India's toll roads are likely to witness a 14-15 percent growth in collections in FY22, ratings agency ICRA said in a report. Accordingly, this growth will be achieved on a low base following an estimated de-growth of 5-7 percent in FY21.

"Road traffic has witnessed a marked improvement in H2 FY2021 after subdued traffic witnessed in the initial months, post resumption of tolling from April 20, 2020. This has been driven by increased movement of both - passenger and commercial vehicles, resulting in growth of around 10 percent on a YoY basis."

"Overall, in 9M FY2021, the traffic shrinkage witnessed is 4.6 percent as compared of 13 percent de-growth in Gross Value Added (GVA) of construction, mining and manufacturing."

"Freight movement has a strong correlation with the GVA of construction, mining and manufacturing, consequently toll collections closely mirrors the trends in GVA."

According to the report, the movement of GVA and traffic growth has mostly followed similar growth trends, with exception of brief periods including demonetisation, implementation of GST and during revision of axle load norms.

"Adequate liquidity buffer in the form of debt service reserve and quick recovery post easing of lockdown restrictions have arrested major slippages in the credit profile of toll road assets."

"The non-services GVA growth for FY2022 is estimated to be in the range of 9.5-10.5 percent. Adjusted for the impact of lockdown in this growth; for FY2022, the traffic is expected to increase by 5-6 percent with average toll rate revision of 3-4 percent."

In the past, the traffic witnessed a contraction in FY2014 owing to a slowdown in manufacturing and mining activity, following a ban on mining of several ores.

"With removal of the ban on iron-ore mining and pick-up in manufacturing activity, the median traffic growth improved to 4.9 percent in FY2015 and thereafter to 8.5 percent in FY2016."

"However, a slowdown in the economic activity post demonetisation period adversely affected the traffic during FY2017, resulting in subdued growth of traffic in FY2017 at 3.7 percent.

It said the after-effects of demonetisation along with implementation of GST led to weak first half in FY2018, thereby limiting growth to 4.9 percent.

Further, the slowdown in economy, coupled with impact of revision in axle-load norms has adversely hit vehicular traffic and growth remained subdued at 2 percent in FY2019.

"Most of the stretches have witnessed a traffic slowdown during FY2020 with contraction of 3.8 percent due to continued impact of revised axle norms in H1 FY2020, a general slowdown in the economy and the constrained vehicular movement in the run-up to the nationwide lockdown due to Covid-19 pandemic in Q4 FY2020."

In addition, the report pointed out that many of BOT concessionaires have deferred periodic maintenance which was due in FY2021 on account of de-growth in traffic, lower toll collections due to Covid-19 pandemic and to preserve liquidity.

"Any significant delay in commencement of the periodic maintenance could affect the riding quality and also result in significant cost escalations which will adversely impact the cashflows."

(Edited by : Jomy)