Toll collection likely to grow 15% in FY22: Icra

Toll collections are likely to grow 14-15 per cent in 2021-22, rating agency Icra said on Thursday maintaining stable outlook for the Indian road sector.

Toll collections witnessed a marked improvement on the back of increased movement of both passenger and commercial vehicles, which has picked up significantly over the last three months, thereby surpassing the pre Covid-19 levels, it said.

"In FY2022, the traffic is expected to increase by 5 per cent and toll rates (WPI linked) by 3-4 per cent resulting in an overall increase in toll collections by 14-15 per cent on a low base in FY2021 (given the impact of toll suspension in first 20 days of April 2020)," Icra said in a statement.

It said on an average, the increase in toll collections in September - November 2020 stood at around 13 per cent, implying a growth of 8-9 per cent in traffic in terms of passenger car units (PCUs); one-third of this growth is contributed by the passenger vehicle category and the remaining from commercial vehicles.

“Strong liquidity buffers and quick recovery in traffic have arrested major slippages in the credit profile of toll road assets. Few state annuity projects with weaker counterparty credit profile suffered due to elongation in annuity payment cycle, thereby resulting in a stretched liquidity position," Icra noted.

The Ministry of Road Transport and Highways has initiated a slew of relief measures like shift from milestone-based billing (typically ranging between 45-75 days) to monthly billing and release of retention money / performance security in proportion to the work already executed among others, which has immensely supported the road contractors.

These initiatives have helped in reducing the cash conversion cycle, while also getting the performance guarantees and associated margin money released for the executed portion of the projects, it said.

"The execution during 8M (April-November) FY2021 stood at 6,207 km, 4 per cent higher than 5,958 km in 8M FY2020. Adjusting for the first 20 days of April 2020 wherein no construction activity was allowed, the execution per day saw a growth of 13 per cent to 27.7 km/day in 8M FY2021 from 24.4 km/day in 8M FY2020," the statement said.

The execution for FY2021 could surpass 10,500 km, it said and added project awards also saw a massive jump of 111 per cent to 6,764 km in the first eight months of FY2021 from 3,211 km in the year-ago period, given the thrust laid on Bharatmala Pariyojana.