Caisse de dépôt et placement du Québec (CDPQ) is planning to set up an infrastructure investment trust (InvIT) to house road assets acquired by the Canadian pension fund manager, two people aware of the development said, requesting anonymity.
An InvIT is a pool of money collected from investors to manage operational infrastructure projects, in return for a regular yield to its unit holders.
Mint reported on 13 August that CDPQ was in exclusive talks to acquire Highway Concessions One, a roads portfolio owned by infrastructure fund manager Global Infrastructure Partners (GIP). On 16 October, The Economic Times reported that CDPQ had agreed to buy the road portfolio for around ₹2,400 crore.
The Canadian fund manager is exploring setting up of an InvIT to hold the roads that it is buying from GIP, as well as other road assets that it might buy in the future, the first person said. “They have started discussions to set up an InvIT to hold these roads. Most infrastructure investors are adopting the InvIT route to hold operating assets because of the various advantages that the structure offers," he added.
CDPQ has also started discussions with a few domestic institutional investors to invest in the proposed InvIT, he said. “They have a mandate from their Canadian office to bring in co-investors. They will sell at least 10% of the InvIT to domestic investors."
Emailed queries to CDPQ did not elicit any response.
The Highway Concessions One (HC1) platform portfolio that CDPQ is buying comprises seven road assets—five toll roads and two annuity roads—spread across seven states and generates a consolidated revenue of ₹620 crore. The construction of roads was funded by IDFC Alternatives’ second infrastructure fund, which was acquired by GIP last year.
The 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.
InvITs have emerged as the structure of choice for investors looking to acquire operating infrastructure assets, such as roads, renewables and transmission projects, as well as for companies looking to leverage their balance sheets by selling off operating assets. Recently, several new InvITs have been announced. These include the renewable energy trust set up by the Piramal Group and Canada Pension Plan Investment Board (CPPIB), and InvITs set up by Reliance Industries Ltd for its telecom and gas pipeline assets.
In July, Reliance Industries said Canadian alternative assets manager Brookfield Asset Management will invest ₹25,215 crore in the units proposed to be issued by Tower Infrastructure Trust, which holds the tower assets of Reliance Jio.
In May, private equity investor KKR, along with Singaporean sovereign wealth fund GIC, picked up a large stake in India Grid Trust (IndiGrid), sponsored by private transmission developer Sterlite Power Grid Ventures. In February, while another Canadian pension fund, Ontario Municipal Employees’ Retirement System, said it would invest $121 million in IndInfravit Trust, which holds a portfolio of five operational toll road concessions, initially built and operated by L&T Infrastructure Development Projects Ltd.
In August, IRB Infrastructure Developers Ltd said Singapore’s sovereign wealth fund GIC is investing ₹4,400 crore in its road platform.