<p>Mumbai: India’s highway sector is facing challenges, with muted central road award activity for the past two years, leading to increased competition and persistent project execution issues, according to India Ratings and Research (Ind-Ra).</p><p>Although state awards have come to the rescue, the sector is likely to continue to witness subdued revenue and margins. “The muted central award activity has altered the sector’s dynamics, pushing states into the driver’s seat. While this shift ensures continuity, it also introduces complexities around execution and financing”, Krishan Binani, Director, Corporate Ratings, Ind-Ra, said in a press statement.</p> .Centre approves two major highways projects in Maharashtra and Odisha.<p>Moreover, the sector is likely to witness a higher number of build-operate-transfer (BOT) projects both on Centre and State levels, necessitating increased private capital. Ind-Ra projects modest 6% to 8% yoy revenue growth for the overall engineering, procurement and construction (EPC) sector in FY26, largely due to flat-to-negative growth in the highways sector, after a significant revenue decline in FY25. Margins are expected to bottom out in FY26, after decreasing about 500bp over FY21-FY26. However, working capital cycles may start rising, as the project mix shifts towards more state awards.</p><p>Ind-Ra expects national highways construction of 9,000-9,500 km in FY26, down 10%-15% yoy (FY25: 10,660km, FY24: 12,349km, FY23: 10,331km), marking the lowest level since FY18. This decline is driven by a flat capex allocation of INR2.72 trillion for FY26, after just a 3% yoy increase in FY25.</p><p>This is a marked slowdown from a robust 19% CAGR during FY21–FY24. Internal and Extra Budgetary Resources (IEBR) has fallen to negligible levels recently as National Highway Authority of India (focuses on debt reduction, shifting towards budget-supported capex and monetisation.</p><p>Awarding activity has remained weak since FY24, with annual awards stagnating at 8,500km per year, compared to construction activity exceeding 10,500km, leading to reduced order backlogs. The Ministry of Road Transport and Highway (MoRTH) and NHAI have changed focus to corridor-based development and more access-controlled highways and expressways, planning 11,000km by FY27 and 15,000km by FY32, up from nearly 3,000km currently, moving away from the Bharatmala project. Ind-Ra expects ordering activity to revive in FY26, in view of the likely 10,500-11,000km awards from the central government. </p>
<p>Mumbai: India’s highway sector is facing challenges, with muted central road award activity for the past two years, leading to increased competition and persistent project execution issues, according to India Ratings and Research (Ind-Ra).</p><p>Although state awards have come to the rescue, the sector is likely to continue to witness subdued revenue and margins. “The muted central award activity has altered the sector’s dynamics, pushing states into the driver’s seat. While this shift ensures continuity, it also introduces complexities around execution and financing”, Krishan Binani, Director, Corporate Ratings, Ind-Ra, said in a press statement.</p> .Centre approves two major highways projects in Maharashtra and Odisha.<p>Moreover, the sector is likely to witness a higher number of build-operate-transfer (BOT) projects both on Centre and State levels, necessitating increased private capital. Ind-Ra projects modest 6% to 8% yoy revenue growth for the overall engineering, procurement and construction (EPC) sector in FY26, largely due to flat-to-negative growth in the highways sector, after a significant revenue decline in FY25. Margins are expected to bottom out in FY26, after decreasing about 500bp over FY21-FY26. However, working capital cycles may start rising, as the project mix shifts towards more state awards.</p><p>Ind-Ra expects national highways construction of 9,000-9,500 km in FY26, down 10%-15% yoy (FY25: 10,660km, FY24: 12,349km, FY23: 10,331km), marking the lowest level since FY18. This decline is driven by a flat capex allocation of INR2.72 trillion for FY26, after just a 3% yoy increase in FY25.</p><p>This is a marked slowdown from a robust 19% CAGR during FY21–FY24. Internal and Extra Budgetary Resources (IEBR) has fallen to negligible levels recently as National Highway Authority of India (focuses on debt reduction, shifting towards budget-supported capex and monetisation.</p><p>Awarding activity has remained weak since FY24, with annual awards stagnating at 8,500km per year, compared to construction activity exceeding 10,500km, leading to reduced order backlogs. The Ministry of Road Transport and Highway (MoRTH) and NHAI have changed focus to corridor-based development and more access-controlled highways and expressways, planning 11,000km by FY27 and 15,000km by FY32, up from nearly 3,000km currently, moving away from the Bharatmala project. Ind-Ra expects ordering activity to revive in FY26, in view of the likely 10,500-11,000km awards from the central government. </p>