A decline in economic growth, lower consumer demand, delays in securing statutory approvals and completing land acquisition have stalled dozens of infrastructure projects, including highways and power plants, in India in recent years. Photo: Mint
A decline in economic growth, lower consumer demand, delays in securing statutory approvals and completing land acquisition have stalled dozens of infrastructure projects, including highways and power plants, in India in recent years. Photo: Mint

Madhucon to sell Agra-Jaipur Expressways to Cube Highways for Rs248 crore

Madhucon Agra-Jaipur Expressways is a BOT project between Bharatpur and Mahua connecting the two key tourist corridors of Agra and Jaipur

Mumbai: Infrastructure firm Madhucon Infra Ltd has entered into an agreement to sell one of its road assets to Cube Highways and Infrastructure Pte Ltd of Singapore for 248 crore.

In a filing to BSE, Madhucon Infra, the holding company, said that it had entered into a share-purchase agreement for the sale of Madhucon Agra-Jaipur Expressways Ltd to Cube.

“Subject to closing adjustments, consideration for 100% equity is 248 crore, including operational grants and funding for the entire major maintenance," the company said.

Madhucon Agra-Jaipur Expressways is an operational build-operate-transfer (BOT) project between Bharatpur and Mahua connecting the two key tourist corridors of Agra and Jaipur. The project started commercial operations in May 2009.

On 11 August, Mint reported that International Finance Corp. (IFC), part of the World Bank group, had picked up a 20% stake in Cube Highways and Transportation Assets Advisors (P) Ltd, promoted by I Squared Capital. IFC had committed a $100 million investment in Cube Highways, which will primarily acquire operating road assets in India, the report said.

I Squared Capital is a global infrastructure investment manager focused on energy, utilities, and transport in North America, Europe, and select high-growth economies.

“The transaction will allow Madhucon Group to monetize their well-established asset to meet the liquidity needs of the company and adds to the growing list of high quality road assets in Cube Highway’s portfolio," Ajay Garg, managing director of Equirus Capital, said.

Equirus Capital acted as the exclusive adviser to Madhucon Group for the transaction and Nishith Desai Associates as the legal counsel.

Once closed, this will be the second investment made by Cube Highways in India. In late 2014, it had bought a majority stake in Jaipur Mahua Tollway Pvt. Ltd (JMPTL) from IJM Malaysia. JMTPL operates the 109km stretch on the Jaipur-Agra National Highway 11 in Rajasthan, under BOT scheme.

Gautam Bhandari, director at Cube Highways said the firm is in active discussions on multiple acquisition opportunities as the company continues to add scale to its portfolio of transport concessions in India.

Referring to the latest acquisition from Madhucon, Cube Highways said the initial acquisition will be for a 74% ownership interest, with the remaining 26% percent subject to approval from NHAI.

Harikishan Reddy, chief executive officer of Cube Highways Advisors, added “This acquisition enables Cube Highways to operate a contiguous 166km stretch of NH-11, and will result in significant operational synergies with Cube Highways’ existing investment in JMTPL. Traffic on this corridor continues to demonstrate healthy growth as it benefits from the growing economies of two large urban centres, Agra and Jaipur."

In August, Gammon Infrastructure Projects Ltd sold six road and three power projects to BIF India Holdings Pte. Ltd for about 563 crore. BIF India Holdings is controlled by Canada-based Brookfield Asset Management Inc. and Core Infrastructure India Fund Pte Ltd (CIIF).

A decline in economic growth, lower consumer demand, delays in securing statutory approvals and completing land acquisition have stalled dozens of infrastructure projects, including highways and power plants, in India in recent years. That has squeezed corporate cash flows, making it difficult for developers to repay debt, and led to a pile-up of bad loans in the banking system.

Highway developers had expected traffic to grow by at least 8% every year, but many operational toll-based highway projects are seeing a mismatch in traffic estimates at the time the projects were awarded and actual traffic at present.

In the BOT model, developers use their own money to execute projects, operate them for a period and transfer them to the government. About 7,500km of highway projects awarded by the National Highways Authority of India to road developers between fiscal 2010 and 2012 on a BOT basis are at high risk today, ratings agency Crisil Ratings said in a report last week.

To avert potential debut defaults, toll revenue across these BOT projects will have to grow 37% compared with a forecast of about 10% for the near term, the report said. Toll rate increases are linked to wholesale price inflation.

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