After demonetisation, the GST rollout seems to have taken a toll on traffic growth and toll collections during the April-June quarter of the current fiscal. This would be the third consecutive weak quarter for traffic growth and toll collections. Since dealers got rid of their inventories in the run up to GST and waited to see the impact of the new tax regime before placing new orders, industry experts said commercial traffic was impacted. Varun Mehta, CFO, Sadbhav Infrastructure Project (SIPL), told FE, “About 25% of cargo volumes are made up by the fast moving consumer goods (FMCG) sector across the 10 toll projects that we operate and the massive destocking by the dealers in this sector on account of GST impacted the traffic growth.” He added that traffic growth was between 3-3.2% but should have been 7-8% in Q1, and had it not been for a 8-10% growth in passenger car traffic on select projects, the overall traffic growth would have been even lower.
Data sourced by FE shows that toll collections for a sampling of 14 toll roads across three major operators increased by a mere 6% year-on-year to Rs 611 crore. This was also despite a positive growth in WPI inflation in FY17, allowing companies to raise toll prices in all projects awarded by the NHAI and which will add to toll revenues in FY18.
Alok Deora, analyst, IIFL Wealth, said the traffic growth has been weak during the last few quarters due to multiple reasons. He said, “While the third and fourth quarters in FY17 were impacted due to demonetisation and the subsequent slowdown in economic activity, traffic had actually started to come back in March. However, June and July have bore the brunt of the roll out of GST.”
However, Shubham Jain, VP, corporate ratings at Icra, said the impact of GST is a temporary phenomenon. He said, “The toll collections witnessed de-growth in the range of 18-20% in the first 15 days of July, across all projects due to the impact of GST (invoicing-related issues led to postponement of shipments). However, there won’t be any impact on valuations as the long-term prospects continue to remain good.”
He added that Icra estimates toll collection to increase 9-11% in FY18. Jain said, “The toll rate revision for FY18 is estimated to be at 3.9% (new toll policy) or 5.3% (old policy), depending on the toll policy. Unlike the last two years when the growth was primarily driven by traffic volumes, the growth this year will be toll-rate driven.”