(LiveMint)
Smaller developers won nearly half of all road-building contracts given out by the National Highways Authority of India in 2017-18, NHAI data compiled by investment bank Equirus Securities showed. The biggest contract winners were large companies such as Dilip Buildcon Ltd (Rs18,770 crore), IRB Infrastructure Developers Ltd (Rs8,900 crore) and Ashoka Buildcon Ltd (Rs5,500 crore). However, a bunch of nearly 90 other small developers, including HG Infra Engineering Ltd, Madhucon Projects Ltd, JKumar Infraprojects Ltd, Gammon India Ltd and a host of joint ventures by Monte Carlo Ltd and PNC Infratech Ltd mopped up 48% of bids awarded in the year.
In a report, Equirus Securities analyst Pranav Mehta said bidding in the smaller project segment (contracts under Rs200 crore) saw participation from 10-15 bidders. In projects over Rs200 crore, this number fell to 6-10. Besides giving out smaller projects that the smaller developers can take up, the government also introduced the hybrid annuity model (HAM) in 2016, where the developer gets 40% of the project cost in five instalments linked to the project’s progress. The rest is borne by the developer, but can be recovered from NHAI as annuity. HAM reduces the financial risk of developers, with their revenue linked to the project’s progress.
“With the introduction of HAM, what we’re seeing is that many developers who used to be sub-contractors of formerly large developers now find they can bid for and win their own projects,” said Alok Deora, associate vice-president (research), IIFL Wealth Management.
