Crisil Reports That Over 90% of HAM Road Initiatives in India Are Progressing Steadily
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New Delhi, Dec 18 (NationPress) Road initiatives under the hybrid annuity model (HAM) in India, awarded by the Ministry of Road Transport and Highways (MoRTH), are progressing well, with over 90% of the project length currently under development being completed on schedule, as reported on Wednesday.
This timely execution and favorable debt protection metrics are expected to bolster the credit risk profiles of these projects, as per a Crisil Ratings analysis.
In the last five fiscal years, excluding 2024, approximately a quarter of the projects awarded by MoRTH were under HAM, highlighting the model’s importance in the sector.
The model's success can be attributed to features such as the necessity of at least 80% right-of-way (ROW) availability prior to the appointed date, the de-scoping and de-linking of project lengths where ROW has not been secured, along with inflation and interest-rate hedging due to the indexation of cash flows.
“Our findings indicate that nearly 66% of the project length currently under construction is anticipated to be completed on or ahead of schedule. An additional 26% is either experiencing slight delays or is pending approval for timeline extensions. These extensions are to accommodate delays not caused by concessionaires, such as insufficient ROW availability or events like heavy rainfall or mining bans,” stated Anand Kulkarni, Director at Crisil Ratings.
This situation leaves only 8% of the project length under construction facing significant execution-related challenges, he added.
Upon completion, HAM projects generally exhibit robust credit profiles due to inherent structural advantages such as the timely receipt of consistent cash flows from a central counterparty.
“Furthermore, the comfortable debt coverage metrics of the CRISIL-rated portfolio, demonstrated by an estimated average debt service coverage ratio of 1.3-1.4 times, enhance the credit risk profiles of these projects,” remarked Saina Kathawala, Associate Director at Crisil Ratings.
While credit risk profiles have remained stable thus far, the growing acceptance of HAM and the relaxation of bidding regulations have resulted in more than a doubling of bidders over the past four fiscal years, as the report indicated.
