Strong bounce back in toll road assets post Covid-19 induced shock: ICRA

Our Bureau Hyderabad | Updated on April 09, 2021

Toll roads to witness 14%-15% growth in collections in FY2022

Road traffic has witnessed an improvement in H2 FY2021 after subdued traffic witnessed in the initial months, post resumption of tolling from April 20, 2020.

This has been driven by increased movement of passenger and commercial vehicles, resulting in growth of around 10 per cent on a Y-o-Y basis, according to ICRA.

Overall, in 9M FY2021, the traffic shrinkage witnessed is 4.6 per cent as compared of 13 per cent de-growth in Gross Value Added (GVA) of construction, mining and manufacturing. Freight movement has a strong correlation with the GVA of construction, mining and manufacturing, consequently toll collections closely mirrors the trends in GVA. The movement of GVA and traffic growth has mostly followed similar growth trends, with exception of brief periods including demonetisation, implementation of GST and during revision of axle load norms.

Shubham Jain, Senior Vice President, Corporate Ratings, ICRA, in a statement said, “The overall reduction in toll collections for the national highway projects could be in the range of 5-7 per cent in FY2021. Adequate liquidity buffer in the form of debt service reserve and quick recovery post easing of lockdown restrictions have arrested major slippages in the credit profile of toll road assets.”

“The toll collections in FY2022 are expected to increase 14-15 per cent on a low base; given the impact of toll suspension in the first 20 days of FY2021. This will help improve cashflows for the toll road SPVs,” he said.

Most of the stretches have witnessed a traffic slowdown during FY2020 with contraction of 3.8 per cent due to continued impact of revised axle norms in H1 FY2020, a general slowdown in the economy and the constrained vehicular movement in the run-up to the nationwide lockdown due to the Covid-19 pandemic in Q4 FY2020.

Many of BOT concessionaires have deferred periodic maintenance which was due in FY2021 on account of de-growth in traffic, lower toll collections due to the Covid-19 pandemic and to preserve liquidity. Any significant delay in commencement of the periodic maintenance could affect the riding quality and also result in significant cost escalations which will adversely impact the cashflows.

Published on April 09, 2021

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