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Business Standard
22-07-2025
- Business
- Business Standard
Construction industry margins to stay between 10.25-10.75% in FY26: Icra
Amid intense competition in the sector, operating margins of construction industry players are estimated to remain steady at 10.25-10.75 per cent in FY26, down from 10.6 per cent in FY25, according to Icra. This marks a sharp decline from the margins in FY21, which stood at 13-14 per cent. The ratings firm has also revised its revenue growth estimate for the industry in FY26 to 6-8 per cent, down from the earlier guidance of 8-10 per cent, due to continued headwinds in road-awarding activity as well as a slowdown in the execution of Jal-Jeevan mission-related projects. However, an expected ramp-up in other segments, especially urban infrastructure and irrigation, may result in relatively better performance for the industry in FY26, compared to flat growth during FY25. Further, the aggregate order book/operating income for Icra's sample set of entities is expected to be 3.5x as of March 31, 2026, providing adequate revenue visibility for industry participants. The aggregate order book/OI was 3.4x as of March 31, 2025. Icra's sample set features 19 companies with a combined turnover of almost Rs 1.3 trillion in FY25. Suprio Banerjee, vice president and co-group head, corporate ratings at Icra, said, 'Contractors, largely focused on the road segment, are likely to underperform compared to broader trends, owing to the slowdown in order-awarding activity from the MoRTH/NHAI. Several mid-sized road construction entities have an order book/revenue ratio of less than 2.0 times, indicating imminent stress on their revenue prospects in FY26, far below the industry average of around 3.5 times." However, players focused on segments like urban infrastructure or the energy sector are expected to sustain double-digit revenue growth in FY26. The majority of road projects under the MoRTH/NHAI were awarded at a sizeable discount compared to the authority's base price, indicating heightened competition. The competition in other sectors, such as metro, water supply, and sanitation, has also intensified, with new entrants trying to diversify their order books, Icra noted. The operating margins of players are expected to remain under check due to aggressive competition, although stable commodity prices and operating leverage benefits should provide some support to profitability. 'While debt levels are likely to increase to support higher working capital requirements, the corresponding operational leverage benefits are projected to keep the interest cover adequate at 3.5-3.8 times in FY26. Given the moderate leverage and satisfactory debt coverage metrics, Icra maintains a stable outlook on the construction sector,' Banerjee added. Construction activities — particularly road projects — have been notably affected due to lower fresh order inflows following the enforcement of the model code of conduct in Q1 FY25, coupled with execution-related challenges due to an extended monsoon season and a transition to milestone-based billing.
New Indian Express
18-07-2025
- Automotive
- New Indian Express
HAM-handed or not? Kerala road collapses raise questions on how national highways are built
The recent collapse of multiple stretches of under-construction national highways in Kerala has not only sparked a heated debate about construction quality, but also about the mode under which they have been built. The Congress party has been quick to criticise the Hybrid Annuity Model (HAM), under which a majority of these roads were built, alleging inflated costs, poor quality and high contractor profits. Should other highway construction modes have been considered instead? What do experts have to say? National Highway projects are executed on mainly three modes—Build Operate and Transfer (BOT), Hybrid Annuity Model (HAM) and Engineering Procurement and Construction (EPC). In an EPC (Engineering, Procurement, and Construction) mode, the Government pays private players to build roads, and gives them no role in ownership, toll collection, or maintenance. In the BOT (Build, Operate, Transfer) mode, private players build, operate, and maintain roads for a specified period, arranging finances and collecting tolls or annuity fees. The HAM (Hybrid Annuity Model) mode, meanwhile, is a combination of EPC and BOT, where 40% of the project costs are funded by the government and 60% by the developer. HAM aims to balance risks between developers and the government, providing a more sustainable financial mechanism for road development. But has it ended up being HAM-handed instead? Why HAM came into play In the early 2000s, the National Highways Authority of India (NHAI) relied on the Build-Operate-Transfer (BOT) model to build roads without spending much money. Private contractors built the roads, collected tolls, and handed them back to the government after 20-30 years. However, by 2014, the BOT model had collapsed due to unrealistic traffic projections, delayed land acquisition, and hesitant financiers. The Hybrid Annuity Model (HAM) was introduced in 2016 to revive private-sector investment in the road sector, which had dwindled due to the challenges faced by the BOT model. Under HAM, the government provides 40% of the project cost as construction support during the construction period, while the remaining 60% is paid as annuity payments over the operations period, along with interest, to the concessionaire. This model aimed to expedite National Highway construction by rekindling private developer interest in highway projects. Another major factor behind the introduction of HAM was the growing liabilities of the NHAI. Its debt burden increased rapidly and touched Rs 3.35 lakh crores by 2024, putting the authority in a tight spot. Interestingly, NHAI's debt did not reflect in the Union Government's total debt as it had an "Autonomous" status. Suprio Banerjee, Vice President and Co-Group Head, ICRA Ltd told The New Indian Express that the HAM model was introduced in 2016 to address the challenges faced by road developers in execution and funding tie-up for BOT-toll projects and to encourage private sector participation. "Since its introduction, the road ministry has awarded more than 19,000 km length of projects under the HAM model to more than 100 developers with a cumulative BPC (bid project cost) of more than Rs 5 lakh crore till March 2025. The awarding also improved over the years with healthy share of awards in HAM mode since FY2021," he added. "Banks weren't funding BOT projects, and financial closure wasn't happening. The assumption of 8-10% annual traffic growth was off, as parallel road, air, and rail infrastructure development affected it. EPC was draining NHAI's coffers, so they introduced HAM. HAM is a win-win for all three stakeholders - government, contractors, and banks - as the risk is shared among them. It picked up well..." said Ankita Shah ,Vice President at Elara Capital. Contractors gaining 100% profit without any risk? But after several stretches of road, including service roads, collapsed under the rains in Kerala, the Congress party released a scathing critique of the Hybrid Annuity Model (HAM). The Congress claimed in a social media post that the Build-Operate-Transfer (BOT) model has been largely defunct since 2016, with most projects now being executed under the Hybrid Annuity Model (HAM) or Engineering, Procurement, and Construction (EPC) model. They pointed out that the HAM model essentially amounts to companies lending to the government at an interest rate 3% higher than the bank rate. The party also highlighted that EPC contracts reveal the true cost of construction, including the contractor's profit, which typically assumes a standard operating profit margin of around 20%. Citing the example of the Azhiyur to Vengalam stretch of NH-66, the post noted that the original contractor was awarded the contract for Rs 1,838.1 crore but the work was subcontracted for Rs 971 crore. This raises questions about the risk taken by the company and the excessive profits earned. The X handle @INCKerala highlighted that the contract for the Azhiyur-Vengalam project excludes the cost of operation and maintenance (O&M) for 15 years, which will be paid separately by NHAI to the company, adjusted for inflation annually. Specifically, the contractor has quoted an annual O&M amount of Rs 8.65 crore for this project. Further scrutiny, the party said, reveals that the actual construction cost of the Azhiyur-Vengalam stretch is approximately Rs 23.7 crore per kilometre, less than half of the awarded amount of Rs 45 crore per kilometre. This stark difference underscores the windfall profits enabled by the Hybrid Annuity Model (HAM) over 15 years, despite construction costs aligning with those of EPC projects, the Congress went on to allege. The post emphasised that executing projects through EPC, with the government taking loans directly, would be significantly cheaper. KPCC General Secretary (Organisation) M Liju told The New Indian Express, "Think about the overall loot happening in the name of highway construction. It would have been much cheaper if all projects were executed through EPC, with the government taking loans directly. The 60% annuity payment is essentially a loan from companies to the government at a higher interest rate than the bank rate. Instead of directly taking a loan at Bank rate of 8%, NHAI takes a loan from construction companies at 11%. What's the risk taken by the company to warrant such lucrative rewards?" Costlier, but still the better option? Interestingly, speaking at a panel discussion a senior official of the National Highways Authority of India (NHAI) had highlighted some months earlier that the HAM is costly to the government, involving upfront grants and repayment of funds with interest. According to Suprio Banerjee, "A HAM project requires more funding from developers compared to EPC projects, but less than BOT-Toll projects. However, the authority can recover some costs through toll collection, as it retains toll rights under HAM." He further noted that over the last three years, EPC has been the preferred route, accounting for 65-70% of total road awards, while HAM projects comprised 25-30%. Although HAM's share declined to around 13% in FY2024, it's expected to rebound to over 25-27% in FY2026, driven by projects above Rs 500 crore being awarded in BOT (HAM or Toll) mode. In a paper Comparative Study of Bot And Ham Models of Public Private Partnership published in the International Journal of Research in Advent Technology, Nikhil Kumar and Akash Agrawal argue that compared to BOT model, HAM turns out to be a better alternative for the highway construction project. Here, the risk allocation is minimum and financial burden is also shared to a great extent to both public and private and moreover such HAM projects have a better future. "The main reason which has made HAM so popular is its ability to handle risk with regard to financial management. In this aspect government is liable to pay only 40% of the overall cost in five instalments and the rest 60% is the burden of the private party. They can raise the fund by means of equity, loans or any debt and the financial support is given to them only when a certain target is achieved in due course of time otherwise penalty would be imposed over them," the paper says. "The cost of building remains the same across EPC, BOT, and HAM projects; the difference lies in how the investment is recovered. In HAM, no single party bears the entire risk, as both the promoter and the government have a stake. In contrast, EPC and BOT models carry counterparty risks," Ankita Shah said. "The success of these models ultimately depends on traffic volume, which can be unpredictable due to changing government policies and circumstances. For instance, toll plazas are often kept open during elections, affecting revenue. In HAM, the government shares the risk. The future of road construction likely lies in a mix of all three models, with BOT suitable for high-traffic stretches and EPC for socially necessary projects with lower traffic volume," she added.
Time of India
25-06-2025
- Business
- Time of India
Higher education revenue to grow 9–11% in FY26 amid rising enrolments and course expansion as per reports
NEW DELHI: The revenue of higher education institutions is expected to expand by 9-11 per cent in FY2026, similar to the growth estimated for FY2025, on the back of expanding seat capacities, improving enrolments and addition of courses, according to a report released by rating agency ICRA on Tuesday. Moreover, tightening student visa norms in the US, the UK, and Canada is likely to aid Indian higher education institutions in the near to medium term. ICRA's analysis suggests that the credit profile of these institutes, especially those catering to the medical stream, has witnessed steady improvement in recent years. With nearly 15-20 per cent of India's population estimated to be in the 15-24 age bracket, and with improving literacy rates, the demand for higher education in the country is projected to increase over the next decade. While the increasing cost of higher education has remained a deterrent, improving access to credit (education loan) for students vying for higher education from various financial institutions has been providing support. Additionally, the Centre's expenditure on higher education has doubled in the last 10 years, which, coupled with the rise in the number of universities from 642 in AY2011 to around 1,189 as of AY2025, has translated into a handsome revenue growth for major universities, the report states. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like They Were So Beautiful Before; Now Look At Them; Number 10 Will Shock You Reportingly Undo Healthy admissions, along with an annual fee hike of around 6-8 per cent, have translated into a strong compounded annual growth rate (CAGR) of 15 per cent in revenue growth for these colleges during FY2020-FY2024. Suprio Banerjee, Vice President at ICRA, said: "The higher education sector in India is poised for growth owing to continued strong demand, increasing disposable family income, easy access to credit, and enhanced Government focus and private sector participation, especially in the medical and engineering stream. However, the sector faces challenges such as fragmentation, infrastructure deficiencies, affordability issues, employability concerns, shortage of qualified faculty, and limited autonomy due to high regulations. " The gross enrolment ratio (GER) for higher education has risen over the years to around 28 per cent in AY2022 from 21 per cent in AY2012. The NEP 2020's target has been to boost the GER in higher education to 50 per cent by 2035, which, though ambitious, also reflects the large untapped growth potential for the sector, the report added. Is your child ready for the careers of tomorrow? Enroll now and take advantage of our early bird offer! Spaces are limited.
Canada Standard
24-06-2025
- Business
- Canada Standard
Stricter visa rules in US, UK and Canada to boost Indian higher institutions: ICRA
New Delhi [India], June 24 (ANI): Tightening student visa norms in the USA, the UK and Canada is likely to aid Indian higher education institutions in the near to medium term, according to rating agency ICRA. ICRA's analysis suggests that the credit profiles of these institutes, especially those catering to the medical stream, have witnessed steady improvement in recent years. ICRA projects the revenue of higher education institutions to expand by 9-11 per cent in FY2026, similar to the growth estimated for FY2025, on the back of expanding seat capacities, improving enrolments and addition of courses. With nearly 15-20 per cent of India's population estimated to be in the 15-24 age bracket, and with improving literacy rates, the demand for higher education in the country is projected to increase over the next decade. While increasing cost of higher education has remained a deterrent, improved access to credit (education loan) for students vying for higher education from various financial institutions has been providing support. Additionally, the Government of India's (GoI's) expenditure on higher education has doubled in the last 10 years, which, coupled with the rise in the number of universities from 642 in AY2011 to ~1,189 as of AY2025, has translated into a handsome revenue growth for major universities. Healthy admissions, along with annual fee hike of ~6-8 per cent has translated into a strong compounded annual growth rate (CAGR) of 15 per cent in revenue growth for these colleges during FY2020-FY2024. Suprio Banerjee, Vice president & Co-Group Head, Corporate Ratings, ICRA, said, 'Other than the GoI's impetus on higher education, the recent tightening of student VISA norms in the US, the UK and Canada will also propel some of the Indian students targeting enrolment in international universities to explore options at home. The higher education sector in India is poised for growth owing to continued strong demand, increasing disposable family income, easy access to credit, and enhanced Government focus, through initiatives like the National Education Policy (NEP) 2020 and private sector participation.' Banerjee added, 'The operating surplus for the entities under study remained healthy at ~30-35 per cent during FY2020-2024 and is expected to remain strong at upwards of 30 per cent in FY2025 and FY2026. Despite intermittent sizeable capex requirements for capacity expansion, the debt coverage metrics are expected to remain healthy, driven by on-book liquidity to fund the capex as well as healthy surplus generation limiting the borrowing levels'. The gross enrolment ratio (GER) for higher education has risen over the years to ~28 per cent in AY2022 from 21 per cent in AY2012. The NEP 2020's target has been to boost the GER in higher education to 50 per cent by 2035, which though ambitious, also reflects the large untapped growth potential for the sector. (ANI)
India Gazette
24-06-2025
- Business
- India Gazette
Stricter visa rules in US, UK and Canada to boost Indian higher institutions: ICRA
New Delhi [India], June 24 (ANI): Tightening student visa norms in the USA, the UK and Canada is likely to aid Indian higher education institutions in the near to medium term, according to rating agency ICRA. ICRA's analysis suggests that the credit profiles of these institutes, especially those catering to the medical stream, have witnessed steady improvement in recent years. ICRA projects the revenue of higher education institutions to expand by 9-11 per cent in FY2026, similar to the growth estimated for FY2025, on the back of expanding seat capacities, improving enrolments and addition of courses. With nearly 15-20 per cent of India's population estimated to be in the 15-24 age bracket, and with improving literacy rates, the demand for higher education in the country is projected to increase over the next decade. While increasing cost of higher education has remained a deterrent, improved access to credit (education loan) for students vying for higher education from various financial institutions has been providing support. Additionally, the Government of India's (GoI's) expenditure on higher education has doubled in the last 10 years, which, coupled with the rise in the number of universities from 642 in AY2011 to ~1,189 as of AY2025, has translated into a handsome revenue growth for major universities. Healthy admissions, along with annual fee hike of ~6-8 per cent has translated into a strong compounded annual growth rate (CAGR) of 15 per cent in revenue growth for these colleges during FY2020-FY2024. Suprio Banerjee, Vice president & Co-Group Head, Corporate Ratings, ICRA, said, 'Other than the GoI's impetus on higher education, the recent tightening of student VISA norms in the US, the UK and Canada will also propel some of the Indian students targeting enrolment in international universities to explore options at home. The higher education sector in India is poised for growth owing to continued strong demand, increasing disposable family income, easy access to credit, and enhanced Government focus, through initiatives like the National Education Policy (NEP) 2020 and private sector participation.' Banerjee added, 'The operating surplus for the entities under study remained healthy at ~30-35 per cent during FY2020-2024 and is expected to remain strong at upwards of 30 per cent in FY2025 and FY2026. Despite intermittent sizeable capex requirements for capacity expansion, the debt coverage metrics are expected to remain healthy, driven by on-book liquidity to fund the capex as well as healthy surplus generation limiting the borrowing levels'. The gross enrolment ratio (GER) for higher education has risen over the years to ~28 per cent in AY2022 from 21 per cent in AY2012. The NEP 2020's target has been to boost the GER in higher education to 50 per cent by 2035, which though ambitious, also reflects the large untapped growth potential for the sector. (ANI)
