Mumbai: Road developer IL&FS Transportation Networks Ltd (ITNL) on Thursday said it has agreed to sell a road project in Andhra Pradesh to Cube Highways and Infrastructure Pte. Ltd, a joint venture between I Squared Capital and International Finance Corporation, for Rs.140.37 crore.
Cube Highways will also assume debt of about Rs.500 crore associated with the project. As a result, ITNL’s consolidated debt will be reduced by about Rs.640 crore, chief financial officer Dilip Bhatia said in a phone interview.
The annuity-based project—Andhra Pradesh Expressway Ltd (APEL)—operates a 75km four-lane road stretch on NH-7 across Andhra Pradesh and Telangana. APEL has a seven-year operating history.
ITNL, which has 31 road projects in its portfolio, had consolidated debt of Rs.27,643 crore as on 31 March.
Mint reported in April that ITNL was in advanced talks with US-based infrastructure investment manager I Squared Capital for the sale of a majority stake in two of its annuity-based road assets. Cube Highways is a Singapore-based company investing in road and highway projects, along with some other infrastructure sectors in India. It has been among the active investors in the Indian roads sector, looking to acquire operational assets with double-digit internal rate of returns (IRRs).
“We are excited to add this high-quality annuity road to our growing portfolio. This road receives fixed semi-annual payments from National Highway Authority of India (NHAI) with no exposure to traffic volume, and provides a good balance to Cube Highways’ existing portfolio of toll roads,” said Gautam Bhandari, director, Cube Highways, and partner, I Squared Capital.
Cube Highways continues to evaluate numerous buyout opportunities in the highway and transport sectors, especially given positive regulatory changes being implemented by NHAI, he added.
Cube Highways’ existing portfolio of toll roads includes the Jaipur-Mahua Tollway, Mahua-Bharatpur Tollway and Western UP Tollway. The acquisition will diversify Cube Highways’ geographic presence and expand its portfolio to nearly 1,300 lane km.
In October last year, Mint reported that infrastructure firm Madhucon Infra Ltd had agreed to sell its Mahua-Bharatpur road asset to Cube Highways for Rs.248 crore. Earlier in January, infrastructure firms NCC Ltd and Gayatri Projects Ltd had agreed to sell 100% of their shareholding in Western UP Tollway Ltd to Cube Highways for Rs.575 crore.
I Squared Capital is a global private equity firm focusing on energy, utilities and transport. In 2015, it raised a $3 billion fund named ISQ Global Infrastructure Fund, one of the largest infrastructure-focused private equity funds raised in recent years.
Founded in 2012 by former Morgan Stanley executives, I Squared Capital is an independent global infrastructure investment manager focusing on energy, utilities and transport in North America, Europe and some high-growth economies. The fund has a corpus of $3.8 billion.
In June, Mint reported that I Squared Capital was looking to invest as much as $1 billion (around Rs.6,700 crore) in Indian infrastructure, including roads, logistics and rooftop solar power projects.
I Squared Capital has committed to invest in road assets worth Rs.8,000 crore through Cube Highways, Mint reported.
I Squared has invested more than Rs.1,000 crore through Cube Highways in three road assets, excluding APEL. It has committed to invest Rs.2,000 crore in rooftop solar projects.
Annuity-based projects are those where the developer of the project is reimbursed the cost of building the project and gets a return on investment every six months, after starting commercial operations.
Shares of ITNL rose 2.07% to Rs.71.50 at the close of trading on BSE on Thursday, while the Sensex fell 0.8% to 27,835.91 points.