In the past three-and-a-half years, the hybrid annuity model (HAM) of road construction has grown substantially, but some warts are now showing up: Smaller developers are finding financial closure elusive, and over-aged projects awaiting appointed dates are facing termination risk. CRISIL Research’s analysis of road projects under the National Highways Authority of India (NHAI) reveals HAM has expanded its network since its launch in February 2016. Over fiscals 2017 to 2019, HAM projects accounted for a quarter of the executed road projects and 45-50 per cent of the projects awarded. First the good news: A deep-dive project-by-project analysis by CRISIL Research reveals that of the 6,670 km HAM projects awarded by the NHAI during fiscals 2016 to 2019, a good 70-75 per cent have achieved financial closure, most of them by large developers with a turnover of over Rs 15 billion. Now the concern: Though the foundation has been laid, some cracks have surfaced on the HAM highway. The smaller developers, many of which have changed lanes from engineering, procurement and execution (EPC) projects to HAM for the first time, are struggling to secure funding after bidding aggressively, and banks tightening capital requirements. The upshot has been a deceleration in the pace of financial closures. Read the full report here