Global investors including marquee funds are keenly looking to pick up stake in completed highway projects worth Rs 24,500 crore with an average six years of operational history.
Global investors including marquee funds are keenly looking to pick up stake in completed highway projects worth Rs 24,500 crore with an average six years of operational history.
Road projects worth over Rs 40,000 crore, spanning around 3,600 km, have either been sold off in the last three years or are currently in the process of being divested as cash strapped companies are trying to raise funds to deleverage their balance sheets.
The deals, which are yet to be sealed have a debt size of over Rs 16,400 crore, said rating agency India Ratings and Research.
According to it, the Indian highway sector is witnessing an enhanced level of activity in the acquisition space, largely led by global marque funds and investors namely, I Squared Capital, Brookfield Asset Management, PSP Investments and Macquarie’s India Infrastructure Fund among others.
These international funds have picked up stake or are in advanced stages of acquisition of around 2,900km length of national and state highway projects.
Similarly, domestic financial investors namely, IDFC India Infrastructure Fund and other infrastructure companies such as, Tata Realty and Infrastructure Ltd. have made a mark by showing interest in deals of around 780km length of highways.
The recent increase in investor appetite could well be sustained going forward as the government is likely to allow global sovereign wealth funds to invest in private highway projects.
The rating agency believes that the National Highway Authority of India’s 100 per cent exit policy, which was cleared in mid-2015 and road developers bid to deleverage their balance sheet have both aided the momentum.
A study of the deals shows that out of a total of 40 deals, including the ones in the pipeline, only five projects have been or are likely to be acquired by another corporate house, while institutional investors mostly account for the balance. National highways and toll road projects are the most in-demand as around 94 per cent of highway projects in the fray are national highway projects and around 87 per cent of the projects are toll-based projects, which normally have a higher potential of giving returns to the acquirer.
Highway bonanza Rating agency feels that there has been a paradigm shift in the acquisitions – from developers to financial investors. Rs 111bn worth debt transactions have taken place in the highway sector during the last three years from February 2013-June 2016 The list of sellers or potential sellers include HCC Concessions, NCC Infra, Soma Enterprises, Reliance Infra and GMR The sector is witnessing an enhanced activity level in the acquisition largely led by I Squared Capital, Brookfield Asset Management, PSP Investments and Macquarie’s India Infra Fund Rs 400bn worth road projects have either been sold off in the last three years or are currently in the process of being divested to raise funds Rs 245bn worth projects with an average six years of operational history have seen a keen interest from investors who are willing to pick up stake in such projects
