A significant hike in toll rate stemming from elevated inflation and healthy traffic growth on national highways will help toll road operators grow revenue by a significant 16-18 per cent in FY23, CRISIL Ratings said.

Toll revenue growth will remain strong in FY24 as well but lower at 9-11 per cent, riding on above-average traffic growth. In FY22, India’s cumulative toll collection stood at ₹34,742 crore against ₹28,681 crore in FY21.

The robust toll collections, along with the adequate balance sheet liquidity, will continue to support the credit profiles of toll road operators, a CRISIL Ratings study of 49 toll road assets across 14 states showed.

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“Revenue of toll road operators will soar in FY23, driven by a high toll rate hike of around 10.5 per cent, which is linked to inflation based on the Wholesale Price Index (WPI). Traffic growth at 5-7 per cent will also remain healthy, albeit on a low base of FY22. This resilience in traffic growth will be on the back of economic activity led commercial traffic, and strong personal mobility, supported by leisure and business travel,” CRISIL Ratings Director Anand Kulkarni said.

Toll roads are preferred by investors looking to pool road assets together under infrastructure investment trusts (InvITs) to generate healthy returns and benefit from inflation hedging. Therefore, toll roads account for around 70 per cent of assets held under road sector InvITs.

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Traffic growth

In FY24, traffic growth is expected to taper to 4-6 per cent but will remain higher than the 4-year compound annual growth rate of 2-3 per cent seen through FY22. Traffic growth is closely linked to real GDP growth, which is expected to decline to 6 over cent in FY24 from 7 per cent in FY23.

“Further, with WPI inflation printing lower at 4.95 per cent for December 2022, the next fiscal will see a toll rate hike of around 5 per cent. Consequently, toll revenue is expected to grow 9-11 per cent for FY24,” CRISIL projected.

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The sector has faced multiple headwinds since FY18, such as the impact of GST implementation, change in axle load norms for commercial vehicles, restrictions due to Covid-19, and supply chain disruptions, affecting the movement of traffic. These factors combined, limited traffic growth to 2-3 per cent between FY18 and FY22, it added.

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