Will asset reconstruction firms enhance recoveries of stressed road assets by FY27?
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Synopsis
As asset reconstruction companies gear up for a significant recovery in stressed road assets, insights reveal a staggering 120% increase by FY27. The factors driving this surge include timely payments and robust toll collections. Discover how ARCs are reshaping the landscape of road project recoveries.
Key Takeaways
- Cumulative recovery rates are expected to increase by 120% by FY27.
- Timely NHAI payments and strong toll collections are key drivers.
- ARCs are focusing on acquiring terminated assets.
- Prudent valuations are enhancing asset appeal for refinancing.
- Traffic growth and project viability are improving recovery timelines.
New Delhi, Dec 17 (NationPress) - The cumulative recovery rates for stressed operational road projects managed by asset reconstruction companies (ARCs) are projected to increase by approximately 120 percent by the next fiscal year (FY27) compared to FY25 levels, according to a report released on Wednesday.
The analysis from Crisil Ratings indicates that this growth will be fueled by timely annuity payments from the National Highways Authority of India (NHAI), robust toll collections, and successful resolutions through the Insolvency and Bankruptcy Code (IBC).
As the report emphasizes, ARCs have significantly developed their capabilities within the road sector and are now aiming to acquire terminated assets, leveraging collaborative efforts among various stakeholders to facilitate timely recoveries.
Many operational projects under the build-operate-transfer model faced stress between FY17 and FY19 due to construction delays and cost overruns attributed to land acquisition delays and Right of Way (ROW) challenges.
Between 2019 and 2022, ARCs acquired these stressed assets at an average of about 44 percent haircuts on principal outstanding debt.
This report is based on an analysis of 2,500 lane km of stressed operational road projects, with total Security Receipts (SRs) issued amounting to about Rs 3,200 crore, along with around 1,000 lane km of terminated road projects that have SRs of approximately Rs 3,000 crore.
“The prudent valuation at acquisition by ARCs, coupled with healthy toll collections and stable annuity payments, is making operational road assets more appealing for refinancing and acquisition by stronger sponsors through the Insolvency and Bankruptcy Code (IBC),” stated Mohit Makhija, Senior Director at Crisil Ratings.
He further noted that these developments are accelerating the recovery timelines for ARCs by about 12 to 18 months when compared to earlier projections.
While traffic exhibited a compound annual growth rate of around 9 percent from FY22 to FY25, the debt-to-annuity and debt-to-toll ratios have shown improvement in FY25, as per the report.
Factors such as traffic growth, the descoping of pending ROW issues, and the completion of delayed construction projects have contributed to the viability of these projects at the newly reduced debt levels.
Point of View
This report underscores the growing efficiency and strategic capabilities of asset reconstruction companies in revitalizing stressed road projects. It reflects a proactive approach to financial recovery, aligning with national infrastructure goals and enhancing economic stability within the sector.
NationPress
21/12/2025
Frequently Asked Questions
What are asset reconstruction companies?
Asset reconstruction companies (ARCs) specialize in acquiring and managing distressed assets, particularly in sectors like infrastructure and real estate, to facilitate recoveries.
How do ARCs improve recovery rates?
ARCs improve recovery rates through effective management, timely payments from authorities, and leveraging legal frameworks like the Insolvency and Bankruptcy Code.
What factors lead to stressed road assets?
Stressed road assets often arise due to construction delays, cost overruns, land acquisition issues, and regulatory challenges.
What is the expected growth in road project recoveries?
The report predicts a growth of approximately 120% in recoveries of stressed road projects by FY27 compared to FY25 levels.
What is the role of NHAI in this context?
The National Highways Authority of India (NHAI) plays a crucial role by ensuring timely annuity payments and facilitating smooth operations for road projects.
