Good traffic growth led to a lot of players bidding heavily for projects between FY10 to FY12. But awarded projects faced delays in achieving FC as many players had bid aggressively by quoting a huge premium amount. Land acquisition hurdles and revenue leakages remained rampant.“All EPC companies are facing challenges related to the issue of BGs, FC of projects, working capital limits, etc,” points out Vijay Agrawal, Executive Director, Equirus Capital. “Now, lenders have started considering non-fund limits as part of fund-based limits while appraising working capital requirements. Typically for an EPC company, fund based limits are 25 per cent of non-fund based limits.” As lenders are considering fund-based and non-fund based in entirety, many EPC companies are facing a funding crunch. Banks are now asking for release of earlier BGs where time limits have expired and not released by the authority fearing devolvement. Pointing to the issue of capital recycling, Devayan Dey, Director-Capital Projects and Infrastructure, PWC, says, “While there are plenty of assets up for sale in the sector, there are perception issues around many of them.” For HAM, only a few players with appropriate capability, like Cube Highways, are interested. In toll projects, too, there is lack of agreement on the quality of assets and buyer-seller convergence is slow. Meanwhile, Agrawal emphasises upon the basic principle of finance: Equity should be funded by way of equity and not by debt. A few companies like KNR have avoided aggressive biddings and capital commitment. As they have bagged projects at better margins and within their execution capabilities, they need not worry about FC or execution. KNR has also tied up with institutional investors for upfront selling of its HAM projects after completion, thus creating a path for freeing up capital for future biddings. “We believe financial discipline can overcome any funding issues,” says Agrawal. Debt tie-up is critical in HAM and the bigger issue remains acquiring land. “A few years ago, NHAI used to follow a mechanism, wherein a developer with more than three projects that had not received FC could not bid for a new project,” recalls Vishal Kotecha, Associate Director, India Ratings and Research (Fitch Group). “However, this has been relaxed as project award activity was skewed in Q4 FY2018, resulting in developers securing a large number of projects requiring significant funding arrangement.”SHRIYAL SETHUMADHAVAN