October 26, 2016 / 15:39 IST
After a lull of two years (FY13-14), road ordering has picked up pace, largely driven by Govt financing the construction (not BOT, reflected in 70% of orders on EPC). Recent Govt announcement on 75% cash payouts to contractors wherein favorable arbitration award has been received would further deleverage EPC contractors. Govt target 25K km road awards in FY17 (10K km in FY16). Total Road construction opportunity (EPC+ BOT) = USD 45 bn over next 5 years driven by several new Govt programs.
Developers hurt by aggressive bidding during FY10-12 and stretched balance sheets have largely remained on the side-lines in recent bids. Cash payouts on arbitration claims to significantly de-leverage balance sheets of stressed EPC contractors over 1-2 years and will re-start bidding. This will coincide with declining share of EPC, resulting in increased competition, forcing companies to bid for BOT projects to protect profitability.
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