Highway Construction Growth in India to Slow Down in FY25: Report

The national highway construction in India is expected to be slow for the next fiscal year, and according to the report of CareEdge Ratings, it would slow down by about 7-10% for FY25. The highway construction will reduce to about 11,100-11,500 km from the previous fiscal of FY24’s 12,350 km average pace of around 31 km per day.

The slowdown is attributed to execution challenges, rising competition, and significant delays in receiving appointed dates after project awards. Maulesh Desai, Director of CareEdge Ratings, highlighted that among ongoing projects worth ₹1.83 lakh crore, nearly 55%—valued at ₹1 lakh crore—are facing delays of over six months.

“The sector is grappling with increasing execution hurdles, intensifying competition, and prolonged waits for appointed dates, which have collectively slowed project implementation,” Desai stated.

CareEdge Ratings conducted an extensive analysis of 17 sponsors and EPC contractors involved in Hybrid Annuity Model (HAM) projects. While steady execution led to a 14% compound annual growth rate (CAGR) in total operating income (TOI) between FY21 and FY24, a reduction in project awards in FY24 and the first half of FY25 has weakened revenue visibility. The order book-to-TOI ratio has declined from 2.78x in FY22 to 2.15x in FY24, with many projects awaiting appointed dates, limiting executable orders.

Operating profitability is also projected to shrink by 200 basis points in FY25 compared to FY23, driven by heightened competition and rising overhead costs. Additionally, the discontinuation of the Atma Nirbhar Bharat scheme for monthly payments is expected to extend the working capital cycle by 15-20 days, further straining developers.

Despite these challenges, the Hybrid Annuity Model remains the dominant mode for highway project awards, accounting for nearly 55% of total projects between FY21 and FY24. CareEdge Ratings analyzed 374 HAM projects awarded by the National Highways Authority of India (NHAI) from 2015 to 2024, covering 16,000 km with a total bid project cost exceeding ₹4.03 lakh crore.