Mumbai: Canadian asset manager Brookfield is closing the purchase of three remaining assets from Gammon Infrastructure Projects Ltd, with which it had entered into a transaction to buy a total of nine assets in August, two people aware of the development said.
“Work on the second tranche of asset purchase was on the slow lane for some time. However, the transaction is now almost complete and will be closed in the next couple of weeks," said one of the two people cited above, requesting anonymity as the talks are private.
The second tranche includes Vijayawada Gundugolanu Road Project Pvt. Ltd, Sikkim Hydro Power Ventures Ltd and Pravara Renewable Energy Ltd.
On 27 August 2015, Gammon Infrastructure Projects had entered into an agreement with BIF India Holdings to sell six road and three power projects 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 fund sponsored by Kotak Mahindra Capital Co. Ltd.
CIIF is an India-focused infrastructure fund managed by the Singapore branch of Kotak Mahindra (UK) Ltd.
Brookfield had more than $200 billion (around ₹ 13 trillion today) in assets under management as of 30 June.
On 29 February, Gammon announced the closure of the first tranche of sales, which included five road assets and one power project. The first tranche resulted in a cash inflow of around ₹ 380 crore for Gammon, according to the company’s filings with the stock exchanges. The buyer also took on a debt of around ₹ 1,365 crore, associated with the six assets.
“The second tranche closure will see Gammon receive money to the tune of around ₹ 150-200 crore," said the second person cited above, also requesting anonymity.
Gammon’s managing director Kishor Kumar Mohanty declined to comment on the development. Brookfield and CIIF, too, declined to comment on the development.
Several other investors, such as I Squared Capital, IDFC Alternatives and Macquarie Infrastructure and Real Assets (MIRA), are active buyers in the Indian road sector.
In June, Mint reported that Singapore-based Cube Highways and Infrastructure Pte Ltd said it has completed the acquisition of a 74% stake in Madhucon Agra-Jaipur Expressways Ltd and a 100% stake in Western UP Tollway Ltd.
Cube Highways is a joint venture between private equity firm I Squared Capital and International Finance Corp. (IFC), the private investment arm of World Bank.
On 12 August, Mint reported Essel Highways Ltd, a unit of Essel Infraprojects Ltd, has secured an $85 million loan from investment bank Goldman Sachs as part of a $220 million debenture issuance. The funds will be used to finance new projects and strategic acquisitions.
While there have been some road asset acquisitions by financial investors in recent times, industry experts believe the market is not expected to see a significantly higher level of activity going forward. “Overall, on the road side, we continue to be in a situation where there are a lot of sellers and only a handful of buyers," said Sanjay Sethi, managing director and chief executive at infrastructure advisory firm Nestor Consulting India.
Operationally, things have improved a bit for road operators and so the valuation dynamics might change a bit going ahead, he said.
“Traffic numbers have improved for a lot of assets and some debt restructuring has also been seen which will help road operators post better numbers. Operators might hold on to some assets with an eye on improved valuations, given this improvement in numbers and an expectation of further improvement in traffic on robust GDP growth," said Sethi.