With the newly-introduced hybrid annuity model (HAM) slowly becoming popular at the Centre, states too are beginning to adopt the model. Maharashtra’s public works department (PWD) is planning to award about 10,000 km of projects in the next six months. “We have recently come to a decision that these will all be awarded under the hybrid annuity model,” Ashish Singh, principal secretary, PWD, told FE.
In the first eight months of FY17, 42% projects, or 1,085 km, have been awarded under the HAM model. Around 45%, or 1,181 km, have been awarded under EPC and just 13%, or 332 km, have been awarded under BOT.
In fact, of a total of 6,631 km, the NHAI is targeting to award almost half, or 3,137.54 km, under the HAM route, with the remaining shared between EPC and BOT projects. In the last financial year (2015-16), 72 % of the total projects, or 3,149 km, awarded by the National Highways Authority of India (NHAI) was under the EPC model, 20% (873 km) was under the BOT model and 8% (345 km) was under the newly-introduced hybrid annuity model.
Not all infra players want to participate in HAM projects. L&T has decided to adopt an asset-light strategy, as have IRB Infrastructure, ITD Cementation, J Kumar Infraprojects and KNR Constructions. However, a new set of more aggressive road developers such as Dilip Buildcon, MEP Infrastructure, Ashoka Buildcon and others are willing to participate in HAM projects.
“Banks are not willing to fund BOT projects nowadays because revenue projections given by developers earlier have mostly failed. Fewer BOT projects have been awarded because there is little appetite for them,” Rohan Suryavanshi, director, strategy and planning, Dilip Buildcon, said. “Only in cases where there is some confidence in the company, banks advance funds. We will take a call on bidding for more HAM projects depending on our balance sheet as we must remain financially sound,” he added.
Sapna Seth, associate director, Singhi Advisors, said, “More than the model, it is to do with the financial soundness and working capital which is seeing the emergence of new players for bidding.” According to Alok Deora, an analyst with IIFL Wealth, the new hybrid road projects have helped to reduce the intense competition in BOT and EPC projects. “Some of the BOT and EPC players have stayed focused on their business models. However, as the number of kilometres awarded is strong, there are enough jobs for players in each segment,” he said.