Changes to hybrid annuity model will help protect returns, says Icra
Recent changes to Hybrid Annuity Model (HAM) for road sector projects will help in improved cash conversion cycle as well as protect the returns for developers, rating agency Icra said on Thursday.
It also said that changes in model concession agreement with a shift to Marginal Cost of Funds-based Lending Rate (MCLR) from bank rate for computing interest on annuities is a very positive development.
The interest on annuities for HAM projects is sizeable, amounting to around 45 per cent of overall inflows during the concession period.
Currently, the prevailing low bank rate is expected to reduce the overall inflows for a HAM project thereby adversely affecting its debt coverage metrics and returns to the investors, the rating agency said in a statement.
