Indian road sector is picking up pace despite multiple headwinds and government's relief measures have helped road contractors, rating agency ICRA said on Wednesday.
The sector is now at an interesting crossroad, presenting multiple opportunities and risks, it said.
"The Ministry of Road Transport and Highways (MORTH) has initiated a slew of relief measures like shift from milestone based billing (typically ranging between 45-75 days) to monthly billing and release of retention money/performance security in proportion to the work already executed among others which has immensely supported the road contractors," ICRA said in a statement.
These initiatives have helped in reducing the cash conversion cycle while also getting the performance guarantees and associated margin money released for execution of projects, it added.
In addition, MORTH and the National Highways Authority of India (NHAI) have also been making payments within 7-15 days post bill certification by independent engineer, ICRA said.
Shubham Jain, SVP & Group Head, Corporate Ratings, ICRA said, "It is heartening to see positive and proactive steps taken by NHAI with an objective to strengthen the liquidity position of road contractors and developers." This is also reflecting in the way in which road contractors have ramped up execution efforts despite facing multiple headwinds post lockdown, including reverse migration of labour, he said.
"Notwithstanding the high cost of re-mobilising the labour, many contractors made special arrangements to facilitate return of labour due to improved cash conversion cycle from NHAI/MORTH projects," he added.
