Essel Group to sell 3 road assets to CDPQ

Industry:    May, 2019

Essel Infraprojects Ltd has agreed to sell three of its road projects to Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest fund manager, said two people aware of the development, as the Subhash Chandra-promoted Essel Group company seeks to trim its massive debt.

The assets are expected to fetch a combined enterprise value of3,300-3,500 crore, said the first person cited above, requesting anonymity. “Essel is likely to formally announce the deal within the next three to four weeks,” the person said. “The entire proceeds of the sale will be used towards debt repayment.”

The three projects comprise toll roads in Madhya Pradesh (Lebad-Jaora state highway), Karnataka (Navayuga Devanahalli Tollway near Bengaluru airport, a national highway) and Telangana (Essel Dichpally Tollway, a state highway).

“With the term sheet signed, Essel will now have to get the clearances from the national and state authorities for transfer of ownership,” the first person said.

In April, Mint reported that both CDPQ and Cube Highways, the roads platform of infrastructure investor I Squared Capital, were doing due diligence on Essel Infra’s road projects.

Essel Infra has 14 road projects in its portfolio, of which six are national highways and the rest state highways, according to the company’s website. The company had a debt of 11,466 crore as of December 2018.

CDPQ did not respond to emails seeking comment until press time. A spokesperson for Essel Infra declined to comment.

A potential deal will offer an entry for CDPQ into India’s toll roads sector. The investor is currently building a team to manage the assets, the second person said, requesting anonymity.

Essel Infra has placed the bulk of its completed projects—including power transmission, roads and renewable energy assets—on the block to reduce debt. Last October, it announced that it would sell four power transmission lines—two operating and two under-construction—to Sekura, backed by the Edelweiss Infrastructure Yield Plus fund, for 6,000 crore.

After private equity investor Actis LLP pulled out of a deal to buy Essel’s solar power projects, the company is now in talks with several buyers such as Adani Power, Canadian Pension Plan Investment Board, Financial Express reported.

The Essel Group, with businesses in entertainment, infrastructure and packaging, has been struggling to meet debt repayment obligations. In January, shares of its flagship Zee Entertainment Enterprises Ltd (ZEEL) plunged, deferring a scheduled interest payment. The group has since agreed with lenders who have offered time till September for various asset sales, including up to 50% of promoters’ stake in ZEEL. The promoters of Essel group alone owe another 13,000 crore to their lenders.