With the increased focus of the Indian Government towards spending in the road sector, the opportunities of construction that are likely to raise by Rs.6400 billion approximately by the end of 2014 or early 2015. Such investment expectations can be bifurcated into about 435 spending towards building of national highways and expressways while 30 % of the spending can be estimated to be directed towards the construction of state highways. Of this rural roads are expected to have a large chunk of 27% of Government expenditure.
If the government spends more towards the road infrastructure, it has a ripple down effect in the construction industry as
1. The full money invested is directed to only construction activity and
2. It creates more opportunities for the private players to invest into towns and ancillary service outlet building along these roads.
Out of these the major portion of the rural road construction is on account of Pradhan Mantri Gram Sadak Yojna (PMGSY). Of the highway rollout majorly through the National Highway Development Program (NHDP), we expect the construction to expand by more than 25000 km by the end of the target timeframe stated earlier. This will need 14 km of highway to be constructed each day. The growth seen last year is expected to not only continue but also increase in pace.
Bell the Bull says: that despite the reality sector gloom, the roadways construction sector looks bright for the long term seeing the government investment initiative and puts positive bias on these stocks.