Revised Bidding Criteria May Affect 1 In 4 Existing HAM Road Developers: CRISIL

Modifications in the financial qualification criteria announced by the Ministry of Road Transport & Highways (MoRTH) recently for hybrid annuity model (HAM) projects could restrict one in four developers constructing these projects today from bidding in the near term. This and strengthening of the technical qualification criteria should improve bidding discipline and construction quality after a phase of aggressive bidding seen in the past couple of years.

CRISIL’s analysis of 74 developers, who won ~90% of the HAM projects between fiscals 2022 and 2025, shows as much.

MoRTH had brought in numerous relaxations in the qualification criteria for bidding in fiscal 2021, which led to the number of bidders per project gradually increasing to ~15 from ~5 prior to the relaxations. This coincided with lower awarding in the sector, leading to aggressive bidding with bid premiums tanking to a discount of 10-15% on average by last fiscal from 16-20% premium prior to fiscal 20214.

The revisions announced on July 10, 2025, aim at preventing potential issues related to construction timeline and project quality, due to aggressive bidding, by increasing the financial and technical thresholds for eligibility.

Most importantly, the minimum available net worth threshold has been increased to 20% of the estimated project cost from 15% earlier. Additionally, the available net worth will now be calculated after deducting 20% of the balance value of existing public-private partnership projects being undertaken by the developer. This will help in ensuring that the net worth of developers is commensurate with the number and size of new HAM projects being bid for.

Anand Kulkarni, Director, Crisil Ratings, said, “Based on our assessment and average ticket size of Rs 900-950 crore5 for new HAM projects, the revised qualification criteria of available net worth could potentially prevent ~25% of the players who have won projects between fiscals 2022 and 2025, from bidding for new projects in the near term. Another 15-17% of the players would not be able to add more than one project to their order books. This is because multiple projects won by some of these players in the recent past would lead to substantial future commitments vis-à-vis their net worth. As ongoing projects make progress, some net worth will be freed up, enabling them to bid for new projects in 1-2 years.”

Another key change is the increase in the technical qualification threshold of the developers. Players must demonstrate a track record of executing similar highways or structure-based projects to be eligible to bid for new projects. The revised criteria requires them to have completed work equivalent to 35% of the estimated project cost of one similar project (like the one they are bidding for) or 25% of two similar projects, compared with the earlier requirement of 20% of one similar project. Additionally, thresholds have been raised for parameters such as timeline of past execution and length of roads constructed. These changes are expected to ensure developers have the appropriate technical knowhow and consequently improve the overall construction standards.

Taking these aspects into account, the revised criteria should result in a balanced distribution of projects across existing and new players and keep aggressive bidding in check.