Highway Sector - Investment Scenarios Preferred Deal Structures in The Highways / Infrastructure Space

HIGHWAY SECTOR INVESTMENT SCENARIOS
Preferred Deal Structures in the Highways / Infrastructure Space
Investments in
Highway Sector
Financial Strategic
Investments Investments
Acquisition of Investment in Co-Investment in

Operational Holding Infrastructure
Assets Companies Buyout Fund
Recent Deals Acquisition of Operational Assets
Date Acquirer Acquiree Deal Size Transaction Overview

Jan-14 Uniquest Infra Navyuga Barwani Was jointly promoted by SEW & Navyuga
N.A.
Ventures Tollways Pvt. Ltd. Project is the 83km Khalghat to
MP/Maharashtra Border section of NH-3
in Madhya Pradesh
67% stake divested in line with
Concession Agreement
Project operationalized in 2011
Jan-14 New Generation Valecha INR 309 Acquisition of 3 operational road assets in
Infrastructure Inc Infrastructure Ltd Cr. Madhya Pradesh & Gujarat
& The 2 projects in Madhya Pradesh are
Valecha operational since 2012 and the 77km
Engineering Ltd project in Gujarat is under construction
Additionally, post transfer of shares for
the 3 projects, the Investor shall be
investing directly into the parent
company
Dec-14 I Squared Capital Jaipur Mahua INR 525 Developed by IJM Corporation of
Tollway Pvt Ltd Cr. Malaysia
Project is the 109km Jaipur to Agra
section of NH-3 with 25 years concession
Project operationalized in 2009
The project has been enjoying a 15%
annualized growth since COD
For private circulation only

Dec-14 Highway HCC INR 64 Cr. Highway Concessions One, an IDFC
Concessions One Alternatives held company acquired 74%
stake in Nirmal BOT with remaining 26%
stake to be acquired post NHAI consent
Nirmal BOT is a 30km annuity project
between Kadtall and Armur on NH-7
developed at a cost of Rs.315 Cr. and
operational since 2009
- Piramal Ramky N.A. Deal in advanced level of evaluation with
Enterprise Infrastructure a signed non
Deal comprised of taking 51% equity
stake and management control with an
investment horizon of more than 6 years
While the transaction has been in
diligence stage, the closure for the same
is still awaited.
- Piramal Supreme N.A. Evaluating acquisition opportunities for 2
Enterprises Infrastructure road assets in Maharashtra
Due diligence in progress with Kotak & SBI
Caps as bankers for the deal
Supreme expects a valuation of 1x Book
Value with proceeds to be used towards
servicing its debt obligations and working
capital requirements
Recent Deals Investment in Holding Companies
Date Investor Investee Deal Size Transaction Overview

Dec-14 Canada Pension L&T Infrastructure INR 1,000 Investment to be made in 2 tranches of
Plan Investment Development Cr. + INR approximately equal amount to be
Board Projects Limited 1,000 Cr. invested in a space of 12 months
FIPB approval received in Feb-14 for the
infusion of the funds through issue of
equity shares, CCPS and/or CCD
The first tranche of investment was made
in Dec-14 by way of subscription to CCPS

Recent Deals Co-Investment in Infrastructure Buyout Fund
Date Investor Co-Investor Deal Size Transaction Overview

Jul-14 APG Asset Piramal USD 1 Strategic alliance between both investors
Management Enterprises Billion by to jointly invest the funds spread over 3
each years
Investor The investment will be made equally and
jointly between both companies and held
on their respective books
Piramal shall also act as manager of
investments as well as sourcing and
recommending investment targets
The investment horizon is over 5 years
with return expectations between 17-21%
Recent Deals Strategic Investments
Date Investor Investee Deal Size Transaction Overview

Jan-15 Gammon Sadbhav INR 72 Cr. Gammon bought the 20% minority stake
Infrastructure Engineering held by Sadbhav in Mumbai Nasik
Proects Ltd Expressway Limited (MNEL)
MNEL is the SPV incorporated for the 4-
laning of the 99.50 km of the Vadape-
Gonde (Mumbai-Nasik) section of NH-3
Project was awarded by NHAI in Jun-05 to
a consortium of Gammon, Sadbhav &
Billimoria for a period of 20 years
Apr-15 Sadbhav Group HCC INR 204 Stake sale being done its existing
Cr. consortium partner for the project
Project awarded in 2009 to a HCC led
consortium comprising of Sadbhav and
John laing
Part of NH-3, the project achieved
commercial operations in Feb-12

Typical Investor List
Investment strategies adapted by most Investors are either outright purchase of assets or
investing in various holding companies or a mix of both.
Following are some of the large investors actively looking for investment opportunities:
o Uniquest Infraventures (funded by Khazanah Nasional Berhad, the Malaysian soverign
wealth fund)
o Highway Concessions One (funded by IDFC Alternatives with LPs & GPs comprising of
sovereign funds)
o I Squared Capital
o Piramal Enterprises & APG Asset Management, Holland
o Macquarie, Australia
o Kotak Infra Fund (funded by Sumitomo Mitsui Banking Corporation and JBIC of Japan and
Brookfield Asset Management of Canada)
o Canada Pension Plan Investment Board
o CDC, UK
o Japan International Cooperation Agency
o Ontario Teachers Pension Plan, Canada
o GIC Pte. Ltd., Singapore
Recent Government Initiatives
Introduction of Hybrid PPP model wherein the government shall share the construction risks by
bearing 40% of the construction costs as well as the revenue risks
Government has also launched the revised Model Concession Agreements for EPC Contracts as
well as OMT contracts to counter the slowdown in the bidding under the BOT model
Government setting a target for investments of up to INR 5 trillion by 2019 and building 30km of
highway per day
Budgetary allocation for the road sector raised by 33% by investing INR 45,751 Cr. for highway
development in FY 2015-16 (up from INR 34,345 in FY 2014-15)
Highway ministry can borrow a little over INR 40,000 Cr. to fund its development program
Introduction of the Electronic Toll Collection system across all highway toll plazas in a phased
manner with 350 stations to have systems in place by March 2015

Changes being introduced to the Land Acquisition Bill shall enable faster implementation of
greenfield & road widening works
Ministry is laying emphasis on building cement roads and is also looking to tie-up with various
cement suppliers to procure large quantities at competitive rates
Major Impediments in the Sector
Concessionaires need to take lengthy NHAI permits for various strategic & financial initiatives
which in turn impacts the transaction due to recurring delays
Similarly, delays in getting lender permits, especially in cases of leveraged buy-outs have
impacted the successful closure of transactions
Lack of clarity on giving 100% exit to the existing concessionaires is impacting the entry of various
specialized global toll road operators and financial investors
Limited availability of long tenure debt instruments from existing lenders is impacting the project
cash flows as the repayment liability is to be serviced within the first 12 15 years while
concession period could be for 20 years or more
Limited options for availing long tenure & low cost debt instruments such as tapping the retail
bond market or availing funding from various global pension funds
Sources:
www.vccircle.com
www.dealcurry.com
www.business-standard.com
www.moneycontrol.com
www.livemint.com

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HIGHWAY SECTOR INVESTMENT SCENARIOS

Preferred Deal Structures in the Highways / Infrastructure Space

Acquisition of Investment in Co-Investment in

Recent Deals Acquisition of Operational Assets

Date Acquirer Acquiree Deal Size Transaction Overview

For private circulation only

Recent Deals Investment in Holding Companies

Date Investor Investee Deal Size Transaction Overview

For private circulation only

Date Investor Co-Investor Deal Size Transaction Overview

Recent Deals Strategic Investments

Date Investor Investee Deal Size Transaction Overview

For private circulation only

Recent Government Initiatives

For private circulation only

Major Impediments in the Sector

For private circulation only

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