EPC Struggles: Small Road Builders Face Uphill Battle

Small and mid-sized road construction firms face hurdles in securing contracts due to reduced EPC orders and increasing competition from larger players. The switch to BOT and HAM models demands significant capital outlay from these small players, exposing them to financial and execution risks.

Small and medium-sized road construction companies in India are confronting challenges in obtaining new contracts. The National Highways Authority of India (NHAI) has reduced engineering, procurement, and construction (EPC) orders, as highlighted by India Ratings and Research (Ind-Ra) on Monday.

The Ministry of Road Transport and Highways (MORTH) has leaned more on build, operate, and transfer (BOT) and hybrid annuity mode (HAM) projects recently. This shift is set to heighten competition in the EPC sector, favoring large companies with robust balance sheets over smaller entities.

Ind-Ra noted that small players face significant upfront capital demands and exposure to execution and funding risks when bidding for HAM and BOT projects, compounded by financial closure delays and toll risks in BOT projects. Moving to BOT/HAM models, while offering steadier business profiles over time, still impacts the stability of small EPC players.

(With inputs from agencies.)