CHENNAI: There has been a sharp turnround in the credit profiles of road engineering, procurement and construction (EPC), companies, ratings agency CRISIL said on Monday. The reasons, according to CRISIL, include the shift towards hybrid annuity model and EPC models from the old build-operate-transfer route.
CRISIL noted that in the past three years, around 80 per cent of highway projects have been bid out under non-BOT channels.
“While EPC contracts ruled the roost until fiscal 2016 (72 per cent), it is estimated 56 per cent of highway projects were bid under HAM in 2016-17,” it said.
According to CRISIL, the benefits of these two models, especially the lowering of implementation risks on account of substantial pre-acquisition of land, and no traffic risk, have translated into higher growth for companies in the sector.
“Not surprisingly, 50 road EPC companies rated in the investment-grade by CRISIL, have benefited from the trend and delivered 20 per cent compounded annual growth in revenue in the past three years... This has led to a significantly improved credit ratio at 2.0 last fiscal, up from 0.11 in fiscal 2014,” it said.
Paradigm shift
The hybrid annuity model and engineering, proc-urement and construction model of road construction are gaining currency, replacing the older build-operate-transfer route, CRISIL said