Infrastructure Leasing & Financial Services Ltd (IL&FS) is selling its stake in a Chinese road builder to a fund managed by Ping An Insurance, as the financially troubled non-bank lender continues to offload its assets to repay its debts.
IL&FS said in a statement it has received approval for the deal from retired Justice DK Jain, who is overseeing the company’s asset sales after the infrastructure developer and financier collapsed two years ago.
The company, through a unit of IL&FS Transportation Networks Ltd, owns a 49% stake in Chongqing Yuhe Expressway Co. Ltd (CYEC). The balance 51% stake in CYEC is held by Chongqing Expressway Group. CYEC holds a concession for a toll-based expressway of 58.72 km in China till 2032.
IL&FS will sell its stake to PingAn Infrastructure Phase 1 Equity Investment Fund (Tianjin) Co. Ltd.
Ping An had bid for the IL&FS stake at an equity valuation of $281 million for 100% of the road developer. This values the 49% stake of IL&FS around $138 million (Rs 1,020 crore). Ping An will also take over the Rs 1,600 crore debt in CYEC as of October 2018. This means the deal will help IL&FS address nearly Rs 2,600 crore of its debt.
The sale is part of the infrastructure major’s efforts to address a total debt of over Rs 99,000 crore by selling assets across sectors or restructuring and winding down certain units.
Ping An Insurance is one of the largest financial services companies in the world. It is ranked 21st on the Fortune Global 500 list. The company is listed on the stock exchanges in Hong Kong and Shanghai.
IL&FS asset sale
IL&FS Transportation has 28 road projects under the build-operate-transfer model, of which 21 are operational and the remaining under construction.
In October 2018, soon after IL&FS collapsed, the road unit began talks with Cube Highways and Infrastructure Pte Ltd to sell some of its road projects. At the time, people aware of the development said the toll-road assets were valued at $1.2 billion. It invited expressions of interest to sell its road assets in December 2018.
Earlier this month, Cube Highways got Justice Jain’s approval to acquire Chenani Nashri Tunnelway Ltd from IL&FS for Rs 3,900 crore. It also received Jain’s approval to sell Jorbat Shillong Expressway Ltd to Sekura Road Ltd for Rs 916 crore.
Apart from the sale of these two assets, IL&FS has received in-principle approval from the Securities and Exchange Board of India to form an infrastructure investment trust (InvIT) for 11 road assets.
IL&FS Transportation’s other past deals include selling a part of its stake in two road projects to Delhi-based Oriental Tollroads Pvt. Ltd in October 2017. In August 2016, the company agreed to sell an 86.74% stake in Andhra Pradesh Expressway Ltd to Cube Highways for Rs 140.37 crore ($21 million).