Private equity (PE) firm Actis Llp has agreed to acquire five hybrid annuity model (HAM) road projects from Patel Infrastructure Ltd at an equity value of around $91 million, two people aware of the development said.
Actis may place these road assets under an infrastructure investment trust (InvIT) that will also house the six operating highway toll road projects that it bought from Welspun Enterprises Ltd last year. The Welspun deal, struck at an enterprise value of $775 million, marked the first road investment in India by Actis Long Life Infrastructure Fund.
The Economic Times on 5 May reported about Actis being in advanced talks with Patel Infrastructure Ltd to acquire a portfolio of four HAM roads.
Under the HAM model, a concessionaire is compensated by fixed annuity payments during the construction and operation and maintenance (O&M) phase. Also, 40% of the construction annuity is paid during construction, with a balance of 60% over the remaining concession period. At a time when the state-run National Highways Authority of India (NHAI) has a total debt of ₹342,086 crore, HAM projects have seen considerable interest. NHAI’s debt servicing is expected to nearly double from ₹33,000 crore in FY24 to ₹62,000 crore by FY28. InvITs manage income-generating infrastructure assets, typically offering investors a regular yield and a liquid method of investing in infrastructure projects.
“The Actis-Patel Infrastructure deal for the five HAM road assets has been signed,” said one of the two people on condition of anonymity.
An external spokesperson for Actis said the PE firm won’t comment on Mint’s queries. Queries emailed to Patel Infrastructure late Wednesday night remained unanswered.
Mint earlier reported about India’s road sector witnessing strong investor interest, with around 50 HAM road assets worth $3 billion up for sale. The sector has caught PE firms’ interest amid the expansion of India’s national highway network to 146,145 kilometre and the government’s focus on infrastructure. A case in point is Cube Highways, one of India’s largest private-sector operators of toll roads. The company, backed by I Squared Capital, Abu Dhabi Investment Authority (ADIA) and Japan Highways International BV, has also set up an InvIT—Cube Highways Trust.
“The ministry, through NHAI, has been raising funds through innovative financing mechanisms of securitization of toll revenues like Toll Operate and Transfer (TOT), InvIT and project-based financing by securitizing the toll revenues. So far, ₹26,366 crore has been raised through TOT and ₹10,200 crore through InvIT. In addition, funds amounting to ₹33,561 crore have been raised through project-based financing,” the road ministry said in a statement on Thursday.
Actis has $12.73 billion of assets under management. The PE firm, which invests only in emerging markets, has so far committed $2.1 billion to the Indian market, spanning financial services, energy and real estate. It has achieved significant success in India’s green energy space and sold its renewable energy platform Sprng Energy at an enterprise value of $1.55 billion to energy giant Shell Plc.; and Ostro Energy to ReNew Power Ventures in 2018 at an enterprise value of $1.5 billion.