Challenges Ahead: India's Highway Sector Faces Muted Growth

India's highway sector faces challenges due to muted central road award activity, increased competition, and execution issues. State awards have partially mitigated the impact, but the sector is expected to face subdued revenue and margins. Ind-Ra projects modest growth and a shift towards more BOT projects.

The highway sector in India is currently navigating a tough landscape characterized by muted central road award activity over the past two years. This stasis has led to heightened competition and ongoing project execution challenges, according to India Ratings and Research (Ind-Ra).

State-awarded projects have stepped in to fill gaps left by the slowed central activity, but complexities in execution and financing remain, warns Ind-Ra's Director of Corporate Ratings, Krishan Binani. The sector could experience subdued revenue and profit margins as these dynamics play out.

Furthermore, Ind-Ra anticipates an increase in build-operate-transfer (BOT) projects, requiring more private capital investment. Though the engineering, procurement, and construction (EPC) sector might see slight growth by FY26, the overall outlook remains flat due to declines in the highways sector.

(With inputs from agencies.)