MUMBAI : Cube Highways and Infrastructure, the biggest buyer of road assets in India, is looking to tap the dollar bond market to raise around 3,500 crore ($500 million), said two people aware of the development, requesting anonymity.

The proceeds of the proposed dollar bond issuance, said the first person cited above, will be used to refinance debt of the third bundle of toll-operate-transfer (TOT) road projects, which it had acquired from the National Highways Authority of India (NHAI) last November.

“The dollar bond market has a lot of liquidity going around and investors have shown a keen interest in debt paper coming out of Asia, including India. The pricing is also attractive from an issuer perspective and all these factors are making them (Cube Highways) consider a possible dollar bond transaction," the person said.

Indian companies have raised $21.32 billion of debt through offshore bonds in 2019—the highest both in value and volume terms in the last six years, according to data from financial market tracker Refinitiv.

The TOT bundle that Cube Highways had acquired from NHAI includes nine stretches of roads, totaling 566.27 kilometers (km) across Uttar Pradesh, Jharkhand, Bihar and Tamil Nadu.

Cube Highways, which is owned by Singapore-based global infrastructure fund, I Squared Capital, had won the bid for this TOT bundle with an offer of 5,011 crore.

The TOT model, introduced in 2016, enables the government to monetize public-funded infrastructure and build new assets. Under the model, the highest bidder wins the rights to run and maintain operating road assets for a pre-decided tenure, and earn revenue from toll collection during the period.

“Cube Highways is currently working on getting an international rating done and they have also shortlisted some investment banks to advise on the bond offering," said the second person. “The tenor of the bonds is expected to be five years and the notes are expected to get an investment grade rating of BB-," he added.

Email queries to I Squared Capital did not elicit any response.

Cube Highways has emerged as one of the most active buyer of road assets in India. Earlier this month, it entered into an agreement with road builder KNR Constructions Ltd to acquire a 100% stake in Kerala-based KNR Walayar Tollways Pvt. Ltd, which operates a four-lane 53.5 km toll road connecting Walayar with Vadakkancherry along NH 47.

At present, Cube Highways holds 28 road projects and over 8,600km of highways across India.

In September 2019, Cube had agreed to acquire five new hybrid annuity road projects in Maharashtra, Telangana and Odisha from Dilip Buildcon Ltd. Last March, it had agreed to acquire DA Toll Road Pvt. Ltd, which operates a toll road connecting Haryana, Delhi and Agra, from Reliance Infrastructure Ltd for an enterprise value of around 3,600 crore.

Cube Highways also counts Abu Dhabi Investment Authority, International Finance Corp., Mitsubishi Corp. and Japan Overseas Infrastructure Investment Corp. for Transport and Urban Development as its shareholders.

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