About 5,100 km of under-construction highway projects worth Rs 67,200 crore (Rs 672 billion) are under high risk, Crisil Ratings said in a survey.
Apart from this, 2,400 km operational BOT projects worth Rs 25,800 crore (Rs 258 billion) are at high risk mainly because of weak financial profile of sponsors and inability to service debt.
"About 7,500 km of highway projects, including 5,100 km under-construction and 2,400 km operational, awarded mostly between fiscals 2010 and 2012 on a build, operate, transfer, basis, are at high risk today," Crisil Ratings senior director Sudip Sural said in a conference call.
About 50 per cent of the projects under-construction are at high risk of not being completed because of significant cost over-runs and weak wherewithal of sponsors.
"We believe the remaining will benefit from proactive moves by the government to facilitate right of way and other clearances.
“We find the recent government move to ensure 80 per cent ROW, before a project is awarded very constructive," he said.
Sural further said that the under-construction projects require equity and cost-overrun support of around Rs 28,500 crore (Rs 285 billion) over the next two years.
"Of this, about Rs 16,000 crore (Rs 160 billion) could be stumped up from internal accrual of sponsors and sale of stake at the special purpose vehicle level. That leaves a significant shortfall of Rs 12,500 crore (Rs 125 billion)," he added.
The report found that 26 out of 80 operational projects are in no position to service debt on their own because of lower-than-estimated traffic.
These projects, which are mostly toll-based, span about 2,400 km, or 40 per cent of total length of operational BOT highways, and have an outstanding debt of Rs 17,100 crore (Rs 171 billion).
"Operational highway projects have been facing cash flow mismatches in the past few years because of lower-than-estimated traffic volume, and interest rates that were on the ascend till 2014.
"Now, with interest rates on the decline, pressure will ease a touch, but debt service coverage ratios will remain less than one, over the next two years," Sural said.
As a result, timely support from sponsors to bridge cash-flow mismatches will be critical because debt in these projects is without recourse to the sponsor, he added.
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