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Aggressive Bidding Still Prevails in the Road Sector

KRChoksey has come out with its report on road sector. The research firm believe such aggressive bids will continue in near future until some players face problem to achieve financial closure.

Ordering Activity by NHAI in FY12E: The ordering activities in surface transportation sector are gaining momentum with the opening of 9 new tenders in the last week. NHAI’s plan to award ~7,500 km in FY12E, 19 projects of ~3,003 km is awarded till date, 11 projects of ~1,319 km bids have received and undervaluation, 4 projects of ~401 km bids are due shortly, 7 projects of ~700 km got approval from Government & bids to invited in near future and 16 projects of ~2,100 km are in stage of approval that to be awarded before March FY12E. Further, NHAI will award ~15,000 km of new projects from phase III & phase IV in next two years i.e. FY13E & FY14E.

Aggressive bidding still prevails in road sector: The chart has given below reveals that aggressive biddings are still prevails in road sector. The big players like L&T, IRB, ITNL, Reliance infrastructure are getting tough competition from small players. The difference between L1 & L2 bids has not narrowed, out of 9 projects awarded recently only one has received grant.

View & Outlook: We believe such aggressive bids will continue in near future until some players face problem to achieve financial closure. The difference between grants and premiums is increasing and this is negative for the industry. However, it reveals the picture of aggressive bids to grab the opportunities because govt expected these projects will require a grant but all the 8 projects have been awarded on a premium.

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To read the full report click on the attachment

Attachments : RoadSector_KRChoksey_021211.pdf

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