Home >Companies >News >IDFC arm buys 76% stake from NCC, Soma in Bengaluru highway

Mumbai: Infrastructure firms NCC Ltd and Soma Enterprise Ltd will sell their entire holding in highway project Bangalore Elevated Tollway Ltd (BETL) to an infrastructure fund of multi-asset manager IDFC Alternatives Ltd at an enterprise value of about 750 crore, including debt, as the companies look to monetise operational assets.

Mint reported on 17 February that NCC and Soma Enterprise have agreed to sell their stake in the highway project to an infrastructure fund of  IDFC Alternatives, quoting people familiar with the discussions.

NCC and Soma hold 38% each in BETL, while Infrastructure Leasing and Financial Services Ltd (IL&FS) holds the remaining 24%.

The elevated highway became operational in April 2010 and had a project cost of 765 crore, according to data from Soma Enterprise and IL&FS websites. The project has a debt in excess 550 crore.

The sale is the latest in India’s highway sector, where several infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetise operational assets and repay creditors.

EY LLP acted as the exclusive advisor to NCC and Soma on the transaction.

BETL currently operates the 34 km road, and the 10 km four-lane elevated highway project connecting Silk Board to Electronic City junction on National Highway-7 in Karnataka. The project was awarded by the National Highways Authority of India (NHAI) with a 20-year concession period.

BETL had a turnover of 28.42 crore and a net-worth of about 40.93 crore for the financial year 2014-15.

This is NCC's second sale since January, when it along with joint venture partner Gayatri Projects Ltd sold its entire holding in highway project Western UP Tollway to I Squared Capital-backed Cube Highways and Infrastructure Pte Ltd. 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.

India’s infrastructure firms executing large projects, including privately-held Soma Enterprise, IVRCL Ltd, Madhucon Projects Ltd, Lanco Infratech Ltd and Reliance Infrastructure Ltd, 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.

IDFC Alternatives is one of India’s largest multi-asset class fund managers with assets under management to the tune of $3.4 billion. Its Infrastructure Fund II is the successor of its debut infrastructure fund and has an investible corpus of 55 billion.

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.

“Buying control in operational cash-generating core assets remains our preferred investment thesis. We look forward to continuing the calibrated traction on our roads platform and having BETL as the latest in a series of disciplined acquisitions over the past couple of years," said Aditya Aggarwal, partner at IDFC Alternatives.

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