SBI Macquarie Infrastructure Fund is in talks with global PE funds such as Aion, ISquared Capital and Canadian pension fund CDPQ to sell its 39 per cent stake in listed infrastructure major Ashoka BuildconBSE 1.87 %’s BOT road projects, Ashoka Concessions.
The stake sale is expected to fetch around $300 million for the fund, said three people with direct knowledge of the deal.
In 2012, SBI Macquarie, a joint venture infrastructure fund between India’s SBI Group and Australia Macquarie Group, invested roughly Rs 800 crore in the company, valuing it at aroundRs 2,400 crore at that time. In February, the company informed the stock exchanges that it will look at giving an exit to SBI Macquarie.
“In terms of the contractual requirements between ACL and its shareholders and to bolster its capital, ACL is evaluating various options and is planning to commence discussions with potential investors shortly to explore such options.”
The company and the investors have appointed investment bank Jefferies to look for buyers. “The talks are in the initial stage where the said funds are doing their due diligence of the company.
The total enterprise value that the promoters and the investors expect is around $700-800 million,” said one of the persons with knowledge of the company’s plans. At the current value, SBI Macquarie is expected to make around 15-18 percent return on its capital. The company has six toll projects and two annuity-based road projects under its subsidiary ACL.
Its toll projects include the Belgaum-Dharwad, Dhankuni-Kharagpur, Bhandara, Durg, Jaora-Nayagaon and Sambalpur highways. Ashoka Buildcon, the listed parent of the subsidiary, holds the remaining 61 percent in the company. “The parent might decide to cede some more stake in the company for the incoming investors,” said another person aware of the deal.
While the spokesperson for SBI Macquarie and Aion declined to comment, spokesperson for Ashoka Buildcon, ISquared and CDPQ too did not respond to emailed queries.
According to the latest financial results announced by the company, Ashoka Concessions Ltd, or ACL, had a total toll collection ofRs 6,641.9 crore for the financial year ended March 31, 2017, growing annually at 8.5 percent over the previous year.
The total debt on the books of the company stands at around Rs 3,700 crore. Under the Build-Operate-Transfer (BOT) toll model, the infrastructure developer builds, operates a highway for a specified period, collects toll to recover the cost and then transfers it to the government. In annuity cases, the government pays the developer annuity over the concession period.
India has the second largest road network in the world (4.87 million kilometres). Roads constitute about 80 percent of the country’s passenger traffic and 65 percent of freight traffic.
The value of roads and bridges infrastructure in India is projected to grow at a Compound Annual Growth Rate (CAGR) of 17.4 per cent over FY12–17, a May 2017 report compiled by India Brand Equity Foundation shows.
“The country’s roads and bridges infrastructure, which was valued at $6.9 billion in 2009, is expected to touch $19.2 billion by 2017,” the report said. The construction of highways had reached an all-time high of 6,029 km during FY 2015-16, and the increased pace of construction is expected to continue for the coming years.
Government of India has set earmarked 20 per cent of the investment of $1trillion reserved for infrastructure during the 12th Five-Year Plan (2012–17) to develop the country’s roads.
“Private equity funds were active investors in projects and companies in the infra space, particularly road given the potential there was and the promise of good returns. In the past few years, we have not seen that level of interest post the infra slump. The sector is also not giving visibility of high returns and hence in my opinion difficult for PEs to invest in this area,” said Harish HV, head of private equity transactions advisory services at global consulting firm Grant Thornton.
Source: Economic Times