Private equity major 3i India is investing around $61 million (Rs 302 crore) for a minority stake in SIBHPL, a portfolio of BOT (build, operate and transfer) road projects of Supreme Infrastructure India Ltd (SIIL), a mid-size EPC contractor. The investment has been done through 3i’s $1.2 billion India Infrastructure Fund.
Founded by Bhawanishankar H. Sharma in 1983, Supreme Infrastructure (formerly Supreme Asphalts) undertakes engineering works with most of the government departments, public and private sector organisations. The firm has developed over 400 km of highways and currently has an order book of Rs 5700 crore, of which the unexecuted order book stands at Rs 3750 crore.
“SIBHPL offers us the opportunity to expand our presence in the road sector in India through a portfolio of high quality road BOT projects. This investment allows us to partner with the Supreme Group, which has established a strong track record of constructing road assets in the country,” said Anil Ahuja, managing director and head of 3i Asia.
Ernst & Young acted as the sole strategic and financial advisor to SIIL for this transaction.
In March 2011, 3i Group plc invested around $111.51 million in KMC Infratech Ltd, a subsidiary of KMC Constructions involved in BOT (built, operate and transfer) projects in the roads and highways sector.
The road sector has been increasingly attracting the attention of private equity players. India may require $1.7 trillion in the decade starting 2010, to meet its infrastructure demand and keep pace with the economic growth and urbanisation, according to a report by Goldman Sachs. Of this, power and roads alone may require upwards of $700 billion.
In 2011, Norwest Venture Partners and Xander Group invested Rs 400 crore in Sadbhav Infrastructure Project, which had a portfolio of nine concession-based projects. Nandi Infrastructure Corridor Enterprises Ltd (NICE), which is developing the 164 km tollway between Bangalore and Mysore, was also in deal talks with players like JPMorgan and Goldman Sachs. Private equity major Actis also formed a $200 million joint venture with Tata Realty & Infrastructure to develop roads and highways last year.
The $1.2 billion 3i India Infrastructure Fund has a portfolio of investments spanning the entire asset lifecycle. Since its inception, the fund has invested in Adani Power Ltd, Soma Enterprises Ltd, Krishnapatnam Port Company Ltd, KMC Infratech Ltd, GVK Power and Infrastructure Ltd and Ind Barath Energies Utkal Ltd. For the infrastructure space, it seeks to invest between €70 million and €400 million ($139.89 million-$799.4 million) per deal, focusing on European, North American, and Asian infrastructure assets. The firm typically takes a minority shareholding of 10-45 per cent in the investee company, as well as a board seat.