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Outlook on toll roads businesses looks positive

Outlook on toll roads businesses looks positive

Approximately 65% of the freight traffic depends on sectors such as construction, mining, and manufacturing having a strong rebound after the Covid-19, rating agency Icra said in a statement.

Rating agency Icra revised its outlook on toll road businesses from ‘stable’ to ‘positive’ for the financial year 2023 since the toll collections are soon expected to witness a healthy increase due to the improved economic activity.

The growth in sectors like construction, mining, and manufacturing is predicted to be between 6% to 8% for FY2023, it is also expected to result in overall growth in traffic volumes by 5% and 6%. This comes with an increase in toll rates which should support strong growth in toll collections.

Toll rates for projects linked to December WPI would witness an 8.4% growth while the toll rates for March WPI-linked projects will witness a growth of 14.5%. Regarding the toll collections, they might increase by 17% to 20% in the FY2023 due to a sharp rise in toll rates, traffic volumes, and adjustment of revenues by 3% to 4% which were lost due to the second wave of Covid-19 in the first quarter of 2022.

Additionally, the increase in toll collection will most likely outweigh the expected increase in Operations and Maintenance costs owing to the high WPI and can result in better coverage metrics. The agency expects cumulative DSCR to grow by at least 10 bps for the majority of the road projects.

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