Capital outlay on roads, renewables seen rising 35% in this and next fiscals to Rs 13 lakh cr: CRISIL Ratings

Backed by strong execution speed, the combined capital outlay on roads and renewables in the current and next fiscals is expected to rise to Rs 13 lakh crore, a whopping 35 per cent growth compared with the preceding two fiscals.

The pace of construction of roads and capacity addition in renewables is expected to increase by 25 per cent and 33 per cent respectively, over the current and next fiscals, as per credit rating agency CRISIL Ratings. "This bodes well for the economy, given the high multiplier effect of road development and the critical role renewable energy can play in achieving India’s energy transition," it said.

Gurpreet Chhatwal, Managing Director, CRISIL Ratings, said, “The pace of execution of renewable energy projects is set to increase 33 per cent to 20 GW per annum over current and next fiscals (15 GW per annum in the past two fiscals) supported by a healthy executable pipeline of 50 GW of projects as on March 31, 2023. Similarly, road construction is set to accelerate 25 per cent to 12,500-13,000 sq km per year over the current and next fiscals on continued healthy awarding of projects and step up in execution by road construction players.”

A supportive policy environment adds its own spurs, the credit rating agency said. For instance, steps such as late payment surcharge has helped keep dues from discoms to renewable generators in check. In roads, the introduction of the hybrid annuity model (HAM) has speeded up execution and drawn in investments. Further, initiatives such as Atmanirbhar Bharat, forbearance during the pandemic, and emergence of infrastructure investment trusts (InvITs) have afforded a fillip to both sectors.

Investor interest has been encouraging, with Rs 75,000-80,000 crore raised through equity and asset monetisation in the past two fiscals in both sectors, Manish Gupta, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, said,  “Investor interest has been encouraging, with Rs 75,000-80,000 crore raised through equity and asset monetisation in the past two fiscals in both sectors."

"Continued focus on asset monetisation and equity raising, along with healthy cash flows will keep the capital structure balanced in both sectors. So, despite higher capital outlays, rated renewables and road entities should have a healthy average debt service cushion of 1.2-1.3 times over the tenure of debt on their balance sheets, which supports their credit profiles,” he said.