IndInfravit Trust has inked a pact to acquire nine operational road projects from Sadbhav Infrastructure Project Ltd at an enterprise value of about Rs 6,610 crore ($959 million) through a combination of cash and allotment of its units.
The roads portfolio comprises seven toll roads and two annuity roads, with total 2,619 lane kms in Gujarat, Karnataka, Maharashtra, Rajasthan and Telangana, the companies said in a statement.
IndInfravit, which has a portfolio of five operational toll road concessions, is sponsored by L&T Infrastructure Development Projects Ltd (L&T IDPL). The infrastructure investment trust’s other unit holders include Allianz Capital Partners, Canada Pension Plan Investment Board (CPPIB) and OMERS Infrastructure.
CPPIB will commit up to C$220 million ($168 million or Rs 1,158 crore) for the proposed deal, it said.
The transaction is in line with IndInfravit’s strategy to acquire additional road projects in India, and significantly expands its portfolio.
After the deal, Sadbhav Infrastructure will hold not more than 10% units in IndInfravit, according to the statement.
The transaction is subject to certain regulatory and other customary conditions including approvals from IndInfravit’s lenders, unit holders and shareholders.
“(The acquisition) serves as a clear expression of our intentions to actively pursue growth and expand IndInfravit Trust’s revenue base… we look forward to more such transactions in the near future,” said J Subramanian, CEO at LTIDPL IndvIT Services Ltd, which manages the trust.
Ambit Pvt. Ltd exclusively advised IndInfravit while Morgan Stanley acted as an exclusive financial adviser to Sadbhav Infrastructure on this transaction.
Sadbhav Infrastructure is a road developer majority owned by Sadbhav Engineering Ltd. After the completion of this transaction, Sadbhav Infrastructure will continue to own three operational road projects and 12 under-construction projects under the Hybrid Annuity Model.
Sadbhav Infrastructure will use the proceeds to recycle its capital in bidding for new road projects, inject equity into under-construction projects as well as to repay its debt. It will continue to focus on its core expertise of development of new roads.
Shares of Sadbhav Engineering closed at Rs 256.75 apiece on the BSE on Monday, up 4.07% from the previous close. Sadbhav Infra’s shares declined 2.34% to close at Rs 70.85%. IndInfravit units jumped 5.7% to close at Rs 108.90 apiece.
Other InvIT deals
Of late, there has been a significant uptick involving InvITs with more and more foreign investors striking deals.
CPPIB had increased its exposure in IndInfravit in May via a private placement.
In April, global alternative assets giant KKR announced the acquisition of a controlling stake in Sterlite Investment Managers Ltd and purchase of a sizeable portion of units in India Grid Trust, an InvIT that holds power transmission projects. Singapore sovereign wealth fund GIC also participated in the multi-layered transaction.
Earlier this year, India Grid Trust chief executive officer Harsh Shah told VCCircle that the InvIT was aiming to boost its overall assets under management to Rs 30,000 crore in three years by way of acquiring assets.
Sterlite’s India Grid Trust is among the three InvITs that have been floated since the Securities and Exchange Board of India (SEBI) notified regulations in 2016 for setting up such trusts. The other two are IRB’s InvIT and L&T IDPL.
IRB Infrastructure Developers Ltd was the first company to launch a public offering of InvITs in May 2017. While its IPO attracted strong interest from investors, its stock market debut was lackluster, with its units falling below the IPO price.
The offering of Sterlite Power Venture’s India Grid Trust fared worse as its IPO struggled to garner full subscription. Its units dropped in value on listing day.
This damped investor sentiment at a time when at least five other infrastructure companies were seeking to float IPOs of InvITs. Billionaire Gautam Adani-controlled Adani Group subsequently called off plans to float an InvIT for the power transmission arm anticipating few takers.
SEBI has made multiple amendments to regulations governing InvITs and real estate investment trusts to make them attractive for investors. The capital markets regulator allowed strategic investors such as multilateral financial institutions and non-banking financial companies to invest up to 25% of the total offer size. It later permitted such trusts to raise funds by issuing debt securities.