Pension funds Canada Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec (CDPQ) are competing to acquire Highway Concessions One, a roads portfolio owned by infrastructure fund manager Global Infrastructure Partners (GIP), two people aware of the development said.
“The two Canadian funds are the only suitors left in the race. They are locked in a close battle to buy these roads," said the first of the two people cited above, both of whom spoke under condition of anonymity.
The two pension funds have bid at around ₹3,200 crore in enterprise valuation for the roads portfolio, he said, adding that the final value at which the roads get sold might be higher as the funds continue to be engaged in negotiations with GIP.
Mint first reported in December 2018 that GIP had started a formal process to find buyers for the Highway Concessions One (HC1) portfolio, which comprises roads totaling 472 route km. In April, Mint reported that the HC1 sale process had garnered interest from several buyers including Italian roads operator Atlantia as well as the Piramal Group, apart from the Canadian pension funds.
Emails sent to GIP and CPPIB remained unanswered. A spokesperson for CDPQ said the firm does not comment on rumours.
The HC1 portfolio, comprising seven road assets—five toll roads and two annuity roads—is spread across seven states and generates a consolidated revenue of ₹620 crore.
The construction of the roads was funded by IDFC Alternatives’ second infrastructure fund, which was acquired by GIP last year.
The HC1 platform’s road projects include Ulundurpet Expressways Pvt. Ltd in Tamil Nadu, Nirmal BOT Ltd in Telangana, Dewas Bhopal Corridor Pvt. Ltd in Madhya Pradesh, Bangalore Elevated Tollway Pvt. Ltd in Karnataka, Godhra Expressways Pvt. Ltd in Gujarat, Jodhpur Pali Expressway Pvt. Ltd in Rajasthan and Shillong Expressway Pvt. Ltd in Meghalaya.
The route length under management has grown at a compounded annual growth rate of 45% since the inception of the platform in 2014, according to the company’s website.
GIP Alternatives completed acquisition of the infrastructure business from IDFC Alternatives last July. The acquisition allowed the infrastructure fund manager, which has offices in the US, UK and Australia, to establish a foothold in India.
Prior to the acquisition, IDFC Alternatives had raised two infrastructure funds—India Infrastructure Fund and India Infrastructure Fund II—aggregating $1.8 billion. As part of its investment strategy for the second fund, it had focused on buyout transactions, clubbing the assets under various platforms to ensure aggregation, better control, and governance.
India’s roads sector has seen significant pickup in deal activity this year with many developers looking to monetize their toll road assets.
IndInfravit Trust, an infrastructure investment trust (InvIT) sponsored by the L&T Group, on 1 July said that it is acquiring nine operational road assets from Sadbhav Infrastructure Project Ltd for ₹6,610 crore.
IndInfravit currently holds a portfolio of five operational toll road concessions.
IndInfravit is acquiring the assets through a mix of cash payment and units of the InvIT. After the completion of the transaction, Sadbhav will likely hold up to 10% units in IndInfravit.
In June, Mint reported that Edelweiss Infrastructure Yield Plus fund, an alternative investment fund set up by the Edelweiss group, is acquiring two annuity road assets from Hyderabad-based Navayuga Group for approximately $150 million.
Earlier in March, Cube Highways and Infrastructure, the Indian roads and highways platform of global infrastructure fund I Squared Capital, agreed to acquire DA Toll Road Pvt. Ltd, which operates a toll road in the states of Haryana and Uttar Pradesh, from Reliance Infrastructure Ltd.