Toll collections fall as slowing economy hits traffic

Written by Shubhra Tandon | Mumbai | Updated: Dec 3 2013, 11:01am hrs
Toll collections came under pressure during July-September with the slowdown in the economy affecting traffic. An FE analysis shows that a clutch of 17 road projects managed by IRB Infrastructure Developers and Ashoka Buildcon have seen toll collections falling 6% to R318 crore in Q2FY14 crore sequentially. Of these, 12 have registered a steeper fall in toll collections at 9.5% to R130.6 crore q-o-q.

The fall has worsened when compared with the same period of 2012-13. In July-September 2012, collections were down a mere 2% to R118.4 crore. Some of the prominent stretches impacted include IRBs Surat-Dahisar, Bharuch-Surat and Pune-Nashik projects, among others, and Ashoka Buildcons Belgaum-Dharwad, Ahmednagar-Aurangabad, Indore-Edalabad and Katni bypass projects.

The second quarter is traditionally affected by the monsoon, slowing down traffic. This, coupled with slow industry growth, has affected toll collections even more. Indias GDP of 5% for FY13 was the lowest in a decade.

IRB, however, registered a year-on-year increase of 10% in total income to R967 crore in the quarter ended September 30, 2013, suggesting the impact of the decline in collections was limited. Also, the company increased rates in some projects and commissioned new ones, adding to revenues. On the other hand, due to slow execution, Ashoka Buildcons income fell 4% to R248.75 crore against R259.24 crore in the previous corresponding quarter.

Toll collections have always has a correlation with the economy. As you see, in a slowing economy, tolling revenues are also falling. At present, around 0.8 times is the correlation between traffic to GDP growth; so, if the GDP is down to 5%, its very natural to have traffic growth in the range of 4% depending on where the projects are, explains Virendra D Mhaiskar, chairman and managing director, IRB Infrastructure Developers.

Some projects like Thane-Bhiwandi Bypass, Pune-Nashik, Nagar Karmala Tembhurni, Kharpada Bridge, Belgaum-Dharwad, Bhandara, Dewas bypass, Katni bypass and Pune-Shirur showed a fall in toll collections y-o-y, while in most other projects, collections have remained flat. On a full-year basis (FY12 vs FY13), three road projects IRBs Mohol-Mandrup-Kamptee, Ashoka Buildcons Ahmednagar-Aurangabad and Katni bypass have seen a 2-5% fall.

Slower mining activity has also impacted some road assets. Toll collections on IRBs Jaipur-Deoli project, for example, are affected due to the ban on mining of sand and aggregates in Rajasthan. The project, which commenced partial tolling from September 27, 2013, is seeing daily toll collections of R15 lakh as against the companys estimate of R22 lakh, says a recent report from a domestic brokerage.

Similarly, the companys Tumkur-Chitradurgas toll collections remain impacted due to the continuing ban on mining in Karnataka. In the first half of FY14, the project garnered R79 crore of toll revenues, down from about R81 crore in the corresponding period last year.

Meanwhile, the delay in execution due to a heavy monsoon impacted the progress of Ashoka Buildcons under-construction projects.

Belgaum-Dharwad road project saw its toll revenues fall by about 7% to Rs 14.2 crore on a q-o-q basis and around 5% on a y-o-y basis. The company has completed 87% of EPC work of the total project. The project is expected to get commissioned by December 2013. Similar is the case with Dhankuni-Kharagpur project, on which only 47% of EPC work is complete and has seen a fall of close to 6% in toll collections to Rs 49 crore.

The traffic fell 4-5% due to the heavy monsoons and the economic slowdown. But the impact of good monsoons should have a positive effect on traffic movement towards the end of the year, says Paresh C Mehta, chief financial officer, Ashoka Buildcon.