While Adani Transport recently bagged two such HAM projects from NHAI, MEP Infrastructure has been able to achieve financial closure for three of its HAM projects
The road sector seems to be staging a comeback with revival in fortunes of hybrid annuity model (HAM) projects.
While Adani Transport recently bagged two such HAM projects from National Highway Authority of India (NHAI), MEP Infrastructure has been able to achieve financial closure for three of its HAM projects.
"Adani Transport has recently participated in tenders issued by NHAI under HAM and the company-led consortium has received a letter of awards from NHAI for two road projects," the wholly-owned subsidiary of Adani Enterprises said on Tuesday.
The two projects, both in Telangana, involve four-laning of 42 kilometre stretch of NH-363 from Mancherial to Repallewada and 58.6 kilometre stretch of NH-65 from Suryapet to Khammam under Bharatmala Pariyojana on HAM basis.
Adani has emerged as winner for both the bids by quoting close to 30% higher than NHAI's estimates.
For the NH-363 project, against NHAI's estimated cost of Rs 1,041 crore, the Adani entity bid Rs 1,356.90 crore and for the NH-65 stretch, Adani bid Rs 1,566.30 crore, 28% higher than NHAI's Rs 1,217.32 crore.
While a conglomerate like Adani group might not find it difficult to raise funds for these projects, the ability of a much smaller player, MEP Infrastructure, to achieve financial closure for three of its special purpose vehicles (SPVs) for projects in Maharashtra indicates easing of financing woes for HAM projects being witnessed earlier, said an industry expert.
The three SPVs with Chinese state-owned Longjian Roads and Bridges as its partner have been able to tie up Rs 1,402 crore while equity contribution of the SPV partners constitutes Rs 350.62 crore. The balance of combined projects cost of Rs 2,922 crore would come from grant from NHAI, disclosures by the company shows.
The hybrid annuity model was introduced to reduce risks in public-private partnership (PPP) projects with the government and the private sector sharing the total cost in the ratio of 40:60. The model, which was a mix of EPC (engineering, procurement and construction) and BOT (build, operate, transfer) formats became challenging for the developers to arrange funds for project execution.
Lenders were cautious in choosing and granting funds to HAM projects as they have limited resources. Moreover, the demands from various developers was high as a number of projects were awarded in quick succession.
In some cases, the financial closures took longer time than expected and project execution got delayed, which cost developers dearly, said an official of SPML Infra.
These recent developments confirm the trend of revival in HAM projects that showed early signs by end of December quarter, a report by Motilal Oswal said.
"Concerns regarding financial closure for newly-awarded HAM projects have receded as 80% of the awarded projects have been able to achieve financial sanctions from banks, and now around 20% are in the process to achieve financial closure," the report said.
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