Mumbai: Ajay Piramal-controlled Piramal Group and global private equity investor Lone Star Funds are in advanced talks to set up an investment platform to acquire operating road assets, said two people aware of the development.
Piramal and Lone Star plan to invest $600-700 million in the platform, said the first of the two people cited above, requesting anonymity as he is not authorized to speak to reporters.
The development follows Piramal’s tie-up with Canadian pension fund manager Canada Pension Plan Investment Board (CPPIB) to set up a renewable infrastructure investment trust (InvIT) to acquire operating wind and solar assets.
The proposed InvIT, announced last month, will have an initial targeted corpus of up to $600 million with an option to scale up further. CPPIB and Piramal will initially allocate $360 million and $90 million, respectively, to the corpus. The InvIT would seek to acquire up to 1.5-2 gigawatts (GW) of stable and long-term cash-generating renewable assets.
According to the second person cited above, the roads platform being set up by Piramal and Lone Star will have a traditional fund structure and will not be an InvIT like the renewables platform. He too requested anonymity.
A spokesperson for Lone Star Funds declined to comment.
“We do not comment on market speculations," said a spokesperson for the Piramal group in an emailed response to queries.
“However, as part of our growth strategy, we constantly evaluate opportunities across sectors including road, that are truly scalable and aligned to our business interests and objectives. For instance, our recent partnership with CPPIB on the asset aggregation platform focused on renewables is part of a larger business plan for PEL (Piramal Enterprises Ltd) to acquire long-tenure assets and a stable income stream. Piramal Group remains committed to consistently create long-term value for all its stakeholders," the spokesperson added.
The Indian roads sector continues to see strong interest from private equity and infrastructure investors, with a large number of assets up for sale, as developers struggle to deleverage their balance sheets.
On 16 May, Mint reported that Essel Infraprojects Ltd has agreed to sell three of its road projects to Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest fund manager, as the Subhash Chandra-promoted Essel Group company seeks to trim its massive debt. The assets are expected to fetch a combined enterprise value of ₹3,300-3,500 crore, Mint reported.
Another major infrastructure investor, Macquarie Infrastructure and Real Assets, is looking to exit its seven-year-old investment in roads platform Ashoka Concessions Ltd, Mint reported last month. In 2012, Macquarie, an Australian company, acquired a 34% stake in Ashoka Concessions, a platform to own and operate toll earning road assets, for ₹800 crore. The remaining stake is held by Ashoka Buildcon. In March, Cube Highways and Infrastructure, the Indian roads and highways platform of global infrastructure fund I Squared Capital, agreed to acquire DA Toll Road Pvt. Ltd, which operates a toll road in the states of Haryana and Uttar Pradesh, from Reliance Infrastructure Ltd. Reliance is selling the road for an enterprise value of around ₹3,600 crore, which it plans to use for debt reduction.