NHAI awards drop 60% in H1 FY23, competitive intensity in HAM moderates

The National Highways Authority of India (NHAI) awarded only 777 km of road projects in the first half of this fiscal — a three-fiscal low and a 60% drop compared with last year.

Slackened pace of execution and highly inflated prices of key input materials (owing to uncertainties arising out of global geopolitical tensions) have acted as major impediments to awarding momentum.

That said, NHAI has already floated tenders for ~2,200 km so far this fiscal — as much as 36% more than in the same period last fiscal — and considering the ramp-up that typically happens in the fourth quarter, awarding in the second half of the fiscal is expected to improve substantially.

Nonetheless, awarding for the full fiscal is still likely to moderate on-year. We expect 4,800-5,200 km of awards this fiscal, much lower than the 6,306 km awarded last fiscal.

Of the 777 km awarded in the first half of this fiscal, hybrid annuity model (HAM) projects cornered a healthy 51% share, while engineering, procurement and construction (EPC) accounted for the rest. The shares are expected to remain at current levels for the full fiscal as well, with HAM accounting for 45-50%, EPC for 45-50%, and build-operate-toll (BOT) for <5%.

Delving deeper into HAM awards, some of the concerns around intense competition in the space seem to have a softened to an extent.