NHAI can monetise Rs 2 trn from HAM assets during FY24-27: Report

The National Highway Authority has the potential to monetise around Rs 2 lakh crore from its HAM assets between fiscals 2024 and 2027, according to a report.

The authority's roads hold significant potential for asset monetisation in the medium term, and this is expected to be realised through an expanded portfolio of HAM (hybrid annuity model) assets and EPC (engineering, procurement and construction) projects, which have a monetisation capacity -- ranging from Rs 1.75 lakh crore to Rs 2 lakh crore during FY24-27, according to an analysis by Care Edge.

The analysis is based on 306 HAM projects awarded to 62 distinct sponsors awarded between fiscal 2016 and 2023. These projects encompass a total length of 12,700 km with a combined bid project cost (BPC) of Rs 3.35 lakh crore and debt aggregating Rs 90,000 crore.

HAM projects awarded before 2020, worth a BPC of Rs 1 lakh crore, are operational and have monetisation opportunities of Rs 9,000-11,000 crore now, benefiting both the NHAI and developers.

One of the key reasons for the timely completion is the on-time payments, which significantly improved the operating cycle for developers by reducing it by 15 days. This has also provided liquidity in the range of Rs 10,000-12,000 crore.

However, more than a third of the projects awarded after March 2020 are facing execution challenges, primarily due to aggressive bidding and increased complexities, as per the report.

Timely execution of HAM projects has resulted in a compound annual growth rate of 15 per cent in the total operating income from FY19 to FY23. A minor decline of 5 per cent is anticipated in the total operating income in FY24 due to rising execution challenges. The rise in commodity prices dented the operating margins to 14 per cent in FY23 from 17 per cent in FY20.

According to the agency, of the total sample of HAM projects awarded post-March 2020, projects with an aggregate BPC of Rs 50,000 crore are delayed by four to six months beyond the specified grace period. Also, a significant number of projects, with a combined BPC of Rs 14,500 crore, have been awaiting the appointed date for over a year.

As much as 88 per cent of these HAM projects, accounting for a total BPC exceeding Rs 1 lakh crore, and mostly awarded before March 2020, have successfully achieved operational status and only 12 per cent of them are delayed.