Singapore sovereign wealth fund GIC will invest up to Rs 4,400 crore ($621 million) in the roads business of IRB Infrastructure Developers Ltd, as it continues to pour large amounts of capital into India.
As part of the transaction, IRB will transfer nine of its build-operate-transfer road assets to a private infrastructure investment trust (InvIT) in which it will hold a 51% stake and GIC 49%.
The investment amount includes funding of future construction costs, IRB said in a statement.
IRB said it will use the investment proceeds to reduce debt and finance under-construction projects.
This is the second big-ticket deal in India's roads sector in barely a month. In early July, Canada Pension Plan Investment Board-backed IndInfravit Trust inked a pact with Sadbhav Infrastructure Project Ltd to acquire nine operational road projects for Rs 6,610 crore ($959 million) through a combination of cash and allotment of its units.
This marks one of the biggest investments made this year by GIC, which is one of the most active sovereign wealth funds in India.
Among the recent ones, GIC increased its investment in Hyderabad-based renewable major Greenko Energy Holdings in July.
In May, GIC along with Indian Hotels Company Ltd, the operator of Taj luxury hotels, had signed an investment framework for about Rs 4,000 crore ($600 million) to acquire hotels in India.
In the same month, it also agreed to invest in India Grid Trust, an infrastructure investment trust, along with private equity firm KKR.
Earlier in March, GIC tied up with Tata Group and Hong Kong-based stressed assets investor SSG Capital Management to co-invest Rs 8,000 crore in GMR group’s airports business.
The portfolio of GIC’s transaction with IRB spans across 1,200 km in Haryana, Uttar Pradesh, Rajasthan and Gujarat, Maharashtra and Karnataka. Three of these projects have recently become operational and the remaining six are under various stages of construction.
IRB said five of the assets under construction are four- to six-laning projects, where tolling and construction has already begun. These projects are strategically located along economic corridors and across tourist hubs, the statement added.
The net revenue in the roads portfolio stood at Rs 630 crore in 2018-19. At the completion of construction, the enterprise value of the portfolio would be approximately Rs 22,500 crore.
GIC will be a long-term investor with IRB in the infrastructure sector. “IRB and GIC plan to also explore future road sector opportunities in India together through the private InvIT, exhibiting IRB’s strength and domain expertise as a market leader in Indian roads and highways sector,” said Virendra Mhaiskar, chairman and managing director of IRB.
IRB will have management control over these assets with GIC having standard/customary rights of a financial onvestor and corresponding board representation.
Bajaj Consultants Pvt. Ltd acted as the exclusive financial adviser to IRB for the transaction.
S&R Associates acted as legal adviser to IRB and Nishith Desai Associates acted as legal adviser to GIC.