Ind-Ra downgrades road sector outlook for FY20

New Delhi: Rating agency Ind-Ra has revised the outlook for road sector to stable-to-negative from stable for the remaining part of 2019-20 fiscal due to subdued funding climate, economic growth-led deceleration in traffic volumes and uncertainty on the bidding model.

The weakening of financing sentiment and a sharp rise in land acquisition costs exert pressure on the central budget and could compel the government to rethink the bidding model, India Ratings and Research (Ind-Ra) said in a statement on Monday.

Simultaneously, developers' order book to revenue multiple slipped to a four-year low due to absence of new bidding, leading to lower revenue visibility, it said.

Construction activities are expected to plateau in 2019-20 due to dismal project awards in 2019 and delayed appointed date due to the land acquisition issues.

The ambitious Bharatmala Pariyojana is likely to see 55 per cent cost overrun and awarding activity to be completed not before 2023-24.

Road and highway ministry's efforts to offer opportunities through new models such as toll-operate-transfer and rejuvenated build-operate-transfer would garner participation, contingent on addressing issues in earlier concession arrangement.

"Ind-Ra has revised the outlook on toll road projects to stable-to-negative from stable for the remainder of FY'20, driven by heightened risk in prediction of traffic growth due to deceleration in economic growth," it said.