Road construction companies to benefit from higher government order flow

Among various infrastructure segments, roads received the highest government projects worth Rs 22,200 crore in January-July 2021. This was three times compared with the corresponding period of the previous year. This together with improving execution, increasing labour availability, and timely release of payments by the government augur well for the road construction companies.

The share of roads segment in the total infrastructure projects awarded by the government improved to 29.2% in the first seven months of 2021 from 15.3% in the year-ago period. This reflects the government’s increasing thrust on road development.

According to analyst estimates, project execution for well-placed companies has improved to 85-90% in recent months from 70-80% in the second half of the previous year. Besides, the average daily toll collection recorded on FASTag — an electronic toll collection system operated by the National Highway Authority of India — has improved to Rs 96 crore in July 2021 from Rs 52.4 crore in July 2020.

Among road construction companies, , PNC Infratech, and are likely to be major beneficiaries of the higher order flow given their strong balance sheets and superior execution skills.