Icra upgrades toll roads sector outlook to ‘positive’ for FY23
Premium- The growth in construction, mining and manufacturing is estimated to be 6-8% for FY2023 and is expected to result in 5-6% growth in overall traffic volumes.
Rating agency Icra has revised its outlook on toll roads businesses to ‘positive’ from ‘stable’ for FY2023 as toll collections are expected to see a healthy increase on the back of improved economic activity.
Around 65% of the freight traffic is dependent on sectors like construction, mining and manufacturing which have seen a strong rebound, the rating agency said in a statement.
The growth in construction, mining and manufacturing is estimated to be 6-8% for FY2023 and is expected to result in 5-6% growth in overall traffic volumes. This correspondence brings with an increase in toll rates should support strong growth in collections.
“Toll rates for projects which were linked to December WPI to witness 8.4% growth while the toll rates for projects linked to March WPI will witness growth of 14.5%. As regards toll collections, they are expected to increase by 17-20% during FY2023 owing to sharp rise in toll rates, traffic growth and adjustment of 3-4% revenues which were lost due to second wave of Covid in Q1FY2022," said Vinay Kumar G from Icra.
“Further, increase in toll collection is likely to far outweigh the expected increase in O&M costs due to high WPI and is expected to result in better coverage metrics. ICRA expects cumulative DSCR to improve by at least 10 bps for most of the road projects," he added.
Among various infrastructure sectors, the road sector is continuing to see maximum action as the economy pushes ahead on an accelerated recovery path post the pandemic disruptions. Though road construction slowed down last year, it still remained above 10,000 km mark and is expected to reach 12,000 km this year. The traffic on roads is also back to pre-Covid levels ensuring healthy return to investors.