Essel Infra's search ends, gets 4 non-binding offers for road assets

Industry experts remain skeptical of infra M&A deals

From being the holding company for an amusement park to a full-fledged presence in the infrastructure sector, Essel Infraprojects has come a long way, but now it is time to sell. 
 

The company, which was been in the market looking for a buyer for its assets for more than year now, said it had received four non-binding offers for its road assets.

“Essel Infra confirms the on-going discussions with all the prospective buyers in the ecosystem, pertaining to the divestment of its road portfolio. The company has already received four non-binding offers from the prospective buyers and is in the process of short-listing buyers who will be provided an opportunity to proceed,” said an Essel Group Spokesperson.

With road projects worth Rs 1 trillion looking for a buyer, industry experts point out it is a tough market for anyone to sell infrastructure assets. 

“Buyers are now willing to pay much less than what was offered a year back. There seems to be a change in the traffic projections that these companies are working out M&A decisions on, with traffic growth now expected to be lower,” said a senior rating agency official.
 

An IDFC Research report put Essel Infra’s road portfolio at Rs 9,200 crore, which includes seven operational and three under construction projects. 

“There is large number of assets in the market looking for suitable buyers at acceptable valuation. Besides, this Government itself is offering brown field assets through competitive bidding through TOT model in roads, second tier airports. With limited number of buyers in the market, it has become buyer’s market. As a result, sellers are finding it difficult to close the deals,” said Vishwas Udge­rikar, Partner, and Deloitte India. He pointed out amongst those looking to monetise assets is National Highways Authority of India (NHAI) with its toll operate transfer (TOT) model. The response to NHAI’s second round of TOT bidding was also tepid. 

Some estimate the combine length of such projects to be 10,000 km, with the cost involved in developing a road project ranging up to Rs 10 crore per km depending on the number of lanes.
 

In a bid to monetise its assets, Essel Infrastructure managed to strike a deal with Edelweiss Infrastructure Yield Plus fund backed Sekura Energy for two operational and two under-construction transmission projects in October last year. The Essel Infra spokesperson added, “Some of the customary regulatory and lender approvals have been received. Once all pre-closing conditions are met, the closure of the transaction will occur.” An email query sent to Edelweiss requesting status of the deal remained unanswered.

Part of its power portfolio includes seven operational solar assets and 15 under construction solar assets valued in the range Rs 3,400-4,000 crore, according to IDFC. 
 

According to people in the know, the Essel group has also been on the lookout for a buyer for its power distribution business. “They were in the market earlier, however, not much translated into a deal,” said a person with knowledge on the development on condition of anonymity. The company runs power distribution in Nagpur and Muzaffarpur circles under the franchise model.