Stringent bidding rules imposed by the Ministry of Road Transport & Highways (MoRTH) have led to a slowdown in project awards by the National Highways Authority of India (NHAI), despite a robust Rs 3.5 trillion pipeline. According to an HDFC Securities report, the shift to more cautious developer models now favours firms with strong balance sheets, as tighter qualification norms limit aggressive bidders.

The revised norms mandate additional performance security, targeting the exclusion of players that previously submitted low bids—often 25 to 40 per cent below NHAI cost estimates—raising concerns over long-term road quality. This has particularly impacted small, unlisted firms that had earlier dominated bidding due to relaxed entry barriers.

While sectors such as buildings, power transmission, and urban infrastructure have recently seen stronger order flows, road construction activity has markedly declined. This has affected the revenue visibility and valuations of construction firms heavily reliant on highway contracts.

The report suggests that engineering, procurement, and construction (EPC) players could mitigate risk by diversifying into solar energy, battery energy storage systems (BESS), river interlinking, and transmission. A recovery in order flow, it notes, would support sectoral re-rating, especially for diversified infrastructure players positioned beyond roads.