IDFC Private Equity, an infrastructure-focused private equity firm, is close to investing $30 million into GVR Infra Projects – a Chennai-based infra project management company. Sources close to the development add that this investment values the company at about Rs 700-Rs 750 crore or about 11 times its FY11 earnings. The private equity firm has already completed the due diligence process on the company and the deal is in the final documentation stage.

Veda Corporate Advisors, a Chennai-based investment bank, is running the mandate to the deal. However, an e-mail message sent to a GVR Infra spokesperson did not elicit any response till the time of writing this article. Also, S.G. Shyam Sundar, senior managing Director of IDFC Private Equity who is front-ending the transaction, did not reply to an e-mail query till the time of publishing the news.

GVR Infra Projects Ltd was originally incorporated in 2001 as GVR Construction Pvt Ltd by civil engineer and first-generation entrepreneur G. Venkateswara Rao, chairman of the GVR Group, and K. Ganga Prasad, managing director of the company. According to the information available, the company recorded an annual turnover of Rs 800 million in 2004 and achieved a turnover of Rs 2224 million by 2007. The infrastructure services company had an annual turnover of Rs 4210 million during FY 2007-2008 and Rs 6280 million during 2008-2009, according to its website.

A few projects that the company plans to undertake are infrastructure projects including road sector and port sector projects in Gujarat, Maharashtra, Orissa, Tamil Nadu, Andhra Pradesh and Karnataka; BOT and Annuity Road Sector Projects under the NHAI in Andhra and Karnataka; civil works in the power projects across Uttar Pradesh and Chhattisgarh; setting up of mini hydel projects in Himachal, Sikkim, Arunachal Pradesh and Uttranchal; setting up a 1200 MW thermal power project in Tamil Nadu; port development project at Jaffrabad, Gujarat; integrated logistics complex in north Chennai and building works and other civil works in major PSUs and private entities.

This deal comes after the infrastructure-focused PE firm made gains in Ashoka Buildcon, another infra ancillary unit engaged in building and operating roads and bridges in India, which got listed in October, 2010. IDFC PE-backed infrastructure developer Ashoka Buildcon opened with a modest 5.5 per cent premium to its issue price of Rs 324 and is trading at a level which is 7 per cent premium to the issue price. This gives IDFC PE unrealised gains of around 2.5x on its four-year-old investment of Rs 100 crore in the construction firm.

Action In ‘Infrastructure Enablers’

With infrastructure slated for high growth and PE funds typically picking up minority stakes in the companies (they are unable to make investments in the core infrastructure owing to their ‘growth equity’ nature), a lot of PE action has been seen in the ancillary infrastructure space or ‘infrastructure enablers,’ as they are generally called.

NYLIM Jacob Ballas India Fund III, LLC, a Mauritius-based private equity vehicle dedicated to India, infused Rs 152 crore into SEW Infrastructure Ltd, an engineering, procurement and construction (EPC) company located in Hyderabad. Axis Private Equity already has investments of Rs 126 crore in Delhi-based railway line manufacturer Harish Chandra India Ltd (HCIL) and Rs 60 crore in Vishwa Infrastructures and Services, which executes projects in the water supply and sanitation sector.

Clearly, deals are coming back especially where infrastructure is the central theme.  According to analysts, while the government has announced plans for infrastructure investment of $1 trillion over FY12-17 (2x the amount for FY2007-12), it needs to fill critical gaps in planning, policies and procedures before such magical numbers can be hit. Incidentally, about 50 per cent of this $1 trillion will be met by private sector schemes.

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