HAM projects being awarded at up to 71% discount: ICRA

The aggressive participation by EPC and BOT players for projects awarded by the NHAI under the hybrid annuity model (HAM) resulted in some of those being quoted at a discount to the base price to as low as 65-71 per cent, said rating agency ICRA.
According to the agency, 67 per cent of the projects awarded by the NHAI were quoted at a discount to the base price, with some HAM projects being awarded for as low as 65-71 per cent of its bid project cost.
"Around 53 per cent of the projects awarded by the NHAI in FY2017 were made through the HAM route when compared to eight per cent in FY2016. This is likely to increase further in FY2018. Till March 2017 a total of 43 projects, covering 2,641 km, were awarded through the HAM," it said.

ICRA Vice-President and Sector Head, Corporate Ratings Shubham Jain said the number of bidders for these HAM projects ranged between 3-10.
"However, the bid competitive intensity moderated during February-March, 2017 with all projects awarded at a premium during this period," he said.
As per ICRA, the top five bidders together won 22 projects, totalling around 1,367 km (52 per cent), for an awarded cost of Rs 20,380 crore at a discount of around four per cent to the NHAI's base cost of Rs 21288 crore.

The first six months post HAM's launch saw relatively low (between 3-7) number of participants with aggressive bids, nearly 70 per cent of total awards, were at a discount.

Subsequently, the numbers of bidders increased with some moderation in aggression; between July, 2016-January, 2017, there was a good mix of premium and discounted bids with 43 per cent of awards at a discount.
The bid competitive intensity further moderated during February-March, 2017 where in all projects were awarded at a premium during this period, ICRA said.
"Given the low equity requirement for HAM, lenders are concerned about the developers' commitment till the end of the concession period, especially given that many of the developers have limited experience in development space," Jain said.