Mumbai: Piramal Enterprises Ltd is looking for investment opportunities in infrastructure and expects to finalize some deals in the next four months, a top official said. The company is looking at road, power and renewable energy projects, with focus on road assets.
About Rs.5,000 crore will be invested by 2016, said Jayesh Desai, co-head of structured investments group at Piramal Capital, the financial services arm of billionaire Ajay Piramal’s Piramal Enterprises.
In April 2013, Piramal Enterprises invested Rs.425 crore in Hyderabad-based Navayuga Road Projects Pvt. Ltd and Rs.500 crore in Green Infra Ltd, a renewable energy firm promoted by IDFC Alternatives Ltd.
After these two debt investments, Piramal Enterprises is now looking for equity investments as well. The company is willing to buy out infrastructure assets—mainly operational road projects—and manage them, Desai said. “We have the ability to put together a team and manage it,” he said.
However, Desai is not keen on under-construction assets with high implementation risks. “We are ready to help when there are cash flow mismatches, but we will not be looking at under-construction or greenfield projects,” he said.
The average ticket size of a single investment could be Rs.500-1,000 crore, which could go higher if required. But there are no plans to invest more in projects where the company has already invested. The group will also continue debt investments in infrastructure projects. The structured investments group is co-headed by Pervez Umrigar, former managing director of Gammon India Ltd. Umrigar is responsible for building teams which will eventually manage acquired assets. He and Desai joined Piramal in 2012 to lead the venture.
Implementation delays and aggressive bidding have eroded developers’ finances. Several projects have not fetched the kind of returns expected, as the economy slowed down. Many developers are now looking to sell assets, say bankers and analysts.
“We will definitely witness a surge in primary and secondary market transactions. There is optimism in infrastructure and we have crossed a bad phase, especially in the road sector,” said Abhaya Agarwal, partner with EY India, adding many developers are looking to hive off their old assets and raise capital. “They want to invest capital in greenfield projects and those which need completion.”
In 2013, private equity funds invested $2.2 billion in infrastructure across 23 deals, according to VCCEdge, a deals tracker. Since January, there have been five transactions worth $589 million in the sector.