The Udaipur bypass road project, awarded to MBL Infrastructures under the hybrid annuity model (HAM), has been cancelled by the National Highways Authority of India (NHAI), the company said on a recent analysts call. The project was awarded in late June last year at a bid amount of R7,790 crore, 24% higher than NHAI’s bid project cost of R6,261 crore. There were eight bidders for the project and MBL Infrastructures had emerged as the lowest bidder.
The cancellation marks the third HAM project to be terminated owing to lenders’ concerns over viability of the projects under the newly-introduced model.
The company said that the project was terminated as the bankers’ declined to furnish guarantees for the project. The company has won three HAM projects, two of them in March last year. Although bank guarantees have been submitted for two projects, they have not achieved financial closure.
FE had reported on November 21 that two HAM projects — awarded to Gawar Infrastructure and Overseas Infrastructure Alliance (OIA) — had been terminated.
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Both the projects missed the deadline of 150 days within which the financial closure was be achieved, as well as the 120 days’ grace period. At that time, former NHAI chairman Raghav Chandra had denied that bankers were uncomfortable with lending to the two projects or to the winning bidders. Currently, bankers are being extra cautious after their bitter experience with build, operate, transfer (BOT) projects and are only selectively funding projects.
Alok Deora, analyst with IIFL Wealth, told FE that while MBL Infrastructures is expecting financial closures for its two remaining HAM projects, uncertainty prevails on its ability to do so. “The company has pledged 80% of the promoters’ shares and is likely to face a challenge in arranging funding for these two HAM projects.”