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The National Highways Authority of India (NHAI) has seen a slowdown in road construction contract awards, following tighter bidding norms introduced by the Ministry of Road Transport & Highways. The new rules require additional performance securities, discouraging aggressive underbidding by financially weaker players. While aimed at ensuring quality, the changes have slowed new project awards, with well-funded infrastructure firms now dominating bids. With road projects making up a major chunk of annual inflows, EPC companies are seeing weaker order books and muted growth. Many are diversifying into sectors like solar, BESS, and railways. Order activity is expected to rebound later in FY26.
The awarding of road construction contracts by the National Highways Authority of India has taken a hit as stricter bidding norms rolled out by the Ministry of Road Transport & Highways have reshaped the playing field. According to a recent report by HDFC Securities, this regulatory tightening has introduced additional performance security requirements, fundamentally altering bidding dynamics across central government road projects. Advertisement
Over the past financial year, the sector had witnessed projects being awarded at steep discounts-typically around 25% below estimated costs encouraging aggressive bidding from smaller, often unlisted players. However, concerns over the long-term quality and viability of such heavily discounted projects have prompted MoRTH to recalibrate the rules.
These new guidelines are designed to raise the entry bar and keep out bidders lacking financial resilience. As a result, infrastructure companies with strong balance sheets and execution track records are beginning to dominate the bidding landscape. Notably, a significant portion of recent project announcements has been under developer models further favouring well-capitalized firms capable of handling higher financial commitments.
Despite an existing project pipeline worth INR 3.5 trillion, NHAI's new project awards have remained sluggish in recent months. HDFC Securities estimates that NHAI's order activity in FY26 is likely to pick up later in the year, potentially reaching INR 600 billion by year-end.
The slowdown in road project awards, which previously accounted for 50-60% of annual inflows for EPC companies, has directly affected growth targets and led to a downward re-rating of several construction firms. In response, many EPC players are actively diversifying their project portfolios, venturing into non-road sectors such as solar power, Battery Energy Storage Systems (BESS), railway infrastructure, river interlinking, and transmission projects under the TBCB model.
The report points out that the current cycle has left EPC firms grappling with their lowest order inflows in recent years, depressed valuation multiples, and muted growth expectations. However, it also suggests that any signs of recovery in ordering volumes could trigger a strong sector-wide re-rating, especially for companies that have successfully diversified.
Source ANI
5th Jun, 2025
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