Cube Highway, CPPIB, Brookfield in race to buy Reliance Infra road assets

Road asset sale to reduce Rel Infra debt by Rs 2,000 cr

Leading international investment funds, including Cube Highways, Brookfield, and Canada Pension Plan Investment Board (CPPIB), have joined the race to buy three road assets of Reliance Infrastructure at a valuation of Rs 2,000 crore.

According to investment banking sources, Reliance Infrastructure has put on the block Pune Satara toll road (PS toll road) in Maharashtra, and Hosur-Krishnagiri toll road (HK toll road) and Salem-Ulenderpet toll road (SU toll road) in Tamil Nadu. Total length of the three toll roads is around 350 km.

The combined debt involving these three toll road assets is Rs 2,000 crore. Hence, with the successful closure of these transactions, Reliance Infrastructure’s debt will come down by Rs 2,000 crore, said a banker. Reliance Infrastructure's total debt was Rs 6,000 crore as on March this year. 

When contacted, a Reliance Infrastructure spokesperson said: “We are fast-tracking the monetisation of our road assets to make the company debt free.”

Bankers said the three road assets are operational and the company is collecting toll via them, thus making these assets attractive for investors.

PS toll road, with a 17-year concession period still left, has an annual revenue of Rs 500 crore and Ebitda (earnings before interest, tax, depreciation, and amortisation) of Rs 350 crore.

HK toll road, with a 15-year concession period left, witnesses an annual revenue of Rs 250 crore and Ebitda of Rs 225 crore.

SU toll road, with a 10-year concession period left, has an annual revenue of Rs 150 crore; its Ebitda is Rs 125 crore.

If successful, this will be the second major road infra monetisation by Reliance Infrastructure. The company sold its Delhi-Agra toll road to Cube Highway for over Rs 3,600 crore in January 2021.

Reliance Infrastructure currently has a total portfolio of nine operational road projects with total length of over 700 km.

Road projects have been attracting investors' attention of late. On June 16, IndInfravit, the infrastructure investment trust (InvIT) of Larsen & Toubro, said it completed the acquisition of four operational road projects managed by Brookfield Asset Management in an all-cash transaction valued at Rs 8,270 crore.

Earlier this month, Adani Enterprises called off plans to acquire Macquarie group’s two road companies at an enterprise valuation of Rs 3,100 crore.

Bankers said the absence of Indian companies in the acquisition race has given an opportunity for foreign investors to acquire Indian infrastructure projects. Top officials of American private equity giants Blackstone and KKR have said in the past that they were keen to invest in Indian infrastructure projects which give good returns.

In April, Cube Highways and Infrastructure (Cube), a Singapore-based company investing in road and highway projects, raised Rs 5,226-crore through a privately placed InvIT.

Through the InvIT, Cube has raised Rs 3,803 crore in fresh capital. The remaining Rs 1,423 crore came from a secondary share sale by Cube, which is backed by I Squared Capital, a wholly-owned subsidiary of the Abu Dhabi Investment Authority, International Finance Corporation, and a consortium of Japanese investors. The InvIT has an initial portfolio of assets that comprise 18 road assets, aggregating 1,424 km, located across 11 states in India.