Govt to keep impetus on road segments for tendering in near term: Ind-Ra

The Central government is expected to keep impetus on roads, irrigation and water works segments for tendering in near term, said India Ratings and Research.

“Ind-Ra believes that the incremental order inflows in roads, railways, irrigation, housing development projects and distribution segments would drive the demand forecast for the sector in FY22.

“The schemes such as Bharatmala, commissioning of ‘Dedicated Freight Corridors’, ‘Swachh Bharat’ mission and ‘Jal Jeevan’ mission and ‘Affordable Housing Schemes’ coupled with the ‘National Infrastructure Pipeline’ would drive the sector order inflows in the medium term,” it said.

However, continued competitiveness in these segments is likely to result in a moderation of operating margins of EPC players.

“Ind-Ra, in its FY22 construction outlook, has revised the sector outlook to improving from negative, based on the rich budgetary allocations which would result in huge order inflows coupled with better execution rates.”

In FY21, the tenders floated had seen incremental growth, majorly contributed by Uttar Pradesh.

“The tenders announced from UP contributed 15 per cent to the overall tenders floated across the country in FY21.

“The orders floated are majorly from ‘Bharatmala Expressway’ projects and ‘Swachh Bharat Mission’ schemes. UP was followed by Telangana and Andhra Pradesh; both put together contributed around 16 per cent to the overall tenders floated in FY21.”

In addition, it said that orders awarded grew 72 per cent YoY in FY21 to Rs 3,183 billion, with the road segment contributing to the major chunk of the orders awarded at 27 per cent.

“This was followed by mining at 23 per cent and railways (including metros) at 21 per cent.”

“Out of the overall order awards in FY21, 70 per cent of the orders were contributed by roadways, mining and railways.”