Nandi Infrastructure Corridor Enterprises Ltd (NICE), which is developing the 164-km tollway between Bangalore and Mysore, is in discussions with private equity funds for divesting a little more than 10% stake for around $100 million, said sources directly familiar with the development.
A private equity fund managed by JP Morgan among other players in the fray could pick up the stake in the phase one of the project valuing it at around $800 million to $900 million. The talks are still going on and no agreement has been reached as of yet, said sources. The
phase one of the project is yet to be completed. It consists of 41 km of peripheral road connecting NH 7 - Hosur Road to NH 4 - Tumkur Road, 9.1 km of link road and 12 km of expressway connecting the first township – The Corporate Center near Bidadi.
"The discussions are still on and there is no deal yet. There is the possibility of a deal being agreed upon in the next two to three weeks, if talks stay on track," said one source who did not wish to be identified. A company official confirmed discussion with financial
investors like JP Morgan, but cautioned that there was no definitive deal in place.
When contacted, a NICE spokesperson declined to comment.
While the valuation of the project is being played up due to the real estate component, any private equity investment would come on the basis of the highway, said one source. Also, the value of the real estate would only kick when the projects are developed. Another point
to note is that most of the realty project is located in an area called Bidadi, where realty valuations cannot be compared to Bangalore.
NICE, which has been dogged by political controversies and legal battles, is a multibillion dollar infrastructure corridor in the making, with the first phase alone involving 7000-odd acres. The valuation of the project has soared with real estate valuations around the corridor sky-rocketing. The BSE-listed BF Utilities Ltd holds 75% stake in the project, while Anil Dhirubhai Ambani Group (ADAG) holds the remaining stake, according to media reports in the past.
Interestingly, BF Utilities counter has witnessed heightened activity in recent weeks. VCCircle learns that at least two Mumbai-based brokerage firms have been actively peddling the stock on the back of a potential transaction at NICE. The share price of BF Utilities closed at Rs 892 today, down by 2.12%. The stock rallied from Rs 708 to Rs 1053 in the latter half of July before slipping to the current 900 level.
The project is expected to have five new township projects on the expressway and NICE also carries rights to supply, water, power, telecommunication services, among others. The project is also expected to have a corporate, commercial, industrial clusters alongside the tollway.
The project is expected to consist of four components - a 9.1 km stretch connecting Bangalore to the peripheral road, a 41 km peripheral road connecting Bangalore to Hosur road (NH-7) and Tumkur, road (NH-4), a 111 km expressway between Bangalore and Mysore and a 3 km elevated road at Bangalore side.
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 infrastructure demand and keep pace with economic growth and urbanisation, said a report by Goldman Sachs. Of this, power and roads alone may require upwards of $700 billion.
In a recent large deal, private equity major Actis formed a $200 million joint venture with Tata Realty & Infrastructure to develop roads and highways. The government is also in discussions with Singapore state investor Temasek to set up a $2 billion road fund, said a report in Wall Street Journal last month.