- India aims to boost road building to 41 kilometers per day
- That could help construction stocks after a drop this year
Indian Transport Minister Nitin Gadkari’s plan to expand the highway network in the world’s fastest-growing major economy could help revive struggling construction stocks.
The nation will aim to add 41 kilometers (25 miles) of roads daily from March next year, up from 20 kilometers a day currently, Gadkari said in an interview. A project logjam had slowed the pace to about 3 kilometers when Prime Minister Narendra Modi’s government took office just over two years ago.
"The situation has changed," Gadkari, 59, said in his office in New Delhi on July 20. "We’re working fast and taking decisions. Now land acquisition isn’t a problem. Forest clearance isn’t a problem."
An eight-member index of builders including Ashoka Buildcon Ltd. and Sadbhav Engineering Ltd. compiled by Bloomberg News has tumbled 11 percent in 2016. The gauge had surged after Modi took office amid optimism about his focus on improving infrastructure. Its decline this year bucks a 7 percent advance in the benchmark S&P BSE Sensex.
The Sensex trades at 21 times reported earnings, data compiled by Bloomberg show. The valuations for the eight-member index range from 6.3 times for MBL Infrastructures Ltd. and 13 times for KNR Constructions Ltd. to 80 times for Man Infraconstruction Ltd.
“Cement, road construction as well as tollway companies will benefit from an acceleration in road building,” said Chinmay Madgulkar, an analyst at Taurus Asset Management Co. in Mumbai.
Road construction has the potential to create millions of jobs, Gadkari said. Boosting employment is critical for the government ahead of key state polls next year and a general election that’s due by 2019.
As many as 95 percent of stalled road projects are back on track now, the minister said. He plans to double the length of national highways to 200,000 kilometers, but didn’t give a time-frame. Gadkari added that the government plans to sign 25,000 kilometers of road deals in the year through March 2017.
His ambitions contrast with India’s mixed history on executing infrastructure upgrades. About 60 percent of the $2 trillion economy’s roads are paved, compared with 87 percent in China, according to Bloomberg Intelligence.
"Things are moving fast," Gadkari said. "As a minister, it’s my duty that by hook or crook I should manage it."