lower base; however, awarding activity has suffered given weak land acquisition during the year.

NHAI well placed on funding front: The NHAI is well placed on the funding side as it had passed an enabling resolution to borrow INR590b in FY17, of which it has been able to utilize only INR380b. The authority thus does not see funding as a restraining factor to achieve the growth target. The NHAI recently raised INR8.5b from LIC and INR100b from the EPFO by issuing bonds.