BackWelspun Enterprises divests 37% stake in Dewas Bhopal road project
Welspun Enterprises sells a 37% stake in its Dewas-Bhopal corridor project to an infrastructure fund of IDFC Alternatives for Rs662 crore, including debt
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Mumbai: Welspun Enterprises Ltd, an infrastructure company, has sold a 37% stake in its Dewas-Bhopal corridor project to an infrastructure fund of IDFC Alternatives for ₹ 662 crore, including debt.
On 5 December, Mint reported that Welspun Enterprises was in advanced discussions to sell its stake in the Dewas-Bhopal project in Madhya Pradesh to investment manager IDFC Alternatives.
Welspun Enterprises held a 50% stake in the 142.6km Dewas-Bhopal Corridor Pvt. Ltd (DBCL), the special purpose vehicle operating the project, while the balance is held by Chetak Enterprises Ltd, a highways developer. After the current sale, Welspun Enterprises will now hold 13% in the project and can transfer the same to the IDFC infrastructure fund II within two years, subject to the approval of the Madhya Pradesh Road Development Corp. Ltd, the company said in a BSE filing on Wednesday.
The four-lane project was completed in April 2010 at a cost of ₹ 630 crore. It is one of the largest of the six build, operate and transfer (BOT) projects in Welpsun Enterprises’s portfolio. The deal value of ₹ 662 crore includes debt of ₹ 317 crore and a contingent deferred consideration of ₹ 34 crore. EY acted as advisor to DBCL in the deal.
“The transaction has strengthened the company’s financial capabilities by increasing the cash and reducing net debt by nearly ₹ 2.82 billion ( ₹ 282 crore)," Welspun Enterprises said in the filing.
Earlier this year, the government made it easier for BOT road developers to divest their holdings in operational projects, which led to a pickup in deals in the roads sector. In BOT projects, a private operator builds the project from its own funds, operates it for a period and then transfers it to the government.
Infrastructure-focused firms such as I Squared Capital and IDFC Alternatives are among the few investors in the market with an appetite to buy out large operational assets across roads and power to build their own portfolio as opposed to picking up a partial stake.
According to Bloomberg, Welspun Enterprises had a stand-alone debt of ₹ 87.42 crore on 30 September and a consolidated debt of ₹ 430.57 crore on 31 March. The company operates 500km of completed BOT road projects, builds highways, urban and water infrastructure, and residential and commercial projects.
In 2014, the $3 billion Welspun Group decided to merge three of its units—Welspun Infratech Ltd, Welspun Plastics Pvt. Ltd and Welspun Infra Projects Pvt. Ltd—with Welspun Projects Ltd to simplify its corporate structure and leverage the strengths of a combined balance sheet. The new merged entity, called Welspun Projects, was subsequently renamed Welspun Enterprises.
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