Mumbai: Canadian pension funds CPPIB and CDPQ, and the Piramal Group have entered the final round of bidding to acquire Highway Concessions One (HC1), the roads portfolio of infrastructure fund manager Global Infrastructure Partners (GIP), two people aware of the development said. Mint had first reported in December 2018 that GIP had appointed Citibank Inc. to scout for a buyer for its road assets.
“The sale of the HC1 portfolio has progressed to the second round of bidding with just four suitors left in the fray. Canadian pension funds CPPIB and CDPQ are competing with Italian roads operator Atlantia as well as the Piramal Group, which is looking to acquire the assets for its new roads platform," said the first of the two persons cited above, both of whom spoke under condition of anonymity.
GIP’s road assets, totaling 472 route km, have been valued at between ₹4,000 crore and ₹4,250 crore ($600 million) by the bidders, he added.
The HC1 portfolio, comprising seven road assets—five toll roads and two annuity roads, is spread across seven states and generates consolidated revenue of ₹620 core.
The construction of the roads was funded by IDFC Alternatives’ second infrastructure fund, which was acquired by GIP last year.
According to the second person cited above, the roads portfolio was the most mature asset among all the platforms which GIP had acquired from IDFC Alternatives. “Therefore, it is the first one to be monetized," he added.
Queries emailed to GIP and CPPIB remained unanswered.
Atlantia said it has not presented a binding bid.
Citibank declined to comment on the development.
“We do not comment on market speculation," a Piramal Group spokesperson said.
A CDPQ spokesperson said it “does not comment on founded or unfounded rumours".
The HC1 platform’s road projects include Ulunderpet Expressways Pvt. Ltd in Tamil Nadu, Nirmal BOT Ltd in Telangana, Dewas Bhopal Corridor Pvt. Ltd, 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 the acquisition of the infrastructure business from IDFC Alternatives last July. The acquisition allowed the infrastructure fund manager, which has offices in the US, the 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.
The Indian roads sector has seen significant pickup in deal activity with many developers looking to monetize their toll road assets.
In January, Mint reported that Essel Infraprojects Ltd was in talks with infrastructure developers and private equity companies to sell a part of its roads portfolio. The Subhash Chandra-controlled company has placed six road projects on the block and is seeking a combined enterprise value of ₹11,500 crore, Mint reported.
Another road developer, Sadbhav Infrastructure Project Ltd, has put up 12 operating road assets on sale. In March, The Economic Times reported that CPPIB, through the infrastructure investment trust (InvIT), floated by L&T Infrastructure Development Projects Ltd, is in advanced talks to acquire the assets for $400-500 million.