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MUMBAI : Cube Highways, the largest investor in road projects in India, is in talks with pension funds and sovereign wealth funds to raise as much as $1 billion through an infrastructure investment trust (InvIT), said three people aware of the development.

Singapore-based Cube Highways, backed by infrastructure investor I Squared Capital, owns 28 operating highway projects, with nearly 8,900 lane km across India.

The InvIT will comprise the largest portfolio of privately held road assets in the country.

“The Cube Highways InvIT will include almost all the operating road assets in the company’s portfolio, barring one or two. This is the biggest portfolio of roads to be put under an InvIT in India so far. They are working with a foreign investment bank on the structuring of the InvIT and marketing to investors," said the first of the three people cited above, requesting anonymity.

The Cube Highways InvIT will be a privately placed listed InvIT, he added.

According to the second person cited above, several pension funds, sovereign wealth funds and some insurance companies are in talks with Cube for this investment.

“Canadian investors such as British Columbia Investments and a state-sponsored investment firm from Abu Dhabi are in the race to invest in the Cube InvIT. There are two rounds of talks post which the final set of investors will be picked," he said.

An email sent to I Squared Capital did not elicit a response. British Columbia Investments declined to comment.

Existing shareholders of Cube Highways include I Squared Capital, Abu Dhabi Investment Authority, International Finance Corp., a consortium of Japanese investors including Mitsubishi Corp., Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development, East Nippon Expressway Co. Ltd and Japan Expressway Co. International Ltd.

Cube Highways has emerged as the biggest acquirer of operating road projects in India, including major road projects such as Chenani–Nashri Tunnelway Ltd, India’s largest road tunnel in the Union territory of Jammu and Kashmir from IL&FS Transportation Network Ltd; DA Toll Road Pvt. Ltd, a six-lane toll road connecting Delhi and Agra; Cube Highways acquired nine operating roads from the National Highways Authority of India under the toll-operate-transfer (ToT) model for $684 million.

InvITs manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.

They have emerged as a preferred structure for investors, and are being set up to hold operating projects across roads, transmission lines, renewable projects, telecom towers and gas pipelines.

While companies such as Reliance Industries, Sterlite Power, IRB Infrastructure, L&T and others have set up InvITs to monetize their operating infra assets, even state-owned entities have warmed up to these structures.

In May, PowerGrid Corp. of India Ltd raised over 7,700 crore through an InvIT of transmission lines.

NHAI, too, is working on its own InvIT of road projects.

Mint reported on 3 September that the government’s ambitious 6 trillion monetization programme will be kicked off by leasing out more than 2,229km of gas pipelines of GAIL (India) Ltd to the private sector under the InvIT structure.

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