L&T plans to bid for HAM projects

Larsen and Toubro (L&T), India’s largest engineering and construction firm is planning to start bidding for road projects under the hybrid annuity model (HAM), introduced just two years ago. The Company will bid for HAM projects through its infrastructure development subsidiary, L&T Infrastructure Development Projects (IDPL). L&T had refrained from bidding for HAM projects till now. As a result, HDFC Securities analysts wrote in a research note in April this year that the company’s share in the total value of projects awarded by the National Highways of Authority of India (NHAI) fell from 17.8% in FY15 to just 3.1% in FY18. The decision by L&T follows a similar decision by toll roads developer IRB Infrastructure Developers which had changed strategy midway in FY18 to also bid for HAM projects, as the government was not awarding any build-operate-transfer (BOT), or toll projects, due to a lack of interest by the private sector to take up such projects. In order to expedite roads construction, the Narendra Modi government had introduced the hybrid model wherein the government provides 40% of the cost of construction in instalments, while the remaining 60% is also recoverable by the developer. L&T recently offloaded five road assets through a private infrastructure investment trust (InvIT), IndInfravit Trust, sponsored by L&T IDPL. L&T raised about `4,700 crore with the Canada Pension Plan Investment Board (CPPIB) and Allianz Capital Partners (ACP), in May, announcing they had acquired 30% and 25% of IndInfravit units, respectively.