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Business News/ Companies / IDFC Alternatives to acquire two road projects from GR Infraprojects
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IDFC Alternatives to acquire two road projects from GR Infraprojects

IDFC Alternatives will buy the two annuity assetsin Rajasthan and Meghalayafor an equity value of about Rs350 crore

Several steps by the government to revive road projects have buoyed investor sentiment, according to analysts. Photo: Pradeep Gaur/MintPremium
Several steps by the government to revive road projects have buoyed investor sentiment, according to analysts. Photo: Pradeep Gaur/Mint

Infrastructure fund of multi-asset manager IDFC Alternatives has signed an agreement to buy two annuity-based build, operate, transfer (BOT) road assets from GR Infraprojects Ltd as it looks to expand its own portfolio of operational assets in India, two people directly aware of the discussions said.

IDFC Alternatives will buy the two annuity assets—the 43.9km Reengus-Sikar Expressway in Rajasthan and the 47km Shillong bypass in Meghalaya—for an equity value of about Rs350 crore. The enterprise value of the deal, including debt associated with the two assets, will be higher, the people said, asking not to be named as the discussions are private.

The two companies first initiated the discussions about two months ago and have signed a share purchase agreement, one of the people cited above said.

Investment bank Equirus Capital has advised GR Infraprojects in the deal, this person said.

Equirus Capital declined to comment. IDFC Alternatives did not respond to an email query sent on Thursday. An email sent to GR Infraprojects remained unanswered.

The Reenus-Sikar project was awarded in 2011 and had a total project cost of Rs.333.51 crore, including debt while the Shillong bypass road was awarded at a total project cost of Rs.251 crore and has been operational since 2014.

IDFC Alternatives, whose parent firm IDFC Ltd is an infrastructure-focused lender, is an active investor in Indian infrastructure along with others like US-based I Squared Capital and Australia’s Macquarie Group.

IDFC Alternatives, which invests in a variety of assets, has invested over $1 billion in 20 infrastructure projects in India so far and has been looking to invest in operational road projects after the Indian government eased norms for road developers to fully divest their operational projects.

In the past year, it has bought operational roads assets including the Bangalore Elevated Tollway Ltd (BETL) from NCC Ltd and Soma Enterprise Ltd and the Dewas-Bhopal Corridor project in Madhya Pradesh from Welspun Enterprises Ltd.

Several steps by the government to revive road projects have buoyed investor sentiment, according to analysts. “Over the last eighteen months, NHAI has unveiled a series of reforms, which have significantly resolved the logjam in various projects. Many projects awarded in FY11-14 were stuck or were facing overruns, due to various problems such as land acquisition, environmental clearance, right of way, and the financial state of developers. Some projects, which were operational, were reporting significantly lower traffic than estimated – leading to inability of these projects to service their debt obligations," PhillipCapital analyst Vibhor Singhal wrote in a 4 January report.

Udaipur-based infrastructure and engineering, procurement and construction (EPC) company GR Infraprojects has about 1,887 lane km of projects awarded by the National Highways Authority of India (NHAI) under development, according to the company’s website. Collectively, these projects are worth over Rs3,000 crore.

In BOT projects, a private operator builds an infrastructure project from its own funds, operates it for a period and then transfers it to the government. In BOT annuity-based projects the developer of the project is reimbursed the cost of building the project and gets paid every six months after starting commercial operations.

According to the GR Infraprojects’ filings with the Registrar of Companies, its revenue declined 10% to Rs773.58 crore in the year ended 31 March 2014 from Rs861.92 crore in the previous fiscal. Net profit fell 32% to Rs35.97 crore from Rs53.32 crore.

GR Infraprojects had filed for an initial public offering (IPO) in September 2016 and received a go-ahead in December. The proposed IPO includes a fresh issue of equity shares worth Rs240 crore and an offer for sale of up to 5,413,540 shares by existing shareholders.

Mint reported on 3 January that GR Infraprojects Ltd is evaluating bids to sell all of its three BOT road assets, including the two annuity projects.

IDFC Alternatives operates under three verticals: private equity, a domestic real estate fund and two infrastructure equity funds. Its first private equity fund was launched in 2002. The two infrastructure funds have assets under management aggregating $1.8 billion.

In 2014, IDFC Alternatives’ India Infrastructure fund raised Rs.5,500 crore to invest in power generation, renewable energy, roads, ports and airports.

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Published: 16 Jan 2017, 12:04 AM IST
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