Pickup in traffic, toll hikes boost collections but developers cautious

Written by Shubhra Tandon | Mumbai | Updated: Aug 25 2014, 06:58am hrs
Thanks partly to tariff hikes and partly due to more traffic, toll collections for several roads have seen a somewhat higher growth in the April-June quarter; for a clutch of 17 road projects belonging to IRB Infrastructure Developers, Ashoka Buildcon and Sadbhav Engineering collections are up by 8% to nearly R616 crore over the January-March period and have increased a good 14% year-on-year.

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While IRBs Mumbai-Pune stretch has seen a sharp 24% jump in toll collections thanks to a hefty18% revision in tariff the company is allowed to revise tariffs every three years the lifting of the mining ban in Karnataka has helped drive up traffic on IRBs Tumkur-Chitradurg road.

Ashoka Buildcons Belgaum-Dharwad, Dhankuni-Kharagpur, Jaora-Nayagaon and Indore-Edlabad have gained from tariff revisions in the range of 5.5-10%.

In Q1FY14 and Q2FY14, collections had dipped 3%-5%, before picking up marginally in the third quarter.

Among the roads that have done well this time around are Mumbai-Pune, Surat-Dahisar, Pune-Solapur, Tumkur-Chitradurga, Indore-Edlabad, Hyderabad-Yadgiri and Dhule-Palesnar. VD Mhaiskar, chairman and managing director, IRB Infrastructure Developers, is, however, cautions and says its too early to call a revival though he agrees traffic on many of the more prominent roads has risen by about 6% between April and June.

Traffic should sustain for the next two to three quarters for us to be able to say we are out of the woods, Mhaiskar says. Ashoka Buildcons chief financial officer, Paresh Mehta too doesnt see a significant movement on traffic as yet. Its growing in the range of 2-3% but theres hardly any industrial recovery to suggest this will sustain, Mehta told FE.

In an assessments made a few months back, ratings agency CRISIL had expressed apprehensions many road projects would turn unviable given the poor traffic growth The agency now sees traffic growing at 4-5% range this year and Rahul Prithiani, Director of CRISIL Research, observes that despite the modest growth in traffic, toll collections could rise by 10-11% on the back of a hefty 6% revision in toll rates. The revision in toll rates is linked to inflation as stipulated by National Highway Authority of India (NHAI).

Sadbhav Engineering, the Ahmedabad-based road developer has seen a rise of 2%-15% in traffic across seven road projects in Q1FY15; the management sees some pick up in consumption and industrial production. The highest traffic growth of around 15% has been reported on the Hyderabad-Yadgiri road, albeit on a lower base, after the resolution to the political crisis in erstwhile Andhra Pradesh over the bifurcation of the state into Seemandhra and Telangana. On the Aurangabad-Jalna stretch, the traffic has increased by 5%.

Varun Mehta, deputy general manager (finance), Sadbhav Engineering told FE the Hyderabad-Yadgiri attracts primarily passenger car traffic because of its proximity to city limits. We see car traffic picking up and people are also willing to pay toll, Mehta said adding that traffic on the Aurangabad-Jalna road has picked up thanks to higher automobile sales, Aurangabad being an important automobile hub.

Analysts believe the trend could extend to other roads as well and traffic could pick up helping collections. However, the fact is that the numbers remain way below those estimated when the projects were bid out 3-4 years ago. While developers had pencilled in an increase of at least 7-8%, the growth has come in at lower levels. (EOM)