Urbanisation in India is accelerating. With urbanisation comes increased spend on transport infrastructure and we see this emerging as a multi-year capex theme. Larsen & Toubro (Overweight) appears most levered to this theme given its experience in executing metro/ mono rail projects, while other likely beneficiaries could include HVAC (heating, ventilation, and air conditioning) vendor Voltas (OW) and electrification vendors such as Siemens (Underweight) and ABB (UW).
Urbanisation driving infrastructure spending: Increasing urbanisation is pushing up vehicle sales amid constraints on increasing road density. Our assessment of 35 major cities in India on various socioeconomic parameters suggests that mass transit rail systems should be a high priority in 12 cities with bus rapid transit systems (BRTS) implemented as feeder services.
We estimate that India needs more than 2,500km of metro rail by 2031 and 5,500km of network for BRTS. These metro lines should be integrated with other transport modes, with monorail and BRTS serving as feeders. Thus, we envisage investments of $120 bn in metro rail and $20 bn in BRTS until FY30.
As per the 2011 census of India, 53 urban agglomerations in India have a population of more than one million, with Delhi, Greater Mumbai, Kolkata, Chennai and Bengaluru having the largest population. There are 160m people living in these 53 urban agglomerations. In the next two decades, the number of million-plus population urban agglomerations is expected to increase to 65 (215m population) by 2021. As per the 2011 census there are 19 urban agglomerations in India that have a population of more than 2m and almost all of them have a plan to build a metro network.
Monorail–a feeder for the larger networks: A monorail transit system is being constructed at some places in India, instead of a metro as monorails need less land and are suitable for narrow areas where there are lots of changes in alignment. However, in comparison to metro rails, they are slower and have less carrying capacity. More than 15 projects have been announced till now with most of them currently in the planning stage.
Mumbai monorail project: The project was approved in 2008, to serve as a feeder to the metro railways from the crowded and narrow areas. The project was won by a consortium of L&T and Scomi Engineering, Malaysia. The Rs24.6bn project involves 20km of line from Jacob Circle to Chembaur via Wadala. The first phase of the monorail of length 8.2km from Wadala to Chembur was inaugurated in Q1CY14.
Bus rapid transit system–cost & capacity trade-off: Metro/railways cannot cover the entire city, so in addition to these there is also a need for a rapid bus transport network. While current vehicle penetration in India is low, with less than 25% of travellers owning their vehicles, the lack of adequate road capacity leads to significant congestion. Rapid bus transit systems are hence needed to tackle both traffic congestion and the problem of increasing pollution levels in various cities.
Given the large capital costs and long gestation time involved with building of metro rails, bus rapid transit systems are seen as an alternative in many cities. Bus rapid transit is a mass transportation system where buses have dedicated lanes on city streets that ensure safety, reliability, efficiency and speedier travel.
India way behind global peers in metro rails: Compared to India, which has metro lines of significant length operational in only two cities, the most developed cities of the world have 10km of metro line for every 0.3-0.4m of population. There is a significant gap between the need and the operational metro line length in the country, even by the very conservative National Urban Policy 2006 benchmark.
Currently 190km of track length in Delhi and 28km in Kolkata is operational. Expansion work in these two metros is currently underway. A part of the first line is operational in Bangalore metro. Mumbai, Chennai, Jaipur and Hyderabad metro are currently under construction. Currently, 225km of track length of metro railway is operational in Indian cities, with another 1,100km announced or under construction. We estimate that India needs to invest $77bn over the next 10 years to increase the length of its metro from 225km in 2011 to 2,150km by 2012 and thereafter an additional $43bn is expected to add another 600km.
?Barclays
