Carnival Group, promoted by Shrikant Bhasi, is on a buying spree.
Mumbai-based Carnival Group on Wednesday agreed to buy the commercial real estate projects of Larsen and Toubro Ltd (L&T) in Chandigarh for $275 million (Rs.1,785 crore).
“This acquisition is a part of asset creation for the group as an investment portfolio. This acquisition will help us to further expand our capabilities and allow us to make inroads into newer markets. This project will be operated as a separate unit and will be led by its current India-based management team,” said Bhasi, chairman of Carnival Group.
Last month, Carnival Group had acquired Leela Infopark at Technopark in Thiruvananthapuram for Rs.142 crore. It was the second such acquisition by the Carnival Group, which took over the IT infrastructure of Leela Group in Kochi in July 2014 for Rs.280 crore.
There is more in store.
In July 2014, Carnival Group acquired HDIL’s Broadway forRs.110 crore.
“This project has got a good rental yield.” A.C. Dinesh, director of finance, Carnival Group, said referring to the Chandigarh deal.
This property has Elante mall with its retail space of over 1.5 million.sq. ft., the largest in Chandigarh. Elante has an entertainment zone with multiplex and food court that caters to its customers spread across 20 acres.
L&T’s sale of its non-core assets comes at a time when Indian companies, especially infrastructure developers, are selling assets.
In 2014-15, the total consolidated debt of L&T stood atRs.90,698.61 crore.
Indian companies will continue with such sales to deleverage their balance sheets as cash flows are not happening at this point of time, said Ajay Garg, managing director at domestic investment bank Equirus Capital Pvt Ltd.
“The asset sales are expected to continue. And it is buyers’ market,” Garg said.
A slump in economic growth, declining consumer demand, delays in securing statutory approvals and non-completion of land acquisition have stalled dozens of infrastructure projects, including highways and power plants, in India in recent years.
That has squeezed corporate cash flows, making it difficult for developers to repay debt, and led to a pile-up of bad loans in the banking system.
Early this month, Gammon Infrastructure Projects Ltd sold nine projects—six roads and three power plants to BIF India Holdings Pte Ltd—an entity controlled by Canada-based Brookfield Asset Management Inc. and Core Infrastructure India Fund Pte Ltd, an India-focused infrastructure fund managed by the Singapore branch of Kotak Mahindra (UK) Ltd.
On 8 September, Jaiprakash Power Ventures Ltd said it had concluded the sale of two hydropower projects to JSW Energy Ltd in a deal valued at Rs.9,275 crore, less than the originally agreed Rs.9,700 crore. The company said it has also signed an in-principle agreement with JSW Energy for the sale of a thermal power plant.
These transactions could mark an acceleration of deal-making in the Indian infrastructure sector, including power plants and roads.
Sellers are on a weak wicket in negotiating deals as a number of them have high debt and limited options for further fund-raising. Banks, which have so far kept these companies afloat, are also getting tough as they try and clean up their own books, leaving some companies with no choice but to sell assets.