Highway projects worth Rs 67K cr at high risk

Q: Crisil Ratings told in a report that about 5100 km of under construction highway projects worth Rs. 67200 crore are under high risk.

Abhishek,

7th October 2015

Real estate News in Mumbai

highway projects

crisil

road & highway projects in mumbai

under construction highway projects

operational bot highways

service debt

operational highway projects

weak financial profile

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Replies (4)

At present, construction projects require equity and cost overrun support of around Rs 28500 crore over the next 2 yrs. Of this, about Rs 16000 crore could be stumped up from internal accrual of sponsors and sale of stake at the special purpose vehicle level. That leaves a significant decline of Rs 12500 crore.

Ketalpujara, Mumbai

9th October 2015

Comment

As per Crisil Report, it is found that 26 out of 80 operational projects are in no position to service debt on their own because of lower than estimated traffic. These projects are mostly toll based, spread over 2400 km, or 40% of total length of operational BOT highways, and have an outstanding debt of Rs 17100 crore.

Joydeep D,

7th October 2015

Comment

I think the remaining will benefit from dynamic moves by the government to make easy right of way (ROW) and other clearances. We find the recent government move to ensure 80% ROW, before a project is awarded very constructive.

Ravindra Singh,

8th October 2015

@kishore,
Operational highway projects have been facing cash flow mismatches in the past few years because of lower than estimated traffic volume, and interest rates that were on the increase till 2014.

Joydeep D,

7th October 2015

Comment

As the interest rates on decline, pressure will get a comfort, but debt service coverage ratios will remain less than one, over the next 2 yrs.

As a result, timely support from sponsors to bridge cash flow mismatches will be critical because debt in these projects is without alternative to the sponsor.

Kishore Pathak, Mumbai

7th October 2015

Right Abhishek,
Apart from this, 2400 km operational BOT projects worth Rs 25800 crore are at high risk mainly due to weak financial profile of sponsors and inability to service debt.

Around 7500 km of highway projects, including 5100 km under construction and 2400 km operational, awarded mostly between fiscals 2010 and 2012 on a build, operate, transfer basis are at high risk today.

Ketalpujara, Mumbai

7th October 2015

Comment

It is expected that 50% of the projects under construction are at a high risk and the reason are significant over cost and weak resources of sponsors.

Kishore Pathak, Mumbai

7th October 2015