New Delhi, Dec 17 Cumulative recovery rates for stressed operational road projects by asset reconstruction companies (ARCs) will surge about 120 per cent by the next fiscal (FY27) from FY25 levels, a report said on Wednesday.
The report from Crisil Ratings said that improvement will be driven by timely annuity payments by the National Highways Authority of India (NHAI), healthy toll collections and resolutions through the Insolvency and Bankruptcy Code (IBC).
"Further, having gained substantial capabilities in the road sector, ARCs are also eyeing acquisition of terminated assets banking on collaborative efforts by multiple stakeholders to pave the way for timely recoveries," the report said.
Many operational projects under the build‑operate‑transfer model were stressed between FY17 and FY19 due to construction delays and cost overruns linked to land acquisition delays and Right of Way (ROW) issues.
ARCs acquired these assets between 2019 and 2022 at average haircuts of about 44 per cent on principal outstanding debt.
The report is based on analysis of 2,500 lane km of stressed operational road projects, with total Security Receipts (SRs) issued of about Rs 3,200 crore, and around 1,000 lane km of terminated road projects with SRs of about Rs 3,000 crore.
“Prudent valuation at the time of acquisition by ARCs combined with healthy toll collections and stable annuity payments is enhancing the attractiveness of operational road assets for refinance and takeover by stronger sponsors through the Insolvency and Bankruptcy Code (IBC),” said Mohit Makhija, Senior Director, Crisil Ratings.
Mohit said that these factors are accelerating recoveries for ARCs by twelve to eighteen months compared to earlier estimates.
While traffic grew at a compound annual growth rate of about 9 per cent between FY22‑25, the debt‑to‑annuity and debt‑to‑toll ratios improved in FY25, the report said.
The traffic growth, descoping of pending ROW and completion of delayed construction made these projects viable at the reduced debt levels.
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