India's Road Construction Execution Drops 12% Yoy In Apriloct FY2026: ICRA

(MENAFN- KNN India) New Delhi, Jan 3 (KNN) India's road construction execution recorded a 12 per cent year-on-year decline during the first seven months of FY2026, according to a recent ICRA report.

The Ministry of Road Transport and Highways (MoRTH) completed 3,468 km of roads between April and October 2025, down from 3,920 km in the corresponding period last year.

For the full fiscal year, execution is projected at 9,000–9,500 km, slightly below the 10,660 km achieved in FY2025, which itself reflected a 14 per cent contraction from FY2024. The National Highways Authority of India (NHAI) had recorded a 16 per cent drop in execution in FY2025.

Stable Outlook for Toll Roads

Despite the slowdown in road construction, the operational toll road segment remains stable. Steady traffic and controlled inflation underpin the sector's resilience.

M Rajashekar Reddy, Assistant Vice President & Sector Head, ICRA Ltd, noted, "The outlook on the toll road sector remains stable, paving the way for sustained growth. On the back of benign WPI inflation, the inflation-linked toll rate hike is projected at around 3.2 per cent for newer projects and 1.6 per cent-2.0 per cent for older projects in FY2027," reported ANI.

He added that toll collections are expected to grow 5–9 per cent in FY2026 and moderate to 5–8 per cent in FY2027, compared to around 6 per cent in FY2025. Healthy toll collections, combined with benign operations and maintenance (O&M) costs, are likely to keep debt coverage metrics for Build-Operate-Transfer (BOT) projects adequate.

Muted Project Awards and Competitive Intensity

Project awarding activity remains subdued, affecting revenue visibility for construction firms.

ICRA expects road awards to reach 8,500–9,000 km in FY2026, marginally higher than the 7,500–8,000 km estimated in FY2025, but still below pre-FY2024 levels.

The report highlights that a meaningful increase in awards is essential to reduce competitive intensity, which remains high despite tighter bidding norms for Hybrid Annuity Model (HAM) and Engineering, Procurement, and Construction (EPC) projects.

Funding and Asset Monetisation

On the financing front, NHAI's asset monetisation has crossed Rs 1 lakh crore, reaching Rs 1,04,990 crore since inception through the first nine months of FY2026.

During this period, Rs 12,357 crore was raised via Toll-Operate-Transfer (TOT) monetisation. With additional bundles in the pipeline, total proceeds are expected to reach approximately Rs 1.3 lakh crore by the end of FY2026.

Broader Construction Sector Outlook

While road-focused entities face near-term execution challenges, ICRA maintains a stable outlook for the broader construction sector, projecting revenue growth of 8–10 per cent in FY2027.

This growth is expected to be driven by players diversified into urban infrastructure, irrigation, and energy projects. However, Construction Gross Value Added (GVA) growth is projected to moderate to 6.5–7.5 per cent in FY2026, down from 9.4 per cent in FY2025.

(KNN Bureau)

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