• Infrastructure in India: Completion of projects is behind targets, says Jefferies

    Awarding pace remains sluggish with 8% y-o-y drop in NHAI awards in 9MFY17. Lack of land possession has been sighted as the reason behind bid postponement and consequent delays in awards. Hybrid annuity model is facing challenges in financial closure for new players and leading to cancellation of awarded projects.
    However, completion rate remains robust with NHAI reporting 26% y-o-y growth in 9MFY17. Awarding activity from both National Highway Authority of India (NHAI) and ministry of road transport and highways (MoRTH) has been lower in FY17 vs FY16. Hence the full year targets, which always seemed over-optimistic, will be missed by a large margin.
    Based on our channel checks, we believe that NHAI and MoRTH has awarded 3,200kms and 3,100kms respectively till mid-February. Execution has maintained pace, continuing the improvement in activity seen in the post-monsoon period. NHAI completion rate has improved by 26% y-o-y from 1,355kms in 9MFY16 to 1,704kms in 9MFY17.
    Monthly data on MoRTH is not available but channel checks suggest that there has been negligible impact of demonetisation on execution. In 7MFY17, overall (NHAI+MoRTH) completion had improved to 3,591kms (up 24% YoY) vs 2,892kms last year, implying a run-rate of 17km per day. But this still remains well shy of the 41km per day target. Aaron Rodgers Authentic Jersey

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