Revenue growth for highway developers in the engineering, procurement and construction (EPC) segment could get halved in both 2019-20 and 2020-21 fiscals to around 15% against 30% logged in FY19. "The decline would be largely due to slower awarding of projects and delayed receipt of appointed date - which is the zero date or kick-off date for start of a project - from the National Highways Authority of India (NHAI)," rating agency Crisil said in a report.
NHAI awarded around 7,400 km in FY18. It fell to about 2,200 km in FY19.
"In the current fiscal and the next, awarding is expected to be around 4,000 km a year. The delay in declaring appointed dates for the projects awarded, on the other hand, is primarily due to issues in land acquisition," said Sachin Gupta, senior director, Crisil. Analysing 119 projects awarded under HAM, he said almost 30% have not received appointed dates more than a year after these were awarded. But the slowdown in revenue growth is unlikely to impact the credit profiles of the EPC players primarily because they have a healthy order book and have kept a check on their debt level.
Also, they can be rest assured of the fact that once a project is started, it would not be stalled. NHAI notifies the appointed date only when majority of the land, 80% for HAM projects, is procured. "Thus, once a project is under construction, there is limited risk of delays due to non-availability of land and thereby minimal impact on credit profile of the EPC companies. That said, there is a risk that any further delay in declaring appointed dates could result in termination of some of the awarded projects, " Crisil said.