Toll collections in Q2 soar to highest in 5 quarters as traffic rises after GST effect wears off

Toll collections in the July-September period were smartly higher at 11% year-on-year, the highest in five quarters. The uptick in traffic growth was seen from early August with the effects of GST tapering off. After three consecutive quarters of weak traffic growth and toll collection, stretching back to the demonetisation in November 2016,  a clutch of 17 road projects collected Rs 873.89 crore. These are roads developed by IRB Infrastructure, Ashoka Buildcon and Sadbhav Infrastructure Project (SIPL). Nitin Patel, non-executive director, SIPL, said, he expects the growth rate in traffic to pick up further from Q3FY18 onward. He told FE, “The trend is improving. I expect the roll-out of the GST will have an increasingly positive impact on traffic growth in the next six months. Already, the cost of transportation has reduced for fleet-owners and the entry tax issues have been resolved at state borders, but the main saving has been in the turnaround time. We expect even more impressive growth on our Hyderabad-Yadgiri toll (HYTPL) road, due to steadily rising commercial traffic.” SIPL’s HYTPL project registered a year-on-year revenue growth of over 26% for Q2FY18. Ashish Kataria, CEO, Ashoka Concessions, concurred that the true impact of GST on traffic growth will be seen in the next few quarters.

He added: “Our project on National Highway 6 connects the resource-rich east to the consumption centres in the west of India. We see a lot of mining-related and auto transport traffic. Urban projects like Dhankuni have also experienced good growth due to significant local growth at adjacent manufacturing centres and port traffic.” A pick-up in the local economy at Belgaum-Dharwad in Karnataka and an increase in mining-related and manufacturing activity greatly benefited the company’s Jaora-Nayagaon toll project. This project clocked a y-o-y growth of 18.2%. “We are also seeing a significant increase in the light commercial vehicles (LCV) category on several assets. These are all local-economy driven,” Kataria added. IRB’s Jaipur-Deoli road (now part of IRB InvIT), too, saw an 18% growth in its second quarter y-o-y revenue but this could be impacted in the third quarter due to the ban on sand mining in Rajasthan imposed by the Supreme Court in November and due to which demand for other building materials such as bricks and cement has already fallen. The company’s Tumkur – Chitradurga road project in Karnataka (also part of InvIT) clocked a revenue growth of 11% y-o-y as mining activity remained robust. Encouragingly, toll collections and traffic on roads in the mining belt in central and eastern India – Chhattisgarh, Odisha and West Bengal – saw an improvement after the muted growth in the previous quarters.

IRB’s Mumbai-Pune stretch, which has traditionally seen double digit growth both in traffic and toll, continued to do well, registering a 23% growth in toll revenue in the September quarter. However, SIPL’s Ahmedabad ring road route, which typically sees more cars plying on it, saw a decline as the company was able to collect toll for only a limited time during the second quarter up till mid-October when the state government decided to waive the toll charges for all vehicles. The traffic growth had tapered on this road in the past as commuters had begun to use a service road to avoid paying toll.
Commercial traffic, the key driver on most stretches, is expected to grow at a more sustainable pace, especially after the imposition of overloading restrictions, which saw fleet-owners replace their 2/3-axle trucks with high-tonnage, multi axle vehicles (MAV). Jayant Mhaiskar, Vice-Chairman & Managing Director, MEP Infrastructure added the growth in commercial traffic is expected to increase, especially on national highways. He told Fe, “The Delhi-Mumbai corridor is the busiest, as well as the Mumbai-Chennai corridor, and the collections on these will be higher and will grow at a faster clip than other corridors like Delhi-Kolkata or Chennai-Kolkata.” MEP Infra saw a growth of about 11% y-o-y in the second quarter, on each of its two toll road projects on national highways in Uttar Pradesh and in Tamil Nadu.

Devam Modi, Research Director at Equirus Securities said the migration to MAVs had hurt traffic growth in the past few quarters. “For every five 2/3-axle trucks, you had two MAVs that came in as replacements; although tonnage increased due to an increase in the movement of commodities, but this was not evident in the overall growth in traffic,” he explained. While the lower tonnage trucks were charged Rs 2.20 – Rs 2.40 per km as toll, the MAVs are charged Rs 3.20 – 3.40. Hence, toll operators are now collecting Rs 7.00 as against Rs 11 earlier. However, Modi added, “Most of the migration to MAVs has already happened and I expect traffic growth will now be more sustainable at a pace of 10% or better over the next two years.” Traffic growth would be driven by increased activity across sectors such as mining, construction, auto transport, essential goods, commodity transport, trade and industrial activity, he added. Commodity movement, the key driver of traffic, ranges from 1.2x to 1.4x the growth in regional gross domestic product (GDP) growth, he contended.

Source:http://www.financialexpress.com/economy/toll-collections-in-q2-soar-to-highest-in-5-quarters-as-traffic-rises-after-gst-effect-wears-off/988661/

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