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Business News/ Companies / IDFC Alternatives to buy NCC, Soma stakes in Bangalore highway
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IDFC Alternatives to buy NCC, Soma stakes in Bangalore highway

NCC to sell its 38% stake in the Bangalore elevated highway to IDFC for an equity value of about `100-110 crore

The sale by NCC will be latest in India’s highway sector, where several Indian infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetize operational assets and repay creditors. Photo: Pradeep Gaur/MintPremium
The sale by NCC will be latest in India’s highway sector, where several Indian infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetize operational assets and repay creditors. Photo: Pradeep Gaur/Mint

Mumbai: Infrastructure firm NCC Ltd has agreed to sell its 38% stake in the Bangalore Elevated Tollway Ltd highway project to an infrastructure fund of IDFC Alternatives Ltd for an equity value of about 100-110 crore, two people familiar with the discussions said, asking not to be named as the discussions are private.

The fund is also buying Soma Enterprise Ltd’s stake in the project, which is about 30%, these people said. IDFC Alternatives, the investment arm of infrastructure-focused lender IDFC Ltd, is expected to buy the majority stake for an equity value of 150-200 crore, excluding debt, according to these people.

The sale by NCC will be latest in India’s highway sector, where several Indian infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetize operational assets and repay creditors.

Infrastructure Leasing and Financial Services Ltd (IL&FS) is the other partner in the project.

The 9km elevated highway became operational in April 2010 and cost 765 crore, according to data from Soma Enterprise and IL&FS websites.

An IDFC Alternatives spokesman declined to comment. NCC’s executive vice-president of finance Y.D. Murthy also declined to comment. A Soma Enterprise spokesman did not respond to phone calls and an email seeking comment.

IDFC Alternatives is among the few financial firms in the infra sector looking to buy controlling stakes in operational road projects, which it plans to consolidate into a holding company and eventually list through an IPO (initial public offer) or InvIT (infrastructure investment trust). The firm operates under three verticals: private equity, a domestic real estate fund and two infrastructure equity funds.

NCC was close to raising about 220 crore by selling its stakes in two “build, operate and transfer" (BOT) road projects—the Western UP Tollway Ltd and the Bangalore Elevated Tollway, Mint reported on 15 December. Since then, NCC has announced the sale of its 51% stake in Western UP Tollway to I Squared Capital-backed Cube Highways and Infrastructure Pte Ltd.

Though NCC and joint venture partner Gayatri Projects Ltd sold their entire holding in the Western UP Tollway project for an enterprise value of 575 crore, NCC received close to 97 crore from the sale and is likely to take a hit in its current quarter profit due to the loss associated with the sale. “The company had invested 1.15 billion ( 115 crore) and received a consideration of 970 million, resulting in a loss of about 200 million," Emkay Global Financial Services Ltd analyst Nitin Arora wrote in a 11 February report.

For 2014-15, NCC had reported a loss of about 10-11 crore in the Western UP and Bangalore Elevated projects.

NCC, which constructs highways, buildings and power plants, has been looking to sell its shareholding in operating projects to help bring down debt. As of 30 September, it had a consolidated debt of 3,504.61 crore and plans to pare debt to below 2,000 crore in the next fiscal.

The proceeds from the sale by NCC are expected to be used towards the working capital of the company, Arora said.

“We believe NCC will be the biggest beneficiary of the ‘trinity of forces’ (robust order pipeline, reduced competition and lower interest rates) over the next three years," a 11 February report by PhillipCapital said.

NCC last week reported a 10% fall in consolidated net sales to 2,395.7 crore and a nearly 58% rise in net profit to 40.37 crore for the quarter to December.

India’s infrastructure firms, executing large projects, have struggled with project delays and rising debt. Many have also been hurt by a mismatch in traffic estimates, which have not grown as much as anticipated at the start of the project.

A change in government norms in 2015 allowing highway developers to fully divest their operational projects has helped speed up deal closure.

In August, Gammon Infrastructure Projects Ltd sold six road and three power projects to BIF India Holdings Pte Ltd for 563 crore. Infrastructure firm Madhucon Infra Ltd in October agreed to sell one of its road assets to Cube Highways for 248 crore.

In December, Welspun Enterprises Ltd sold a 37% stake in its Dewas-Bhopal corridor project to an infrastructure fund of IDFC Alternatives for 662 crore, including debt.

Anil Ambani-led Reliance Infrastructure Ltd is in negotiations with global pension funds and investment firms, including the Canada-based Brookfield Asset Management Inc. and CPP Investment Board (formerly the Canada Pension Plan Investment Board), to sell its portfolio of road assets, Mint reported last week.

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Published: 17 Feb 2016, 01:27 AM IST
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