Significant Jump In Hybrid Annuity Model Of Road Construction: CRISIL

New Delhi: Hybrid annuity model (HAM) of accounted for 25 percent of the completed road construction  projects and about half of those awarded in financial years 2017, 2018 and 2019, according to an analysis by CRISIL.

Even for the next three fiscals, that is, 2019-20, 2020-21 and 2021-22 HAM is expected to account for about half of all the road projects.

Many of the smaller infrastructure companies are finding it difficult to get funding after bidding aggressively since the banks have been tightening the lending norms. Most of the smaller firms that are not able to get funding are the ones that have just started getting into HAM model from engineering, procurement and execution (EPC) model.

The infra companies that have been able to achieve financial closure for the projects they have bagged in 2016 to 2019 are large companies having a turnover of Rs 1,500 crore or more. 

There has been significant jump in the number of smaller companies getting into the HAM segment. In fiscal 2019, all the new companies were small.

Since a majority of the smaller companies are getting into HAM segment for the first time, they are bidding quite aggressively to bag a contract. An analysis by  CRISIL shows that about 40 percent of the road projects bid by smaller firms were priced 10 percent below the lowest tender or L1-NHAI cost. In comparison to this, the price quoted by majority of the large firms was 10 percent higher than the NHAI cost.