Bangalore / New Delhi: London-based private equity (PE) firm 3i Group Plc., which has a $1.2 billion (Rs5,472 crore) India-focused infrastructure fund, is looking to make its second investment in a unit of Soma Enterprises Ltd, an engineering and construction firm that develops and runs highways, at least two persons familiar with the matter said.
Ahead of the proposed investment, Hyderabad-based Soma Enterprises has bundled some highway projects into a holding company called Soma Highway (Toll) Projects Pvt. Ltd.
3i has completed due diligence for the investment and Soma has sought approval by the Foreign Investment Promotion Board (FIPB), the agency that clears overseas investments, one of the two persons said. He did not want to be named ahead of FIPB approval.
Soma Enterprises has a portfolio of nearly 800km of tolled highways, including a Rs3,600 crore National Highway 1 stretch between Panipat in Haryana and Jalandhar in Punjab, apart from two annuity projects.
“The discussions with the potential investor are confidential,” said A. Maganti, chief executive officer of Soma Enterprises. “We cannot divulge anything at this stage.”
A spokesperson for 3i declined comment, saying the company doesn’t respond to “market speculation”. An email sent to 3i’s Asia head Anil Ahuja went unanswered.
In April 2009, 3i closed the $1.2 billion India Infrastructure Fund and said it would look at close to 10 investments. 3i, which has already invested $101 million in Soma Enterprises, has a seat on the company’s board.
In February 2009, 3i invested $161 million in Krishnapatnam Port Co. Ltd, the developer and operator of an all-weather, deep-water port on India’s eastern coast in Andhra Pradesh.
In 2006, 3i invested $44.4 million for a 10% stake in construction firm Navayuga Engineering Co. Ltd, the flagship company of the CVR Group that controls Krishnapatnam Port. 3i has also invested $227 million in Adani Power Pvt. Ltd.
Analysts say that PE investors are eyeing the highways sector now because the model concession agreement (MCA) has become clearer and is perceived as being favourable to developers. MCA is a document that sets out the terms and conditions of a highway contract.
“While I don’t know about the specific structure of this investment, private equity companies are actively looking to invest in India,” said Amrit Pandurangi, who heads the transport and infrastructure practise for consulting firm Pricewaterhouse Coopers.
India is looking to boost investments in its highways after a two-year lull resulting from a combination of an economic slowdown and uncertainties over the bid process.