Mumbai: Roads platform Cube Highways and Infrastructure Pte. Ltd and Canada’s Caisse de dépôt et placement du Québec (CDPQ) are in talks to buy three toll roads from debt-laden Essel Group, three people aware of the matter said, requesting anonymity. A potential deal could be a major reprieve for the Subhash Chandra-led group that is struggling to repay lenders.
Cube Highways, the roads platform of infrastructure investor I Squared Capital and CDPQ, Canada’s second largest fund manager are expected to put binding offers in the coming weeks. According to the first of the three people cited above, the sale could fetch ₹1,500 crore for the group.
“Essel has been in talks with various investors to sell part of its roads portfolio as the group looks to deleverage. Cube Highways and CDPQ are two parties that are left in the race and which are doing a diligence on these assets. While Essel had put up six road assets for sale, investors are keen on only three-four assets, which are toll roads. The other two assets were annuity roads," the person cited above said.
Essel Group has struggled to meet debt repayment obligations. In January, shares of its listed flagship company Zee Entertainment Enterprises Ltd (ZEEL) plunged after the company decided to defer a scheduled interest payment.
The group soon reached a formal agreement with its lenders who agreed not to sell pledged shares of listed entities of Chandra’s Essel Group, giving it time till end-September for various asset sales, including up to 50% of promoters’ stake in ZEEL. The group also initiated the process to sell stakes in its renewable energy and asset management businesses.
Essel’s cash crunch has hit debt mutual funds as well. On 11 April, Mint reported that Kotak Mahindra Asset Management Co. Ltd was withholding part of the redemptions from one of its fixed maturity plans (FMP), after two Essel Group companies in which the FMP had invested failed to pay. Altogether, nine asset management companies have lent to Essel Group across 87 schemes, including FMPs and open-ended debt funds. Mutual funds had lent a combined ₹7,000 crore to Essel Group entities.
“The money will help partly repay lenders at the road holding company level and also at the group level. The two investors are expected to communicate their offers to Essel this week itself," the second person said.
A spokesperson for CDPQ declined to comment. Emails sent to I Squared Capital remained unanswered.
“Essel Infra’s asset divestment process is in healthy progress as per the planned approach. At this stage, we do not wish to comment on any other information and the same will be communicated when the deal concludes. We are also bound by confidentiality agreements signed with the potential suitors, which do not permit us to divulge any additional information," said an Essel Group spokesperson.
In an interview to The Economic Times on Monday, Chandra said ZEEL has received interest from five suitors and that he expects these suitors to submit non-binding bids by end of April or first week of May.
Chandra added that he expects the infra asset sales to reduce the burden of around ₹15,000-16,000 crore of operating company debt and around ₹3,000 crore of corporate debt. The rest will be taken care of by the stake sale in ZEEL, he said in the interview. Chandra said his group is also looking at selling other non-core businesses, including Essel Finance and mutual funds.
To be sure, while the group has shown the intention to deleverage itself and is running multiple transactions to sell assets and raise money, not all of its efforts have met with success.
In February, Mint reported that private equity investor Actis Llp has scrapped its plan to buy the solar assets of Essel Infraprojects Ltd.