Metro-rail to boost order book of construction companies by Rs 75,000-90,000 crore

The metro rail sector has seen strong traction in the past couple of years and growth of the metro network in new cities is expected to provide sizeable opportunities for construction companies owing to a strong pipeline of projects that are in the approval or planning stage. According to rating agency ICRA, this is expected to boost the order book of construction companies by Rs 75,000-90,000 crore over the next three to five years. “Roads and urban infrastructure, including metro rail, are two key segments that have witnessed robust order inflows for construction companies,” says K Ravichandran, Senior Vice-President and Group Head, Corporate Ratings, ICRA. “Further, with a sizeable pipeline of projects in these segments, the construction sector is expected to have sufficient order inflows and companies with a strong track record and healthy balance sheet are expected to exhibit strong growth going forward.” Metro rail development is being planned in over 30 Indian cities. A metro rail network is currently operational or partly operational in nine cities, while another five have metro projects under implementation. In addition to the extension of the network in these cities, a new metro rail is to be developed in another 15-20 cities. According to ICRA, the overall cost of expansion of operational or under implementation approved metro projects is over Rs 2.5 lakh crore, thus supporting the order books of construction contractors. Further, metro rail projects worth another Rs 2 lakh crore are in various stages of approvals and are likely to come up for bidding within the next five years. With PPPs being limited in the metro rail sector, only five such projects have been taken up on this mode. According to the agency, there are currently three operational PPP-based metro projects (one in Mumbai, and two in Gurugram), while one project is under implementation (Hyderabad Metro). Not surprisingly, several large Indian construction companies have taken up projects in the metro rail sector.