Long recognised for its speed and scale of development, the road sector is now turning over a new leaf. The sector’s priorities have shifted from rapid road construction to balancing development goals with financial discipline. There is also a growing emphasis on creating a level playing field for all key stakeholders.
The sector has undergone many structural adjustments over the years, and one persistent trend has been its highly competitive bidding environment. Meanwhile, the implementation models employed by the Indian road sector, while in line with global practices, demonstrate a higher level of policy precision and are tailored to prevailing circumstances. That said, switching between construction models has not been easy for contractors and developers. Despite these challenges, the overall pay-off remains positive, with continued connectivity-driven growth across the country.
Steering road development through strategic policies
Macroeconomic shifts have consistently redefined the bidding landscape within the road sector. For instance, the unprecedented crisis of 2020, triggered by the Covid-19 pandemic, significantly impacted the potential award mix and bidder behaviour. During this period, road developers and contractors experienced sharp declines in profitability, leading to a rapid loss of investor appetite for high-risk implementation models. This was further compounded by a steep and immediate decline in traffic volume on key routes, along with the temporary suspension of tolling operations. Naturally, projects perceived as carrying substantial downside risk became undesirable due to market uncertainty regarding the return to normalcy.
Despite the market disruption, implementing authorities were supportive. The government deployed robust relief measures, including the provision of emergency “Covid-19” liquidity loans to several affected developers. In retrospect, there is general consensus that the government has been diligent in helping the sector tide over many crises.
Further, due to the policy impetus and the sector’s priority status, the drive to secure project awards has remained intense. Moreover, changes in model concession agreements have made existing implementation models more attractive, certainly adding more vigour into the space.
Abnormally high bids were a major cause of financial distress for many players in the road sector during the build-operate-transfer (BOT) era. This aggressive bidding often led to unsustainable project economics, resulting in the financial downfall of several developers. Recognising the severity of this issue and the recent resurgence of aggressive bidding, the Ministry of Road Transport and Highways (MoRTH) took a major step in April 2025 by introducing the Additional Performance Security (APS) policy. This measure is specifically designed to discourage reckless underbidding and enforce higher execution standards, thereby aiming to restore financial discipline and project quality in the sector.
EPC project experience
According to projects tracked by India Infrastructure Research, the National Highways Authority of India (NHAI) has awarded around 7,100 km of highway length in the EPC mode (including item-rate contracts) between 2020-21 and 2025-26 (up to September 2025). As compared to other implementation models, EPC projects accounted for around 40 per cent of total NHAI awards between 2020-21 and 2023-24. In 2024-25, overall project awarding slowed due to the general elections and procedural delays in project approvals. During the year, the share of EPC projects declined to around 25 per cent. Length-wise, around 580 km was awarded. In 2025-26 so far, NHAI has awarded only around 40 km of projects under the EPC mode, accounting for only 18 per cent of total awards. Further, NHAI plans to award around 30 EPC projects during the year.
Unlike the hybrid annuity model (HAM), where significant upfront private capital requirements limit the participation of small- and mid-size players, the EPC space is driven by intense competition with a large number of players bidding for such projects.
As per India Infrastructure Research, around 15 per cent of total EPC project awards between 2020-21 and 2025-26 (till September 2025) have been secured by five key players, GHV India, Ashoka Buildcon, EKK Infrastructure, DRAIPL and KCC Buildcon. The remaining 85 per cent of project awards are spread across a large pool of contractors.
Bidding intensity for EPC projects rose sharply in the second half of FY 2025, averaging seven to eight bidders per project in the third quarter, increasing to 10-11 bidders in the fourth quarter (with a median of 9), compared to four to five bidders in the first half of FY 2025. In the first half of FY 2026, bidding intensity has remained elevated with an average of eight to nine bidders per project (with a median of seven). The heightened bidding intensity leading to discounted bids can be attributed to the overall subdued awarding activity in the sector.
HAM at the forefront
HAM was introduced in 2016 with the aim of reviving private sector interest after several national highway projects under the toll-based BOT model were stalled. In its first year, NHAI awarded more than 50 per cent of its projects through HAM. Between 2017-20, HAM’s share in total awarding activity hovered around 40 per cent, although issues related to financial closures and declining interest rates moderated bidding activity. Developer interest returned to the model in a big way in 2020 and has remained strong so far. Unreliable traffic projections made toll revenue-based models unattractive, resulting in contractors opting for HAM which offered predictable returns via government-backed annuities. Moreover, during Covid-19, HAM projects, with 40 per cent upfront government funding, became more viable for financially stressed developers.
In the past five years, since 2020, HAM’s share in total awarding activity has soared to an average of around 60 per cent. Provisions such as the availability of 80 per cent right of way before the appointed date, and inflation and interest-rate hedging through indexation of cash flows to concessionaires, have played a key role in maintaining developer interest in these projects.
According to projects tracked by India Infrastructure Research, NHAI has awarded over 11,500 km of highway length on HAM between 2020-21 and 2025-26 (up to September 2025). In 2025-26 so far, 196 km of highway length has been awarded on an HAM basis, representing 82 per cent of total activity. Further, NHAI plans to award around 80 HAM projects during the year.
As per analysis by India Infrastructure Research, over 35 per cent of total HAM project awards between 2020-21 and 2025-26 (up to September 2025) were secured by seven key players, Megha Engineering, G.R. Infraprojects, Dilip Buildcon, Gawar Construction, PNC Infratech, Ceigall India and H.G. Infra. The remaining 65 per cent of project awards have been spread across a large pool of contractors.
Bidding intensity for HAM projects remained elevated at 8-10 bidders per project throughout FY 2025. In the fourth quarter of 2024-25, the average rose further to 10-11 bidders, reflecting aggressive bidding and ultimately leading to consistently discounted bids against the base price. In the first half of FY 2026, the trend has continued, with average bidders at around 11 per project (with a median of 9 bidders).
According to India Infrastructure Research, over 150 projects, spanning a length of over 7,800 km, are expected to be implemented in the HAM mode over the next four to five years. Of these, about 70 projects spanning a length of around 3,000 km and entailing an investment of over 800 billion are currently under bidding.
Looking ahead
The slowdown in awarding activity is expected to pose challenges for small- and mid-sized EPC players seeking to bid for or secure EPC projects in the medium term. The recent increase in APS may also exert additional financial pressure on smaller players. Furthermore, the authorities’ focus on HAM and BOT projects could lead to a decline in the share of EPC awards. As per CRISIL, EPC companies are expected to diversify their order books, with the share of non-road sectors projected to more than triple to around 35 per cent by the end of 2025-26, compared to 11 per cent in March 2020.
HAM is expected to remain the dominant mode of NHAI project awards in the near term, despite NHAI’s renewed interest in the BOT model. Operational HAM projects have demonstrated strong monetisation potential, while funding support from the centre will further strengthen their position. With a stable policy environment, developers and contractors are likely to remain well-positioned in the bidding space. However, the execution capability and expertise of contractors will need to be closely monitored. To maintain fairness and discipline, MoRTH has already imposed APS requirements, which will help curb aggressive bidding.
