The National Investment and Infrastructure Fund (NIIF) and its joint venture partner Roadis are close to buying two road projects from Essel Infraprojects, wholly owned by Subhash Chandra’s debt-laden Essel group, in a deal valued at an estimated ₹1,500-1,800 crore, said two people aware of the discussions.
Mint reported in August that the Essel group had begun talks with NIIF, India’s sovereign wealth fund, and Roadis to sell part of its road portfolio after discussions with Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest pension fund manager fell through last summer.
Essel had previously agreed to sell three of its road projects to CDPQ at an enterprise value of ₹3,300-3,500 crore.
NIIF-Roadis came into the picture in July, evaluating Essel’s portfolio of assets, particularly toll roads in Karnataka (the Navayuga Devanahalli Tollway near Bengaluru airport, a national highway), Telangana (Essel Dichpally Tollway, a state highway) and in Madhya Pradesh (the Lebad-Jaora state highway). While the deal is close to being signed now, NIIF has trimmed the final asset count for the deal to just the first two.
Discussions with the Essel group began soon after NIIF and Roadis created a joint platform last April that would invest in road projects in India.
Roadis is a subsidiary of the Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension funds. This joint venture plans to invest up to $2 billion as equity in public roads in India by targeting toll-operate-transfer models and acquiring existing road concessions and investment opportunities in the roads sector.
Essel Infraprojects has 14 road projects in its portfolio, of which six are under the hybrid annuity model (HAM). Last year, the company had placed six road projects, two operating transmission lines and solar power assets on the block to repay the bulk of Essel group’s debt. So far, the company has sold a part of its solar power portfolio and two transmission lines to investors.
The Essel group plunged into a payment crisis last year, piling up debt of ₹16,237 crore in various group companies and a further ₹13,000 crore borrowed by promoters. Through last year, promoter Subhash Chandra sold several chunks of his holding in Zee Entertainment Enterprises Ltd, the group’s flagship media company, to avoid defaulting on loans.
The deal comes at a time when private investors in the roads sector have turned cautious. After witnessing four consecutive years of healthy project awarding activity, the National Highways Authority of India reported lowest-ever awards in FY2019 at 2,222km, and the weak trend continued through the first half of FY2020. Credit rating agency Icra has estimated that 2020 will be a year of muted road awards as well, because of procedural delays in awarding new projects and weak private sector interest.
This article was first published on livemint.com