ROADS

For updated information, please visit www.ibef.org February 2018

Table of Content

Executive Summary……………….….…….3

Advantage India…………………..….……..4

Market Overview …………………….……..6

Strategies Adopted………….….…..……..19

Growth Drivers…………………….............21

Opportunities…….……….......……………31

Success Stories……………....……………34

Industry Associations……………....……...38

Useful Information……….......…………….40
 EXECUTIVE SUMMARY
One of the largest road
networks in the world
Rising budget allocation of
road sector
Growing private sector
involvement
Rapid growth in national
highways
Overseas Investment for
infrastructure development
Source: MoRTH Annual Report 2015–16, NHAI, Make in India, Aranca Research
3 Roads
 India had the one of the largest road networks in the world, spanning over a total of 5.6 million kms. Over 64.5 per cent
of all goods in the country are transported through roads, while, 90 per cent of the total passenger traffic uses road
network to commute
 During FY18-19, Government of India allocated Rs 71,000 crore (US$ 10.97 billion) for development of national
highways across the country.
 As on September 2017, 312 projects were recommended for development by the Public Private Partnership Appraisal
Committee (PPPAC)
 Investment of US$ 31 billion is expected in PPP by 2020 for national highways
 The Government of India plans to increase the length of National Highways from to 200,000 kms.
 As of November 2017, national highways of 4,944 kms in length were constructed, against a target of 15,000 kms for FY
2017-18, under various road transport and highway projects
 CPPIB (Canada Pension Plan Investment Board) plans to invest US$ 322 million for infrastructural development in India.
 The Government has received public sector undertakings from countries like Malaysia and Japan for funding the
upcoming highway projects in India – annuity model 60 per cent of the investment is borne by the private investors 40
per cent by NHAI in 5 equal instalments.
 In November 2016, Union Government and Asian Development Bank signed US$ 500 million loan agreement to build
the longest bridge across river Ganga, in Bihar. The bridge is expected to be ready by 2020.
 In April 2017, the Government of India agreed to build world-class road infrastructure in the Jaffna region in Sri Lanka.
The 3 major stretches being built are Mannar-to-Vavuniya, Dambulla-to-Tricomalee and Jaffna-to-Mannar.
For updated information, please visit www.ibef.org
 Roads

ADVANTAGE INDIA
 ADVANTAGE INDIA

 Greater connectivity between different cities,  The Central Government has fast tracked
towns and villages has led to increased road at least 24 roads and highways projects
traffic over the years
 Government is planning to offer a bonus
 Growth in automobiles and freight movement of 10 per cent of the total project cost to
commands a better road network in India firms that construct and deliver highway
projects before deadline
 Rise in the number of 2 and 4 wheelers,
increasing traffic supports the growth

ADVANTAGE
INDIA
 The government has given a massive push  Road infrastructure has been key
to infrastructure by allocating Rs 5.97 lakh government priority; sector received
crore (US$ 92.2 billion) for infrastructure in strong budgetary support over the
the Union Budget 2018-19. years

 Growing participation of the private sector  Financial institutions received

through Public-Private Partnership (PPP) government approval to raise money
through tax-free bonds
 The Government of India plans to invest Rs
1.45 lakh crore (US$ 22.40 billion) towards  100 per cent FDI is allowed under
road infrastructure in North-East region automatic route subject to applicable
between 2018-2020. laws and regulations

Notes: NHAI - National Highways Authority of India, MoRTH - Ministry of Road Transport and Highways, E- Estimated
Source: NHAI, Make in India, MoRTH, Business Monitor International, Aranca Research

5 Roads For updated information, please visit www.ibef.org

 Roads

MARKET OVERVIEW
 ROAD NETWORK IN INDIA IS SUB-DIVIDED INTO
THREE CATEGORIES

Roads
(Total length: 5.6 million Kms)

State highways National Highways District and Rural roads

 Total length: 176,166 kms  Total length: 115,530 kms  Total length: 5,326,166 kms
 Share: 3 per cent of the total  Share: 2 per cent of the total  Share: 95 per cent of the total
roads in India roads in India roads in India

Notes: All figures as per economic survey 2017-18.

Source: Economic Survey 2017-18

7 Roads For updated information, please visit www.ibef.org

 STRONG MOMENTUM IN EXPANSION OF ROADWAYS

 Value of total roads and bridges infrastructure in India is expected to

Roads/Visakhapatnam
bridges infrastructure
port traffic
value(million
in India
tonnes)
(US$ billion)
expand at a CAGR of 13.6 per cent over FY09–17 to US$ 19.2 billion
 In April 2017, the National Highways and Infrastructure Development
Corp. bagged a project to build 5 tunnels worth US$3.42 billion. 20 CAGR 13.6%
These tunnels, namely, Zojila tunnel at Zojila Pass (14 kms), Vailoo 19.20
Tunnel at Sinthan Pass (8-10 kms), Z-Morah tunnel (6.5 kms), Pir-Ki- 18
Gali Tunnel on National Highway-244 (8.5 kms) and Daranga Tunnel
16
at Shudh Mahadev (4.5 kms), will help in avoiding road accidents 16.10
because of avalanches
14
 Increasing industrial activity, increasing number of 2 and 4 wheelers 13.4
would support the growth in the road transport infrastructure projects 12

 In January 2017, the government proposed to lay down cycle tracks 10 11

on all highways and major roads pan India, to promote the use of
electric cars and public transport. 8 8.6 8.6
8.3
 In April 2017, Chenani-Nashri tunnels that links Kashmir valley with
6 6.9 6.8
Jammu was inaugurated. It is the longest road tunnel in the country
and US$371.86 million were invested in this project 4
 Targeted pace of road construction has been increased to 23 km a
day. 2

 The first phase of construction work of Mumbai's 29.2 km long 0

coastal road is expected to begin in April 2018, after bids are 2009 2010 2011 2012 2013 2014 2015E 2016F 2017F
finalised in March 2018.

Note: CAGR - Compounded Annual Growth Rate, FY - Indian Financial Year (April - March), F - Forecast, NHDP - National Highway Development Project, SARDP-NE: Special Accelerated
Road Development Programme for the North Eastern Region and LWE - Left Wing Extremism Programme; Figures are as per latest data available
Source: Business Monitor International (BMI), Ministry of External Affairs, Aranca Research

8 Roads For updated information, please visit www.ibef.org

 INDIAN CONSTRUCTION EQUIPMENT REVENUES ON
AN UPTREND

 By FY20, construction equipment industry’s revenue is estimated to

Construction
Visakhapatnam
equipment
port traffic
industry(million
size (US$
tonnes)
billion)
reach to US$ 7 billion.
 In FY17, India construction equipment industry grew 40 per cent over
the previous year to reach US$ 4.2 billion. 7.5

7.0
6.5
6.5

5.5

5.1
4.5
4.6
4.3 4.2 4.2
3.5 3.9 3.9
3.7

2.9 3.0
2.5

1.5

0.5

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY20 F
-0.5

Note: CAGR - Compounded Annual Growth Rate, FY - Indian Financial Year (April-March), E – Estimate, YoY – Year on Year
Source: The Boston Consulting Group, Mahindra Website

9 Roads For updated information, please visit www.ibef.org

 CONSTRUCTION EQUIPMENT SALE ON AN UPTREND

 With infrastructure investment set to go up, demand for construction

TotalVisakhapatnam
number of construction
port trafficequipment
(million tonnes)
units sold
equipment will rise further.
 The number of construction equipment units sold increased 41.5 per
cent year-on-year in 2016 backed an increase in road projects and a 60,000
low base.
 Concrete Show India 2017 was held at Mumbai, Maharashtra, with
50,000 52,500 52,100
more than 100 Indian and global manufacturers & suppliers from 49,700
industries such as concrete, construction, construction equipment,
etc., participating in the event.
40,000 42,600 42,710
 Between January-September 2017, about 42,710 units of
construction equipment were sold in India, as against 37,346 units 35,900 36,800
between the same period in the previous year. 30,000

20,000

10,000

-
2011 2012 2013 2014 2015 2016 2017*

Note: CAGR - Compounded Annual Growth Rate, FY - Indian Financial Year (April-March), E – Estimate, YoY – Year on Year, * - January-September 2017
Source: NBM & CW, Mahindra Website, Indian Construction Manufacturers’ Association

10 Roads For updated information, please visit www.ibef.org

 RISING DEVELOPMENT OF NATIONAL HIGHWAYS

 Double-lane highways constitute the largest share of highways in India (40658 kms). Double-lane highways are followed by single/intermediate-
lane (19330 kms) and 4/6/8-lane (19128 kms) highways
 The Government has proposed to upgrade 2 lane national highways into 4 lane national highways for which US$ 65 billion has been allocated.
This step is expected to reduce the passenger car units (PCU) to 10000 per day
 In January 2017, Government of Assam announced investment of US$ 2.23 billion for developing 1253 kms of roads in the state, into national
highways
 In response form institutional investors from Canada, Middle East and the US, in February 2017 NHAI floated bids to monetise 10 national
highway projects in the country.
 The National Democratic Alliance (NDA) decided to bring all future road projects such as economic corridors and coastal roads under its aegis,
with an aim to give a boost to its Bharatmala Plan. This flagship programme is estimated to cost around US$148.74 billion.
 Mr Narendra Modi, Prime Minister of India, has proposed an investment of Rs 30,000 crore (US$ 4.67 billion) for development of national
highways in the northeast under the Bharatmala Project
 The government is planning to monetise 105 highway projects, worth US$21.57 billion as a part of new innovative models of financing.
 Mr Narendra Modi, inaugurated road and highway projects worth Rs 15,000 crore (US$ 2.34 billion) in Udaipur, Rajasthan on August 29, 2017.
 Road projects worth Rs 34,000 crore (US$ 5.32 billion) are being undertaken by the central government to decongest the road network connecting
the National Capital Territory of Delhi, according to Mr Harsh Vardhan, Minister of Environment, Forests and Climate Change, Government of
India.
 India’s national highway network is expected to cover 50,000 kilometres by 2019, with around 20,000 km of works scheduled for completion in the
next couple of years, according to the Ministry of Road Transport and Highways.
 As of October 2017, the land acquisition process and detailed project reports (DPR's) for the Bharatmala Pariyojana are underway and the first
project is expected to be awarded before the end of 2018
 The state government of Kerala plans to raise Rs 10,000 crore (US$ 1.54 billion) from non-resident Keralites (NRKs) to finance the development
of two highways in the state and support NRKs in the long-term.
 In February 2018, the Cabinet Committee on Economic Affairs (CCEA), Government of India, approved the six-laning of the 61 km long Nidagatta
- Mysuru Section of NH-275 on Hybrid Annuity Mode in Karnataka for an estimated cost of Rs 2,919.81 crore (US$ 452.01 million).
Source: Media sources, Aranca Research

11 Roads For updated information, please visit www.ibef.org

 NHAI’S SUCCESSFUL IMPLEMENTATION OF
PROJECTS

NHDP phase/Year of Approval Project description Total length (Kms) Cost Development model

Development of Golden Quadrilateral, North Engineering-

Phase I / December 2000 South and East West (NS-EW) corridor, port 13,390 US$ 5.6 billion Procurement and
connectivity and other National Highways Construction (EPC)

Development of North South and East West

Phase II / December 2003 (NS-EW) corridor and other National 7,142 US$ 6.3 billion EPC
Highways

Phase III / PPP

Development of 4-lane National Highways 12,109 US$ 18.5 billion
April 2007 (Build-Operate-Transfer)

Phase IV / February 2012 Upgradation of single lane to 2-lane 20,000 US$ 12 billion PPP

Phase V / Upgradation of 4-lane highways to

6,500 US$ 9.3 billion PPP
October 2006 6-lane and port connectivity

Development of expressway
Phase VI / PPP-(Design-Build-
The project is targeted to be completed by 1,000 US$ 3.8 billion
November 2006 Finance-Operate)
December 2015

Phase VII / Development of ring roads, bypasses and PPP (Build-Operate-

700 US$ 4.2 billion
December 2007 flyovers Transfer)

Source: NHAI, Aranca Research

12 Roads For updated information, please visit www.ibef.org

 SPECIAL ACCELERATED ROAD DEVELOPMENT
PROGRAMME FOR THE NORTH EAST REGION

 The Special Accelerated Road Development Programme for the North Eastern region (SARDP-NE) is aimed at developing road connectivity
between remote areas in the North East with state capitals and district headquarters

 SARDP-NE is vested with the development of double-/four-lane national highways of about 7,530 kms and double-laning improving about 2,611
kms of state roads, as on FY16

 Implementation of the road development programme would facilitate connectivity of 88 district headquarters in North Eastern states to the nearest
National Highways

 In December 2017, Mr Narendra Modi, Prime Minister of India, has announced investment of Rs 60,000 crore (US$ 9.33 billion) under SARDP
between 2018-2020.

 The project would be undertaken in following 3 phases:

Phase Project description Total length (Kms) Date of completion

Improvement of National Highways 3,014

A March 2017
Improvement of state roads 1,085

Development of double-lane of National

2,392
Highways
Investment decision is yet to be taken
B
by government
Double-laning and improvement of state roads 1,331

Arunachal Pradesh package

Development of roads 2,319 March 2017
of roads and highways

Source: NHAI, MoRTH Annual Report 2015-16, PPP in India, Aranca Research

13 Roads For updated information, please visit www.ibef.org

 LEFT WING EXTREMISM (LWE) PROGRAMME

 The government approved a Road Requirement Plan (RRP) for the development of 1,126 kms of National Highways and 4,351 kms of state roads
in Left Wing Extremism (LWE) affected districts

 The project would be vested with the Ministry of Road Transport and Highways (MoRTH).

 The project has been implemented in Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha and Uttar
Pradesh.

 In December 2016, the Cabinet Committee on Economic Affairs had given its go ahead for a US$ 1.72 billion road project across all 35 LWE
affected districts.

 As of June 2017, 1391-kms of roads had been constructed under the Road Requirement Plan Phase-I (RRP) in the most difficult areas. At the
same time, 5,412 kms of roads had been approved under RRP-II.

 The mobile tower project was started in 2014 to improve coverage in LWE areas. As of June 2017, 2,187 mobile towers have been set up and
2,882 towers are being set-up.

 As of November 2017, the Government of India has planned an expenditure of Rs 11,000 crore (US$ 1.71 billion) on a programme for connecting
LWE districts by March 2020.

 Under the Union Budget 2018-19, Rs. 2,881.80 crore (US$ 445.13 million) were allocated towards roads construction in the LWE areas.

Note: LWE – Left wing extremism

Source: NHAI, MoRTH, PPP in India, Aranca Research, Media Sorces

14 Roads For updated information, please visit www.ibef.org

 DECREASE IN PUBLIC PARTICIPATION IN THE
SECTOR … (1/2)

 As of January 15, 2018, there were 1,534 PPP projects in India, of

Visakhapatnam
Total PPP projects
portintraffic
India (million
(Januarytonnes)
2018)
which 745 were related to roads.
 Project awarded under BOT is 18.51 per cent of the total awarded
projects as of January 2018.

51% 49% Roads and Bridges

Others

Source: MoRTH, Aranca Research

15 Roads For updated information, please visit www.ibef.org

 DECREASE IN PUBLIC PARTICIPATION IN THE
SECTOR … (2/2)

 Both NHAI and Ministry of Road Transport and Highways awarded

Projects
Visakhapatnam
awarded toport
BOTtraffic
private
(million
playerstonnes)
(in Kms)
projects of around 6,397 kms in FY16.
 In 2015-16, 7 projects (20 per cent) of the total 4,368 kms of NHAI
7000
projects awarded were allocated to BOT mode
 During FY17, projects of about 422.17 kms were awarded to BOT
players by NHAI. 6000

6144

6067
5000

4000

3000

2677
2000

1000

1116

422
369

877

873
742
464

470
0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY15 FY16 FY17

Note: FY13 - Projects awarded by NHAI;

Source: NHAI, Crisil, ITNL Company Annual Reports, Aranca Research

16 Roads For updated information, please visit www.ibef.org

 PRIVATE PLAYERS GAINING TRACTION IN THE
ROADS SECTOR

 Until 2005, the road construction market was dominated by public sector companies
 With the emergence of private players over the last decade, the road construction market has become fragmented and competitive; players
bidding for projects also vary in terms of size

Major projects: Mumbai–Pune BOT Project, Pune–Nashik BOT Project, Bharuch–Surat BOT Project,
Thane–Bhiwandi by-pass 4 Lane Project, Thane Ghodbunder BOT Project, Ahmedabad–Baroda NH-
8, 6 laning of Agra - Etawah bypass

Major projects: North Karnataka Expressway, West Gujarat Expressway, Noida Toll Bridge,
Ahmedabad - Mehsana Toll Road, East Coast Road, Kotakatta Kurnool Road Project, East Coast
Road, Hazaribagh Ranchi Expressway Ltd, Karnataka Toll Bridges

Major Major projects: NH6 Dhankuni to Kharagpur, Sambalpur Baragarh, NH4 Belgaum Dharwad, NH-3
private Pimpalgaon – Nashik – Gonde Road (JV with L&T), Jaora – Nayagaon Road, Chennai Outer Ring
sector Road, Modhul – Nippani Road, Indore Edalabad Road, Wainganga Bridge, Ahmednagar Aurangabad
players Road

Major projects: Bandra–Worli Sea Link, Badarpur Elevated Highway Project, Delhi Faridabad
Elevated Expressway, Breakwater construction for new port at Ennore, Chennai, New Railway Line
Project from Jiribam - Tupul

Major projects: Tuni–Ankapalli Highway, Tambaram–Tindivanam Highway, Ambala–Chandigarh

Highway

Notes: NH – National Highway

Source: Aranca Research

17 Roads For updated information, please visit www.ibef.org

 NOTABLE TRENDS IN THE ROAD SECTOR
Demand for urban transport
Electronic toll collection
International Investment
Infrastructure initiatives
Notes: FDI - Foreign Direct Investment
Source: NHAI, MoRTH, Aranca Research
18 Roads
 The government’s policy to increase private sector participation has proved to be a boon for the infrastructure
industry with a large number of private players entering the business through the Public Private Partnership
(PPP) model
 The type of PPP models used in road projects are Build Operate Transfer (BOT) toll and BOT annuity
 During the next 5 years, investment through PPP is expected to be US$ 31 billion
 NHAI is taking revolutionary steps, like facilitating Online sale of FASTags and offline sale through Common
Services Centre (CSC) near toll plazas, to ensure availability of FASTags for Electronic Toll Collection.
 Paytm Payments Bank has launched Paytm FASTag to enable electronic toll-fee collection on highways
across the country.
 Infrastructure is the key to supporting double-digit GDP growth in India during the medium to long term
 Cumulative FDI inflows into the construction development sector, including roads and highways, stood at
US$ 24.67 billion till December 2017.
 Programmes like “Bharat Nirman”, JNNURM are designed to pursue nation wide rural connectivity, linking all
the unconnected villages with fair weather roads
 Ministry of Road Transport and Highways has signed an MOU with IL&FS Transportation Networks for
construction of 14.15 km bi-directional Zojila tunnel which will be India’s longest road tunnel and the longest
bi-directional tunnel in Asia.
For updated information, please visit www.ibef.org
 Porter’s Five Forces Framework Analysis

Threat of Substitutes

 Threat of substitutes is low

 Even if government wants to renovate
rather than going for reconstruction, it
is highly likely to go to the same
players

Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers

 Bargaining power of suppliers is very
low
 Several small players exist in the
suppliers section that weaken their
power
 Competitive rivalry between big
players is quite intense as far as
winning projects is concerned due to
high price sensitivity
 Few large players have the expertise
for undertaking bigger projects;
hence, competition is higher in case
of large infrastructural projects
 Bargaining power is strong due to
robust price sensitivity and low costs
 Buyers are government organisations
or major agencies that enhance their
buying power

Threat of New Entrants

 With liberalisation, rules have been

eased for the entry
Positive Impact  Big players block the entry of new
Neutral Impact players in the roads segment,
especially in large projects
Negative Impact

19 Roads For updated information, please visit www.ibef.org

 Roads

STRATEGIES
ADOPTED
 STRATEGIES ADOPTED

 Most players are now opting for inorganic growth routes and are diversifying into other businesses (IIML, a subsidiary of
Diversification IL&FS is into private equity business with over US$ 3.2 billion under management)
 Many players are entering into technical partnerships with foreign players to match their R&D levels with MNCs

 Companies are hiring and training staff to reduce the shortage of skilled manpower and focusing on policies to retain
labour
 Firms plan to increase minimum wages in the construction sector as well as women participation
Training of labour
 Companies are partnering with technical institutes and colleges such as CSTI (L&T and Govt. of Odisha)
 Roads Ministry will give grant of US$ 152,765 to private companies and state road transport corporations willing to set
up or upgrade driver training schools

 Companies are ramping up investment for better and cost effective ways of road construction
 Stepping up R&D to develop better roads in areas which suffer from congestion, delays and accidents, according to
world standards
Promotion of R&D
 As of November 2016, three memorandum of understanding (MOUs) were signed between National Green Highways
Mission (NGHM) and ITC Ltd, Yes Bank Ltd and Teri for setting up a Centre for Innovations in Green Pathways in order
to enhance research and innovations in the field.

 Indian companies are increasing their footprints abroad, thus tapping outside market
Geographical expansion
 IL&FS won a road contract worth US$ 216.7 million in Botswana, through its subsidiary Elsamex SA

21 Roads For updated information, please visit www.ibef.org

 Roads

GROWTH DRIVERS
 STRONG DEMAND AND POLICY SUPPORT DRIVING
INVESTMENTS

Growing demand Policy support Increasing investments

Greater government focus on NHAI implementing one of the

Rise in 2 and 4 wheeler vehicles
infrastructure largest road projects

Resulting in
Inviting

Standardised processes for

Increasing freight traffic bidding and tolling; clear policy Rising private sector participation
framework

Strong trade and tourist flows Tax sops, FDI, FII Strong projected demand making
between states encouragement returns attractive

Source: Make in India, Aranca Research

23 Roads For updated information, please visit www.ibef.org

 KEY CATALYSTS BEHIND INCREASING DEMAND FOR
ROADWAYS

 Higher individual discretionary spending has led to increased spending on cars, motorbikes and scooters

 Growing domestic trade flows have led to a rise in commercial vehicles and freight movement

 Increasing financing on vehicle loans

 Road’s traffic share of the total traffic1 in India has grown from 13.8 per cent to 65 per cent in freight traffic and from 32 per cent to 90 per cent in
passenger traffic over 1951–2017

Rising income leading to increasing number of vehicle owners

Growing movement of goods within the country due to economic integration

Higher
road
Better quality roads makes road travel cheaper and safer
traffic

Increasing roadways leading to greater accessibility between different cities/towns/villages

Growth in small and medium enterprises in India

Notes: 1Including rail and road transport

Source: MoRTH, World Bank, Make in India, Aranca Research

24 Roads For updated information, please visit www.ibef.org

 RISING VEHICULAR TRAFFIC KEY FACTOR FOR
EXPANSION OF ROADWAYS

 Sales of passenger vehicles increased at a CAGR of 10.24 per cent Trends

Visakhapatnam
in passengerport
vehicle
traffic
Production
(million tonnes)
(in million)
during FY06-17 and reached 3.8 million in FY17

 Sales of commercial vehicles in the country increased at a CAGR of CAGR 10.24%

4.0
5.21 per cent in FY10-17, with the number reaching 810,286 during
3.80
FY17 3.0 3.40
3 3.1 3.20 7.1 6.9
 Rising per capita income and growing middle class coupled with
2.0 2.4
easier access to finance and a wider price range of vehicles have
1.8
boosted car sales. 1.6
1.0 1.3 1.3
 Production of passenger vehicles increased at a CAGR of 10.24 per
cent to reach 3.8 million in FY17 from 1.3 million in FY06. 0.0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
 Production of commercial vehicles increased at a CAGR of 5.21 per
cent to reach 810,280 in FY17 from 567,000 in FY10.
Trends in commercial
Visakhapatnam portvehicle
traffic Production (in ’000)
(million tonnes)

CAGR 5.21%
1000

929.1
800

832.6

810.28
782.8
760.7
600

699

698.3
567.7
400

200

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Source: SIAM, Aranca Research

25 Roads For updated information, please visit www.ibef.org

 PRIVATE FUNDING BEING ENCOURAGED TO REDUCE
FINANCE CONSTRAINTS … (1/2)

 Cumulative FDI inflows into the construction development sector, Visakhapatnam

Cumulative FDI
portInflows
traffic (million
(US$ billion)
tonnes)
including roads and highways, has increased at a CAGR of 17.07
per cent from US$ 8.06 billion in FY10 to US$ 24.29 billion till March 30
2017. Cumulative FDI stood at US$ 24.67 billion as on December
2017.

 A Memorandum of Understanding (MoU) has been approved by the 25

24.67
24.29
Union Cabinet between India and the UAE on bilateral cooperation in

24.18
24.07
23.31
road, transport and highways sector. The MoU includes collaboration

22.08
in planning administration and management of road infrastructure, 20
technology and standards for roads/highways construction and
maintenance.
15

11.43
10

9.18
8.06
5

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18*

Note: * - Data till December 2017

Source: DIPP, Aranca Research;

26 Roads For updated information, please visit www.ibef.org

 PRIVATE FUNDING BEING ENCOURAGED TO REDUCE
FINANCE CONSTRAINTS … (2/2)

 NHDP’s Phase I and Phase II were mostly developed by public funds %

Visakhapatnam
of BOT share in
port
different
traffic (million
phases oftonnes)
NHDP
with BOT’s share at 14.8 per cent and 29.6 per cent, respectively

 The PPP model will be the favoured route for executing the 120.00%

remaining phases of NHDP

 In May 2017, the Road Ministry signed 34 MoUs with investment

100.00%
potential of around US$ 29.74 billion with private and public

100%

100%

100%
95.90%
companies such Adani Logistics, Ascendas, Chennai Port Trust, etc.,
to improve multi-modal logistics.
80.00%

83.10%
60.00%

40.00%

29.60%
20.00%

14.80%
0.00%
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 Phase 7

Note: NHDP - National Highway Development Phase, BOT - Build Operate Transfer, Year of Approvals for Phase I: December 2000, Phase II: December 2003, Phase III: April 2007,
Phase IV: February 2012, Phase V: October 2006, Phase VI: November 2006, Phase Vii: December 2007
Source: NHAI, MoRTH, Aranca Research

27 Roads For updated information, please visit www.ibef.org

 POLICY INITIATIVES IN THE RIGHT DIRECTION … (1/2)

 Infrastructure investment is a major focus area for the government

Infrastructure – a key
government priority  The government has given a massive push to infrastructure by allocating Rs 5.97 lakh crore (US$ 92.2
billion) for infrastructure in the Union Budget 2018-19.

 The planned outlay under the Union Budget 2018-19 for the road sector is Rs 1.21 lakh crore (US$ 18.69
Support from the Union billion).
Budget  Moreover, Rs 71,000 crore (US$ 10.97 billion) have been allocated specifically for the development for the
national highways in the country.

 The Prime Minister’s Gram Sadak Yojana (PMGSY) is a scheme for development of rural roads in India. The
Government of India has succeeded in providing road connectivity to 85 per cent of the 178,184 eligible rural
habitations in the country under the scheme. All villages in the country are expected to be connected through
a road network by 2019, as against 2022 previously, under the PMGSY.
Rural Development
 Under the Union Budget 2018-19, Government of India allocated an investment of Rs 19,000 crore (US$ 2.93
billion) for the Pradhan Mantri Gram Sadak Yojana (PMGSY)

 The Government of India will spend around Rs 1 lakh crore (US$ 15.26 billion) during FY18-20 to build roads
in the country under Pradhan Mantri Gram Sadak Yojana (PMGSY).

 Companies enjoy 100 per cent tax exemption in road projects for 5 years and 30 per cent relief over the next
Taxes and other sops 5 years

 Companies have been granted a capital of up to 40 per cent of the total project cost to enhance viability

 The Ministry of Road Transport and Highways, Government of India plans to implement 'Value Engineering
Value Engineering
Programme' in order to promote use of new technologies and material in highway projects being executed in
Programme
India.
Notes: FDI - Foreign Direct Investment, FII - Foreign Institutional Investors
Source: Make in India, Union Budget 2016-17, Union Budget 2017-18, Aranca Research

28 Roads For updated information, please visit www.ibef.org

 POLICY INITIATIVES IN THE RIGHT DIRECTION … (2/2)

 Infrastructure finance companies, such as India Infrastructure Finance Corporation (IIFCL), National Highways Authority
Issue of tax-free infrastructure of India (NHAI), Housing and Urban Development Corp (HUDCO), Power Finance Corporation (PFC) and India Railway
bonds Finance Corporation (IRFC), have been permitted to issue tax-free bonds for a total value of US$ 3.27 billion for FY15;
promotion of infrastructure debt funds is the top agenda

 Government of India has set up the India Infrastructure Finance Company (IIFCL) to provide long-term funding for
Encouragement of infrastructure projects

Infrastructure Debt Funds  Interest payments on External Commercial Borrowings for infrastructure are now subject to a lower withholding tax of 5
(IDFs) per cent vis-à-vis 20 per cent earlier

 IDF income is exempt from income tax

 The Central Road Fund (CRF) assists the state government and union territories in the development of state roads
Central Road Fund (CRF)  The Central Road Fund (Amendment) Bill, 2017 has been passed by the Lok Sabha, Government of India which would
result in revenues of Rs 2,300 crore (US$ 358.7 million) for national waterways in the country.

Goods and Services Tax  The GST on construction equipment has been reduced to 18 per cent from 28 per cent, which is expected to give a
(GST) boost to infrastructure development in the country.

 Existing excise duty on petrol and diesel has been changed to road cess to the extent of INR 4 per litre to fund
Investment in roads and other investment in roads and other infrastructure.
infrastructure  In Union Budget 2018-19, the government provided an outlay of Rs 1.21 lakh crore (US$ 18.69 billion) for the road
sector.

29 Roads For updated information, please visit www.ibef.org

 RECENT BOT PROJECTS AWARDED BY NHAI

Project Length (Km) Cost (US$ million) Year Company

C and C Constructions NA 447.87 2017 NA

4 laning of Buxar-Patna 25 NA 2017 NA

Patna Gaya Dhobi 126 167.95 2017 NA

Chardham Highway NA 1780 2017 NA

Jaipur - Ring Road 47 52.06 2017 NA

Kundli Manesar Paliwal 83 NA 2017 Easel Construction Ltd and HLS Ltd.

Gujarat – 8 highways 1200 1780 2017 NA

New Delhi – Bharat Mala Programme NA 5206 2017 Easel Construction Ltd and HLS Ltd.

6 Laning of Chittorgarh to Udaipur 93.5 169.94 2016 TRIL Roads Pvt Ltd

6 Laning of Gujrat to Rajasthan 113.8 192.17 2016 IRB Infrastructures Developers Ltd

6 laning of Kishangarh Udaipur Ahmedabad 124.78 191.51 2016 IRB Infrastructure Developers Ltd

6 Laning of Kishangarh to Gulabpura 90 159.40 2016 IRB Infrastructure developers Ltd

Notes: BOT - Build Operate Transfer, UB - Union Budget, Km – Kilometre

Source: NHAI, MoRTH, Aranca Research

30 Roads For updated information, please visit www.ibef.org

 BUDGETARY OUTLAY FOR ROADS

 Roadways has been the key focus area for budget allocations over Outlay for roads under the respective Union Budgets
Visakhapatnam port traffic (million tonnes)
the years (US$ billion)
 As per Union Budget 2018-19, the government provided an outlay of 20
Rs 1.21 lakh crore (US$ 18.69 billion) for the road sector CAGR 20.91%

18

18.69
 Between FY09 and FY19, budget outlay for road transport and
highways increased at a robust CAGR of 20.91 per cent
16
 Under Union Budget 2017-18, GOI is planning to develop 2,000
kilometres of coastal connectivity roads in India. 14

14.67
14.5
12

10

7.8

7.1
6

6.6

6.5
4

3.5

3.2
2.8
2

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Note: CAGR - Cumulative Annual Growth Rate, GOI – Government of India, NHAI – National Highway Authority of India
Source: Respective Union Budgets, Aranca Research

31 Roads For updated information, please visit www.ibef.org

 Roads

OPPORTUNITIES
 FUTURE PROSPECTS REMAIN BRIGHT FOR THE
ROAD SECTOR … (1/2)

 National Highway Development Project (NHDP) is a 7 phase project Visakhapatnam

Projects awarded
port traffic
(in kilometres)
(million tonnes)
amounting to US$ 60 billion. The projects aims to widening, up-
gradation and rehabilitation of 47,054 kilometres of national 7000
highways 6000 6491 6397
 NHAI awarded 77 road projects covering 4,335 kilometres in FY 5000
5000
2016-17. 4000
4335
3000
 The Government of India has decided to invest Rs 7 trillion (US$
107.82 billion) for construction of new roads and highways over the 2000
next five years. 1000
1165 1435
 The NHAI has invited bids for projects of 4,900 km as of November 0
FY12 FY13 FY14 FY15 FY16 FY17
2017 and is expected to invite bids for 3,500 km of projects by
December 2017 and has already awarded projects worth Rs 22,100
Projects awarded (in kilometres) by NHDP as of
crore (US$ 3.43 billion) covering 1170 kms in its efforts to speed up Visakhapatnam port traffic (million tonnes)
31st May 2017
the construction of highways.

 The Ministry of Road Transport and Highways, intends to take the 14000
total of projects awarded in FY2017-18 to 20,000 km and targets to 12000 13203
10000 11809
award projects of 25,000 km in FY 2018-19.
8000
6000 7142 6500
4000
1000 700
2000
0
NS &EW NHDP III NHDP IV NHDP V NHDP VI NHDP VII
Ph I & II

Notes: NHDP stands for National Highways Development Project

Source: NHAI, MoRTH, Aranca Research

33 Roads For updated information, please visit www.ibef.org

 FUTURE PROSPECTS REMAIN BRIGHT FOR THE
ROAD SECTOR … (2/2)

 In India, roads remain the most important means of transport, Total vehicle’s
Visakhapatnam growth
port traffic(million
(millionunits)
tonnes)
accounting for around 80 per cent of the passenger traffic and 65 per
cent of the freight traffic
CAGR 9%
30
 Number of total vehicles in India increased at a CAGR of 9 per cent
during the period of FY06-17, from 9.7 million to 25.3 million 25
24 25
20 6.9
 As of FY17, 2 wheelers accounted for 78.73 per cent of the total 21 21 7.1
15 18
number of vehicles in India
10 14
11 11 11
10
5
0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Visakhapatnam
Bifurcation of vehicles
port traffic
by category:
(million tonnes)
FY17
3.20% 3.90%

Two wheelers

14.98%
Passenger vehicles

Commercial vehicles

78.73% Three wheelers

Notes: SIAM - Society of Indian Automobile Manufacturers

Source: SIAM Report, Aranca Research

34 Roads For updated information, please visit www.ibef.org

 Roads

SUCCESS STORIES
 IRB INFRASTRUCTURE LIMITED … (1/2)

 IRB Infrastructure is one of the leading BOT operators in India, with a Revenue Trend: IRB Infrastructure Limited
Visakhapatnam port traffic (million tonnes)
built-length of around 9,846 lane kilometres (US$ million)
 IRB has 20 BOT projects, of which 14 are operational, as on March 1000
2017 CAGR 14.11%
900 931.5
 As of 31 March 2017, IRB Infrastructure’s order book aggregated
US$ 1.55 billion
800
 The company has an 18.79 per cent share in the Golden 783.7
Quadrilateral project as of March 2017. 700
695 702.9
 During FY10-17, company’s revenue increased at a CAGR of 14.11 600
657.0
619.1
per cent
500 548.6

400

369.8
300

200

100

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Notes: CAGR - Compounded Annual Growth Rate, BOT – Build Operate Transfer
Source: Company Annual Report and Corporate Presentation, Aranca Research

36 Roads For updated information, please visit www.ibef.org

 IRB INFRASTRUCTURE LIMITED … (2/2)

 Was awarded an order for 1,129  Won a US$ 312 million contract for
lane kilometres for a total value of the 6 laning Barwa-Adda-Panagarh
US$ 1.5 billion sector of National Highway 2

2011 2012 2015-17

2013 2014

 Was awarded a  4 laning of Beawer-  Won a road contract worth US$ 216.7 million in
contract for 1,086 lane Gomti Road Project Botswana, through its subsidiary Elsamex SA
kilometres for a total  Commercial operation of Warora Chandrapur
consideration of US$ Ballarpur Bamni Road Project has been started
1.5 billion  Won a project to widen roads of 127 km long
Patna-Gaya-Dobhi section of NH 83 in Bihar for a
consideration of US$ 205 million
 In FY17, company’s revenues stood at US$ 931.5
million
Source: Company Annual Report, News articles, Aranca Research

37 Roads For updated information, please visit www.ibef.org

 NOIDA TOLL BRIDGE COMPANY LIMITED (NTBCL)

 Infrastructure Leasing and Financial Services Ltd (IL&FS) promoted Revenue trends: Noida Toll Bridge
Visakhapatnam port traffic (million tonnes)
National Toll Bridge Company Ltd (NTBCL) as a special purpose (US$ million)
vehicle (SPV) for the development of the 22-km Delhi-Noida Direct
25
(DND) flyway on a Build Own Operate Transfer (BOOT) basis

 Incorporated in Uttar Pradesh, India, in 1996, NTBCL is a publicly

listed company and operates only in the country
20
 Salient features 19.9
20.4
19.8 19.4 19.7
18.9
• Eight-lane dual carriageway connecting Noida and Delhi
17.9
17.2
• One major and 3 minor bridges over Yamuna river
15
• Eight-lane approach road on embankment
13.4
• 32-lane, 200m-wide, fully computerised toll plaza

• Extensive tree planting and landscaping 10

• Noise barriers and river training works

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY 17

Source: Company Annual Report, Aranca Research; 1Data for April 2016 – September 2016

38 Roads For updated information, please visit www.ibef.org

 Roads

KEY INDUSTRY
ASSOCIATIONS
 INDUSTRY ASSOCIATIONS

Ministry of Roads Transport and Highways National Highway Authority of India

Transport Bhavan G 5 and 6, Sector 10, Dwarka

1, Parliament Street New Delhi – 110 075
New Delhi –110001 Phone: 91-11-25074100, 25074200
Phone: 91-11-23719097, 23719955 Fax: 91-11-25093507, 25093514
E-mail: ifcmost@nic.in

Indian Roads Congress

Sector 6, (Near RBI Quarters), RK Puram, New Delhi – 110022

Phone: 91-11-26185303
Secretariat: 91-11-26716778, 26183669, 26185273, 26185315,
26185319
Fax: 91-11-26183669
E-mail: secretarygen@irc.org.in

40 Roads For updated information, please visit www.ibef.org

 Roads

USEFUL
INFORMATION
 GLOSSARY

 BOT: Build Operate Transfer

 CAGR: Compound Annual Growth Rate

 EPC: Engineering, Procurement and Construction

 FDI: Foreign Direct Investment

 FY: Indian Financial Year (April to March) – So FY10 implies April 2009 to March 2010

 GOI: Government of India

 INR: Indian Rupee

 LCV: Light Commercial Vehicles

 MoRTH: Ministry of Roads Transport and Highways

 NH: National Highway

 NHAI: National Highway Authority of India

 NHDP: National Highway Development Project

 US$ : US Dollar – Conversion rate used: US$ 1= INR54.43

42 Roads For updated information, please visit www.ibef.org

 EXCHANGE RATES

Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)

Year INR INR Equivalent of one US$ Year INR Equivalent of one US$
2004–05 44.81 2005 43.98
2005–06 44.14
2006 45.18
2006–07 45.14
2007 41.34
2007–08 40.27
2008–09 46.14 2008 43.62

2009–10 47.42 2009 48.42

2010–11 45.62
2010 45.72
2011–12 46.88
2011 46.85
2012–13 54.31
2013–14 60.28 2012 53.46

2014-15 61.06 2013 58.44

2015-16 65.46 2014 61.03
2016-17 67.09
2015 64.15
Q1 2017-18 64.46
2016 67.21
Q2 2017-18 64.09
Q3 2017-18 64.74 2017 65.12

43 Roads For updated information, please visit www.ibef.org

 DISCLAIMER

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44 Roads For updated information, please visit www.ibef.org