ROAD

SECTOR IN INDIA

By SNP Infra Research

www.snpinfrasol.com
 Road Sector in India
With central government astounding commitment towards
infrastructure development of integrated road network, India is
rising high on investment in road sector through innovative business
model like Hybrid Annuity Model (HAM). Around 40 HAM projects
worth around Rs 35,000 Cr has been already awarded by NHAI
and many of them have already tied up their financial commitment
for the same. As per Budget 2018, investment up to magnitude
of Rs 2.41 Lakh Cr has been allocated to the transport sector
as a whole, out of which budget allocation for highway has been
stepped up to Rs 64,900 Crore. Asian Development Bank (ADB)
has approved $500 million of low cost debt to improve rural roads
of 12000 Km in five states in India. Government is planning up to
2000 Km of coastal connectivity through road networks by 2020,
which will spur significant investment in road sectors and will make
the economy more competitive. However, pertinent to number of
road projects becoming NPA, banks and financial institution are
very much apprehensive to sanction loan to new promoters. As
the goal is so ambitious & the market environment is quite complex
with clearances and funding issues, govt. needs to plan out the
road map for it more effectively.
Ministry of Road Transport and Highways (MoRTH) has envisaged
an umbrella program ‘Bharatmala’ to subsume unfinished parts
of NHDP and also focus on the new initiatives like development
of Border and  International connectivity roads, Coastal & port
connectivity roads, National Corridors Efficiency improvements,
Economic corridors development. Further, ministry has proposed
for Recycling of operational highway assets using - the Toll - Operate
-Transfer (TOT) Model through which, the right of collection of Toll
Fees for operational public funded NH projects is to be assigned for
a pre-determined concession period (30 years) to concessionaires
against upfront payment of a lump-sum amount. This will attract
big ticket investment from long term institutional investors i.e. both
domestic and international like pension funds, insurance funds,
wealth funds etc , which will resolve funding issues to the sector
in a big way.
However all is not so rosy with development of road projects vis-à-
vis issues pertinent to land acquisition, clearance and issues related
to concessionaire which contributed around 95% of total projects
turned unviable between the period of 2010 to 2015. Developer,
EPC contractor and lender struggle with pre-construction and
execution risks of large scale road project, resulting in blockage
of significant investment which hinders the government thrust for
road infrastructure development from picking up the pace.
MUST BUY FOR
• EPC Player • Project Contractors
• Project developer • Equipment Suppliers
• O&M Player • Engineering Consultants
• Bank and Financing Agency • Research and Consulting Firms
SNP Infra Research has conducted exhaustive primary and
secondary market surveys to project the inherent opportunity for
road construction industry participants across the country. In this
report we aim to have forward looking view on road construction
industry in India to shape future business strategies of private
developer and government enablement in the sector. This report
also discusses about issues and challenges in the sector and
prospective mitigation for the same from Developer, EPC contractor
and Lender’s perspective.
WE have tracked past trend of investment in road segment and
extrapolated future investment outlook in the sectors. Detail
analysis of policy framework vis-à-vis different business models
and comparative analysis with risks associated with each models
have been neatly presented. Opportunity of different value chain
partners of construction industry i.e. project developer, EPC
contractor, engineering consultant and lenders and financial
institutions have been examined. Ideal cost estimation through
draft financial modelling for different business models along with
inherent risk return prospective has been estimated.
In addition to this under construction/upcoming national highway
and state high way projects database has been provided to enable
value chain partner for strategic decisions.
Key Takeaways
• 
Market Size and Business Opportunity in Indian Road
Construction Sector.
• Contractual Gaps in BOT road project.
• Corrective actions by NHAI vis-à-vis key policy changes.
• Risk allocation as per business model
• Funding challenges for domestic as well as foreign developers
• Investment guide for Project developers vis-à-vis ideal rate of
return (Project IRR/Equity IRR) for Hybrid Annuity Model.
• Business Opportunity in terms of INR Cr for Project Developer.
• Business Opportunity in terms of INR Cr for EPC Contractor.
• 
Business Opportunity in terms of INR Cr for Construction
Materials and Equipment supplier.
• Business scope for International Funds to invest in Indian Road
Construction Space
• Regulatory and Market Risk of different Value Chain Partners
• Regulatory Bodies
• Industry Associations
 Table of Contents (Draft)
1. Executive Summary 7.3  Post-construction Issues
• Operations and Management
2. Indian Road Network • Revenue Risks and Mitigation
2.1  Status of Indian Road
8. Road Project Finance
• Length of Roads
• Quality of Roads 8.1  Project Cost Determination
• International Benchmarking 8.2  Required Return Determination
2.2  National Highway 8.3  Financial Evaluation
2.3  State Highway • Net Present Value Method (NPV)
• Internal Rate of Return Method (IRR)
2.4  Other Roads
8.4  Draft Financial Model (Hybrid Annuity Model)
3. Policy and Regulation
9. Company Profile
3.1  Institutional Setup
9.1  Ashoka Buildcon Ltd
3.2  Policy Framework
• Standard Bidding Procedure 9.2  HCC Infrastructure
• Land Acquisition Policy 9.3  Sadbhav Engineering Ltd
• Model Concession Agreement (MCA) 9.4  Dilip Buildcon Ltd
• Toll Collection Policy
9.5  IL&FS Engineering and Construction Company Ltd

4. Trend of Investment in Indian Road Segment 9.6  Gammon Infrastructure Projects Limited
9.7  IRB Infrastructure Ltd
4.1  Issues Pertinent to PPP Projects During 2010-12
9.8  GMR Infrastructure
4.2  Contractual Gaps in BOT Road Project
4.3  Key Hurdles in Road Project Implementation 10. Conclusion and Recommendation
• Land Acquisition
• Clearances
• Concessionaire Issues
4.4  Corrective Actions of Authority: Key Policy Changes
Along with Report List of upcoming and
5. Business Model in Road Sectors
Under Construction 300+ Road projects
5.1  BOT (Toll )
(NH and SH) will be provided.
5.2  BOT(Annuity)
5.3  Hybrid Annuity Model (HAM) Template of Database
5.4  Comparative Analysis of Risks 1. Name of Project
2. State, Location
6. Opportunity in Road Sectors: Trillion of Opportunity
3. Length of Roads (in KM) and Bridge in (Metres)
6.1  Government’s Initiatives and Road Development Program
6.2  Opportunity for Project Developer/ EPC Contractor
4. Project Category (New/ Capacity Expansion)
6.3  Opportunity for Engineering Consultants 5. Project Size (in INR Crs)
6.4  Opportunity for Financial Institutions 6. Project owner
6.5  Opportunity for Construction Materials and 7. Project Developer
Equipment Supplier 8. EPC Contractor

7. Challenges and Risks in Road Sector Projects. 9. Bid Status

7.1  Pre-construction Issues

10. Construction Status
• Land Acquisition 11. Bid Participant
• Environmental Clearances 12. Project Consultant
• Cost Criteria
13. Contact Details of Project Developer (Key Person)
7.2  Construction and Contract Management Issues
• Contracts
• Dispute Resolution Mechanism
• Lack of Technical Expertise

Release Date: April 2018  •  No. of Pages: 200+ •  Delivery Format: PDF & Excel
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