Toll road projects may see single-digit growth in FY24 after high growth this fiscal: ICRA


NEW DELHI : Rating agency ICRA on Tuesday said that toll road projects in the country are likely to see moderate to high single digit in FY2024 after a 17-20% growth witnessed in FY2023 with moderation in the Wholesale Price Index (WPI) inflation.

Toll rates and traffic volumes are the two variables that decide toll collections, the rating agency said in a statement.

The rise in toll rate is linked to the WPI while the traffic volume is linked to underlying economic activity, primarily manufacturing, construction and mining.

For the projects that were bid post 2008, the toll rate is revised annually in April at 3% fixed rate plus 40% of the change in WPI for December. 

Hike in toll rates for the projects bid prior to 2008 is 100% linked to the March WPI (toll rate revision happens in July or September each year).

“The WPI for December 2022 is 5.0 per cent (against 14.27 per cent in December 2021) translating into a toll rate increase of 5 per cent during FY2024 for the projects which are linked to three per cent fixed rate plus 40 per cent of the change in WPI,” Vinay Kumar G, Sector Head, Corporate Ratings, ICRA, said in a statement.

“For projects awarded prior to 2008, ICRA expects March WPI to be sub-2%. In both the cases, a modest toll rate revision is expected to result in 6-9% growth in toll collections for FY2024, primarily supported by 4%-5% growth in traffic. Despite the moderation in toll rate growth, the bump-up witnessed in toll rates in FY2023 along with steady traffic growth should support the cumulative DSCR for BOT toll road assets,” he added.

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