The toll revenue for highways is estimated to grow by 16% to 18% in fiscal 2023, according to CRISIL. The ratings agency says that this growth is due to a significant hike in toll rates owing to elevated inflation and healthy traffic growth on national highways.

The agency estimates the toll revenue to grow by 9% to 11% in FY24. 

In the next fiscal, the traffic growth is expected to taper to 4% to 6% but will remain higher than the four-year compound annual growth rate (CAGR) of 2% to 3% seen through fiscal 2022.

"Traffic growth is closely linked to real gross domestic product growth, which is expected to decline to 6%2 in fiscal 2024 from 7%3 in fiscal 2023. Further, with WPI inflation printing lower at 4.95% for December 2022, the next fiscal will see a toll rate hike of ~5%. Consequently, toll revenue is expected to grow 9-11% for fiscal 2024," says CRISIL. 

A study by CRISIL of 49 toll road assets across 14 states shows that the robust toll collections, along with the adequate balance sheet liquidity will continue to support the credit profiles of toll road operators.

"The revenue of toll road operators will soar in fiscal 2023, driven by a high toll rate hike of ~10.5%, which is linked to inflation based on the Wholesale Price Index (WPI). The traffic growth at 5-7% will also remain healthy, albeit on a low base of fiscal 2022. This resilience in traffic growth will be on the back of economic activity led commercial traffic, and strong personal mobility, supported by leisure and business travel," says Anand Kulkarni, director, CRISIL Ratings.

Between 2018 and 2022, the traffic growth stood at 3% owing to the impact of goods and services tax (GST) implementation, change in axle load norms for commercial vehicles, restrictions due to the pandemic, and supply chain disruptions, affecting the movement of traffic. As per the rating agency, significant revenue growth in the past has cushioned the impact of higher maintenance costs for toll road operators.

"The credit profiles of toll road players have remained strong in fiscal 2023 and will sustain in fiscal 2024, helped by healthy toll revenue growth. Average debt service coverage ratios will be strong at 1.6-1.7 times. Moreover, liquidity will remain comfortable, supported by debt service reserve of 3-6 months," says Saina Kathawala, associate director, CRISIL Ratings.

In the Union Budget 2023-24, the government has allocated a capital outlay of ₹2.58 lakh crore for roads and highways. This is 25% higher than that of the revised estimate for FY23. In the revised estimates for the current financial year too, the allocation has been enhanced to ₹2,06,302 crore. Capital expenditure in FY23 is up by 80% as compared to the previous fiscal.

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