The slow transmission of the Reserve Bank of India’s (RBI) prescribed bank rate cuts in project lending rates will impact debt service coverage ratios in operational hybrid annuity model (HAM) based projects, according to a note by ratings agency India Ratings and Research. “A sluggish transmission in project’s interest rate was not originally envisaged by developers during the bidding stage and therefore may also impact their equity returns. While the National Highways Authority of India (NHAI) bound concessions receive grants on a timely basis, a concession grantor with a weak credit profile, late annuity payments combined with delayed transmission could pose a risk to HAM projects,” the note said.
The NHAI plans to release monthly grants proportionate to the completion of project construction, and the agency believes this will have a salutary effect on the working capital requirements of developers.
