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NHAI awarding picks up in 4Q, ends below target in FY25

* NHAI’s project awarding in FY25 stood at 4,080km, below the 5,000km target, mainly due to general elections in 1QFY25 and subdued activity until 3QFY25. Awarding picked up in 4QFY25, with ~2,600km awarded during the quarter. The overall muted awarding has impacted order inflows for several road construction companies. NHAI exceeded its highway construction target of 5,150km and built 5,614km in FY25.

* FASTag toll collections grew ~15% YoY in terms of volume and ~17% YoY in terms of value in 4QFY25, supporting asset monetization plans.

* In FY25, NHAI monetized assets worth INR287b, below the INR390b target, due to MoRTH’s directive to pause ToT (toll-operate-transfer)-based monetization. However, it raised a record INR177b through the fourth round of NHAI InVIT. For FY26, NHAI targets INR300b in monetization, with 24 road assets (1,472km) identified for the process.

* The Dedicated Freight Corridor Corporation of India (DFCCIL) has commissioned 2,741km of the planned 2,843km for both the Eastern and Western Dedicated Freight Corridors (DFCs). The completion deadline is extended to Dec’25 due to delays in land acquisition.

NHAI awarding remains subdued in FY25; construction activity exceeds target

In FY25, NHAI awarded road projects totaling 4,080km, falling short of its initial target of 5,000km. There were no project awards in 1QFY25 due to the general elections, followed by subdued awarding activity in 2Q and 3Q. On a YoY basis, project awards rose by 63%, largely due to the low base in FY24. Muted awarding over the past two fiscals has significantly impacted order inflows for many road construction companies. On the construction front, NHAI exceeded its highway construction target of 5,150km by completing 5,614km in FY25. However, this still marked a 15% YoY decline YoY.

FASTag toll collections showing consistent improvement

FASTag toll collection volume improved ~15% YoY in 4QFY25, while the collection value increased ~17% YoY. During FY25, FAStag toll collections increased 13% YoY. Higher toll collections play a crucial role in expediting the monetization process of road assets by the Ministry. Additionally, toll collections benefit companies that aim to monetize their existing toll assets.

Declining input prices to boost margins for contractors

Steel and aluminum prices have decreased ~25% and ~18%, respectively, from their highs seen in Apr’22. Cement prices have decreased ~8% from their highs seen in Oct’23. With higher construction activities and stability in commodity prices, road contractors anticipate some improvement in profitability and margins in FY26.

Players with robust order books, strong balance sheets, and diversified operations well placed

Although there has been a slowdown in project awarding in FY24 and FY25, the tender pipeline is currently robust. Entities with significant order backlogs, strong financial standings, and involvement across diverse sectors are well-positioned to benefit.

* Project awarding by NHAI totaled 4,080km in FY25 vs. the target of 5,000km at the start of FY25. Order awarding by NHAI was NIL in 1QFY25 due to the general elections, followed by subdued awarding in 2Q and 3Q of FY25. On a YoY basis, awarding increased by 63% YoY primarily due to a lower base of FY24. Muted awarding by NHAI in the last two fiscals has severely affected order inflows for several road construction companies.

* On the construction side, NHAI exceeded its highway construction target of 5,150km and built 5,614km in FY25. However, compared to FY24, construction activity was lower by 15%. NHAI also reached an all-time high capex of INR2.5t in FY25, exceeding the target of INR2.4t.

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