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21
September 2016
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| nationalhighway (The Total Investment & Insurance Solutions) |
Investors are looking to pick up
stake in projects worth Rs24,500 crore of completed highways, with an average
of six years of operational history, estimates India Ratings and Research
(Ind-Ra). Ind-Ra, based on publicly available information as well as further
limited information received from issuers, notes that the list of sellers or
potential sellers include companies like HCC Concessions Ltd, NCC
Infrastructure Ltd, Soma Enterprises Ltd, Reliance Infrastructure Ltd and GMR
Infrastructure Ltd. The Total Investment & Insurance Solutions
The agency notes that there has been
a paradigm shift in the acquisitions - from developers to financial investors.
"We believe that this is a positive shift and it will give impetus and
provide opportunities for the opening up of businesses in the operation and maintenance
vertical," it said in a research note. The Total Investment
& Insurance Solutions
The Indian highway sector is
witnessing an enhanced level of activity in the acquisition space, largely led
by global marque funds and investors namely, I Squared Capital, Brookfield
Asset Management, PSP Investments and Macquarie's India Infrastructure Fund
among others. These international funds have picked up stake or are in advanced
stages of acquisition of around 2,900km length of national and state highway
projects. Similarly, domestic financial investors namely, IDFC India
Infrastructure Fund and other infrastructure companies such as, Tata Realty and
Infrastructure Ltd have made a mark by showing interest in deals of around
780km length of highways. With Infrastructure Investment Trusts gaining traction,
Ind-Ra says it believes highways, as an asset class will further evolve and
will set benchmarks.
Road projects worth over Rs40,000
crore, spanning around 3,600km, have either been sold off in the last three
years or are currently in the process of being divested. "This recent
increase in investor appetite could well be sustained, with reports doing the
rounds that the government is working towards clearing the roads to provide
access for global sovereign wealth funds to invest into private highway
projects," the ratings agency says.
The ratings agency believes that the
National Highway Authority of India's (NHAI) 100% exit policy, which was
cleared in mid-2015 and road developers bid to deleverage their balance sheet
have both aided the momentum in the last year. The Total Investment
& Insurance Solutions
A study of the deals shows that out
of a total of 40 deals, including the ones in the pipeline, only five projects
have been or are likely to be acquired by another corporate house, while
institutional investors mostly account for the balance. Barring one project,
all the projects have operational history of over six years, which could well
be one of the reasons for investors evincing interest, since such projects
reveal actual traffic potential. National highways and toll road projects are
the most in-demand projects, around 94% of highway projects in the fray are
national highway projects and around 87% of the projects are toll-based
projects, which normally have a higher potential of giving returns to the
acquirer.
Ind-Ra estimates that deals which
are yet to be sealed have a debt size of over Rs16,400 crore. The activity
pipeline has been abuzz in the last three years and Ind-Ra estimates that the
highway sector has witnessed transactions of around Rs11,100 crore in debt,
during February 2013-June 2016.The Total Investment & Insurance
Solutions
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