Cube, Actis, KKR, Sekura in race to buy nine Macquarie road projects

Transaction to cost up to $1 bn; valuation muted due to tightening of interest rates, says banker

A host of private equity and infrastructure investment firms are in the race to buy nine highway projects put on the block by Sydney-based Macquarie Group.

Cube Highways, Sekura Infrastructure Fund of Edelweiss Group, and private equity firms Actis and KKR have expressed their initial interest in buying the projects, which could cost as much as $1 billion.

The 680-km projects are in Andhra Pradesh and Gujarat, said a banker. “The talks are in the preliminary stage, and Macquarie is in talks with potential buyers,” said the banker. “Due to tightening interest rates in India and the slowdown in traffic due to Covid-19 pandemic, the road assets are not getting a goodvaluation,” the banker said.

An email sent to Macquarie on Friday did not elicit any response. KKR, Cube Highways, Actis, and Edelweiss did not comment.

Macquarie Asset Management has been one of the earliest infrastructure investors in India. Last year, it sold its 56.8 per cent stake in Gujarat toll roads portfolio and 100 per cent in Andhra Pradesh toll roads portfolio to the Adani group at an enterprise valuation of Rs 3,110 crore. The portfolio of 972-km of lane sold to Adani had a long concession life with established traffic in strategically located traffic corridors in western and southern India.

In March 2018, Macquarie won the rights to manage 648 km of national highways with a bid worth Rs 9,681 crore in an auction conducted by the National Highway Authority of India (NHAI). The concessionaire was awarded a 30-year operations and maintenance contract by the NHAI with toll collection rights. It has now sought bidders for the companies managing these assets. Five of these road projects are in Andhra Pradesh while the rest are in Gujarat.

Macquarie declined to comment to the email sent.

The nine special-purpose vehicles are part of the first toll-operate-transfer package awarded by the NHAI in March 2018.

Last week, KKR acquired Hyderabad-based Navayuga group’s 75-km toll road between Kundapur and Udupi at an enterprise valuation of Rs 924 crore. The Navayuga Udupi toll road also operates a shorter 15-km stretch between Mangaluru and the Kerala border. In June last year, Actis acquired Welspun’s six road projects for Rs 6,000 crore. 

According to rating firm India Ratings, after two consecutive years of depressed margins due to the pandemic, road projects are expected to recover in the financial year 2023-24 by around 100 basis points as new contracts with revised pricing are executed. But the pace of margin recovery in the roads segment is likely to be slow, given the continued competitive intensity.
 

On The Block
 

The nine projects were awarded to Macquarie by NHAI in 2018
 
Negotiations on valuation currently underway
 
Macquarie sold two road projects to Adani last year
 
Toll collection of road projects expected to recover in FY24 after Covid-19 disruption