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Cube Highways ties up debt financing to help buy toll roads
Photo Credit: VCCircle

Singapore-based Cube Highways and Infrastructure Pte. Ltd said it has tied up with the State Bank of India (SBI) for a Rs 3,500 crore ($476 million) loan facility to help acquire road projects on a toll-operate-transfer (TOT) basis. 

The investor, which owns and operates toll roads in India, had won the TOT- Bundle 3 projects from National Highways Authority of India (NHAI) with a bid of Rs 5,011 crore in December. But coronavirus delayed the transaction. 

The TOT model developed by NHAI uses a one-time, upfront concession fee paid to the government in return for the right to operate, maintain and collect tolls over 30 years on select operational national highway stretches. The Union Cabinet had cleared the TOT model in November last year. 

TOT- Bundle 3 projects consist of nine road stretches with 2,265 lane kilometers across four geographically diverse states in India. “These project stretches have shown a healthy ramp-up of traffic after the lockdown was lifted,” the release said. 

This development comes just months after Cube Highways’ plan to acquire a road project in northern India came unstuck, after the $263 million deal couldn’t be completed within the stipulated time frame.

Cube Highways had agreed to acquire Ghaziabad-Aligarh Expressway Pvt. Ltd from its three shareholders in May last year. The deal was struck at an enterprise value of Rs 1,834 crore ($263 million then). 

The three shareholders of the SPV were Indian highway developers PNC Infratech Ltd and Bharat Road Network Ltd, and the Indian unit of Oman’s Galfar Engineering & Contracting. PNC owned a 35% stake in the SPV, Bharat Road 39% and Galfar the remaining 26%.

In June, the deal fell apart. PNC and Bharat Road had said in regulatory filings that the proposed share purchase agreement that the companies had signed with Cube Highways had lapsed. They added that the parties to the agreement have decided not to extend its validity any further.

At the time of signing the deal, PNC had said that the equity value of its stake was Rs 270 crore and that the sale would help it reduce its debt by Rs 1,070 crore after accounting for certain receivables and cash flows.

Miami, Florida-based I Squared, which is an infrastructure-focussed private equity firm, had set up Cube Highways in a tie-up with International Finance Corporation (IFC), the World Bank’s private-sector investment arm. It roped in two more investors later—Abu Dhabi Investment Authority in November 2017 and a consortium led by Japan’s Mitsubishi Corp the following month.

Cube Highways has emerged as one of the top foreign buyers in India’s roads sector over the last six years, a VCCircle analysis showed in August last year. The company has added nearly a dozen more assets to its portfolio and invested at least $1.2 billion to buy road assets.  

More than half of this amount came in 2019 alone. In March 2019, Cube Highways agreed to acquire the Delhi-Agra toll road project from Anil Ambani-led cash-strapped Reliance Infrastructure Ltd for a little over $518 million. The deal helped Cube Highways gain control of the heavily trafficked six-lane 180 km road that connects the national capital to Agra, home to the world-renowned Taj Mahal.

In January this year, it signed a pact to buy a road project from KNR Constructions Ltd, adding to the three assets that it had agreed to purchase from the Hyderabad-based company last year.

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