High bids on roads cause stress in the sector

24 May 2024 CW Team

The report highlights this development just before the government's initiative to reignite private sector interest in the sector through the awards of BoT (build operate transfer) projects, where the developer bears all investment risks. According to the report, further adjustments may be necessary to rescue these new projects.

As per the infrastructure outlook for 2025 provided by India Ratings and Research, many new developers, transitioning from EPC to HAM for the first time, have struggled to secure funding due to tightened capital requirements by banks. Moreover, relaxed bidding norms have led to aggressive bidding, with financially weaker players also securing projects with lower bid premiums.

The increase in aggressive bids can also be attributed to fewer projects being awarded in recent years. Consequently, sponsors of some projects are under pressure to achieve financial closure, prompting the National Highway Authority of India to initiate project substitution to attract new investors.

Rishabh Jain, associate director at India Ratings and Research, commented that in the last couple of years, about 8-10 highway projects faced substitution due to the inability of original sponsors to achieve financial closure. However, most of these projects were bid on the HAM model, where risks are lower for developers as payments are guaranteed over a period. This situation should not affect bids for BoT projects, as developer interest would be determined by reasonable traffic projections and toll earnings.

NHAI has identified 53 BOT (Toll) projects covering 5200 km worth Rs. 2.1 trillion for bidding over the next few years, starting FY25. However, the success of these projects depends entirely on the risk appetite of investors and projections of toll revenues, necessitating stable conditions in the sector.

While a portion of the road sector is experiencing stress-like conditions, India Ratings and Research (Ind-Ra) has maintained a stable rating outlook for the overall infrastructure sector for FY25. Additionally, it has upheld a positive rating outlook on airports.

India Ratings and Research has analysed the current state of the highway projects, noting that aggressive new entrants have created stress-like conditions in the sector. This has led to a decrease in bids, causing several projects to fail in achieving financial closure. The report highlights this development just before the government's initiative to reignite private sector interest in the sector through the awards of BoT (build operate transfer) projects, where the developer bears all investment risks. According to the report, further adjustments may be necessary to rescue these new projects. As per the infrastructure outlook for 2025 provided by India Ratings and Research, many new developers, transitioning from EPC to HAM for the first time, have struggled to secure funding due to tightened capital requirements by banks. Moreover, relaxed bidding norms have led to aggressive bidding, with financially weaker players also securing projects with lower bid premiums. The increase in aggressive bids can also be attributed to fewer projects being awarded in recent years. Consequently, sponsors of some projects are under pressure to achieve financial closure, prompting the National Highway Authority of India to initiate project substitution to attract new investors. Rishabh Jain, associate director at India Ratings and Research, commented that in the last couple of years, about 8-10 highway projects faced substitution due to the inability of original sponsors to achieve financial closure. However, most of these projects were bid on the HAM model, where risks are lower for developers as payments are guaranteed over a period. This situation should not affect bids for BoT projects, as developer interest would be determined by reasonable traffic projections and toll earnings. NHAI has identified 53 BOT (Toll) projects covering 5200 km worth Rs. 2.1 trillion for bidding over the next few years, starting FY25. However, the success of these projects depends entirely on the risk appetite of investors and projections of toll revenues, necessitating stable conditions in the sector. While a portion of the road sector is experiencing stress-like conditions, India Ratings and Research (Ind-Ra) has maintained a stable rating outlook for the overall infrastructure sector for FY25. Additionally, it has upheld a positive rating outlook on airports.

Infrastructure Energy

22 Oct 2025

KEC Secures Rs 10, 380 Mn Substation Order in Saudi Arabia

KEC International Ltd., a global infrastructure EPC major, and an RPG Group company, has secured a new order worth Rs 10,380 million for the Design, Supply and Installation of a 380 kV GIS Substation in Saudi Arabia.Vimal Kejriwal, MD & CEO, KEC International Ltd., commented, “We are delighted with the successive order wins in our T&D business. In a landmark achievement, we have secured our largest ever substation order. This prestigious order in the Middle East has widened our portfolio and strengthened our presence in the region. With this strategic win, our year-to-date or..

Infrastructure Urban

22 Oct 2025

Central Bank of India executes first fully digital SCF deal on PSB Xchange

In a major advancement for India’s banking sector, Central Bank of India (CBI) has successfully completed the country’s first fully digital supply chain finance (SCF) transaction on PSB Xchange—a unified multi-lender platform launched by PSB Alliance. PSB Xchange is designed to connect public and private sector banks, NBFCs, and fintechs with corporates and their channel partners to facilitate supply chain finance and small business loans. The transaction marks the first time a fintech-originated corporate lead has been seamlessly processed through the PSB Xchange ecosystem. The lead fl..

Infrastructure Energy

22 Oct 2025

Atlanta Electricals secures Rs 1,835 Mn transformer order from BNC Power

Atlanta Electricals Limited (“Atlanta”) has secured an order worth Rs 1,835 million from BNC Power Projects Ltd for the supply of extra high voltage (EHV) transformers and a bus reactor for its Pugal site. The contract includes a mix of 315 MVA, 400 KV and 100 MVA, 132 KV transformers along with a 400 KV bus reactor. The project scope encompasses design, manufacturing, testing, and supply to the project site. Deliveries will be sequenced following engineering and drawing approvals, offering multi-quarter execution visibility and ensuring a steady production run-rate. The order will be ex..