+
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.

Related Stories

Gold Stories

Next Story
Infrastructure Transport

Mumbai-Ahmedabad Bullet Train’s Surat-Vapi Section Set for 2027

The first section of the Mumbai-Ahmedabad Bullet Train corridor, linking Surat and Vapi, is targeted to begin services in 2027. Construction is expected to be completed by December 2026, while Railway Minister Ashwini Vaishnaw has indicated that an inauguration could take place around the middle of 2027. The National High Speed Rail Corporation (NHSRCL) said the train being manufactured in India is expected to reach the tracks around April or May 2027. The train will undergo extensive testing before the section is opened for passenger services. The project began construction in 2021 and includ..

Next Story
Infrastructure Transport

Indian Railways Approves Four Projects Worth Rs. 7.36 bn Across Four States

Indian Railways has approved four projects with a combined value of Rs. 7.36 bn across Uttar Pradesh, Maharashtra, Andhra Pradesh and Gujarat. The programme covers train protection, signalling, electric traction supply and a road overbridge, with each project assigned to a different railway zone. In Uttar Pradesh, Rs. 2.52 bn has been approved to extend the Kavach 4.0 automatic train protection system across 607.7 km in the Lucknow Division of North Eastern Railway. The system monitors train movements and can apply the brakes if a driver fails to observe a signal or exceeds a safe speed. The w..

Next Story
Infrastructure Urban

Chandru Raheja Sells 1.49% Stake in Mindspace REIT for Rs. 5 bn

Billionaire Chandru Lachmandas Raheja has sold a 1.49 per cent holding in Mindspace Business Parks REIT for Rs. 5 bn through a bulk deal on the BSE. The transaction involved 9.9 mn units and was executed at an average price of Rs. 505 per unit, according to exchange data. Following the sale, units of Mindspace Business Parks REIT were trading 0.18 per cent lower at Rs. 504.05 on Tuesday. Exchange data did not identify the buyers involved in the transaction. Raheja is the chairman of real estate company K Raheja Corp. The sale involved 99,00,990 units, representing 1.49 per cent of the Mumbai-b..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code