Hybrid Annuity Model road projects show signs of stress
ROADS & HIGHWAYS

Hybrid Annuity Model road projects show signs of stress

India Ratings and Research, a part of the Fitch Group, mentioned that there might be impending stress in highway projects, particularly those awarded through the National Highways Authority of India's (NHAI) annual payments model Hybrid Annuity Model (HAM). They suggested that some developers are facing challenges in achieving financial closure, while authorities are encountering delays in land acquisition.

According to Vishal Kotecha, director and head at India Ratings and Research, certain parts of the sector have experienced excessive competition historically. He noted that while small and medium-sized players have generally managed to execute projects, newer sponsors could encounter difficulties. He added that they observed some HAM projects undergoing substitution.

Experts have previously pointed out that the road sector has witnessed heightened competition over the years, resulting in decreased bid premiums and potentially attracting players without significant stakes. Some of these developers are now encountering hurdles in obtaining financing for their projects.

India Ratings and Research highlighted that new developers, many of whom shifted from engineering, procurement, and construction (EPC) to HAM after the relaxation of technical and financial norms, are struggling to secure funding. This is because banks have tightened capital requirements. The agency mentioned that the number of projects awaiting the appointed date has risen to more than 110 projects, valued at over Rs 1 trillion. Financially robust and medium sponsors are facing delays primarily due to land acquisition issues.

Despite these challenges, the agency maintained a stable outlook for both annuity projects and toll-collecting assets for the fiscal year 2024-25.

This is not the first instance where a rating agency has highlighted concerns within the sector. Earlier this month, CareEdge also reported delays in HAM projects.

India Ratings and Research, a part of the Fitch Group, mentioned that there might be impending stress in highway projects, particularly those awarded through the National Highways Authority of India's (NHAI) annual payments model Hybrid Annuity Model (HAM). They suggested that some developers are facing challenges in achieving financial closure, while authorities are encountering delays in land acquisition. According to Vishal Kotecha, director and head at India Ratings and Research, certain parts of the sector have experienced excessive competition historically. He noted that while small and medium-sized players have generally managed to execute projects, newer sponsors could encounter difficulties. He added that they observed some HAM projects undergoing substitution. Experts have previously pointed out that the road sector has witnessed heightened competition over the years, resulting in decreased bid premiums and potentially attracting players without significant stakes. Some of these developers are now encountering hurdles in obtaining financing for their projects. India Ratings and Research highlighted that new developers, many of whom shifted from engineering, procurement, and construction (EPC) to HAM after the relaxation of technical and financial norms, are struggling to secure funding. This is because banks have tightened capital requirements. The agency mentioned that the number of projects awaiting the appointed date has risen to more than 110 projects, valued at over Rs 1 trillion. Financially robust and medium sponsors are facing delays primarily due to land acquisition issues. Despite these challenges, the agency maintained a stable outlook for both annuity projects and toll-collecting assets for the fiscal year 2024-25. This is not the first instance where a rating agency has highlighted concerns within the sector. Earlier this month, CareEdge also reported delays in HAM projects.

Next Story
Infrastructure Energy

KEC Secures Rs 10, 380 Mn Substation Order in Saudi Arabia

KEC International Ltd., a global infrastructure EPC major, and an RPG Group company, has secured a new order worth Rs 10,380 million for the Design, Supply and Installation of a 380 kV GIS Substation in Saudi Arabia.Vimal Kejriwal, MD & CEO, KEC International Ltd., commented, “We are delighted with the successive order wins in our T&D business. In a landmark achievement, we have secured our largest ever substation order. This prestigious order in the Middle East has widened our portfolio and strengthened our presence in the region. With this strategic win, our year-to-date or..

Next Story
Infrastructure Urban

Central Bank of India executes first fully digital SCF deal on PSB Xchange

In a major advancement for India’s banking sector, Central Bank of India (CBI) has successfully completed the country’s first fully digital supply chain finance (SCF) transaction on PSB Xchange—a unified multi-lender platform launched by PSB Alliance. PSB Xchange is designed to connect public and private sector banks, NBFCs, and fintechs with corporates and their channel partners to facilitate supply chain finance and small business loans. The transaction marks the first time a fintech-originated corporate lead has been seamlessly processed through the PSB Xchange ecosystem. The lead fl..

Next Story
Infrastructure Energy

Atlanta Electricals secures Rs 1,835 Mn transformer order from BNC Power

Atlanta Electricals Limited (“Atlanta”) has secured an order worth Rs 1,835 million from BNC Power Projects Ltd for the supply of extra high voltage (EHV) transformers and a bus reactor for its Pugal site. The contract includes a mix of 315 MVA, 400 KV and 100 MVA, 132 KV transformers along with a 400 KV bus reactor. The project scope encompasses design, manufacturing, testing, and supply to the project site. Deliveries will be sequenced following engineering and drawing approvals, offering multi-quarter execution visibility and ensuring a steady production run-rate. The order will be ex..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?