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Mergers and acquisitions in the road sector in the last 12 months are likely to continue at the same or higher pace, according to consultancy firms and investment bankers.
Buyers may also have greater choice as more projects turn operational.
According to industry estimates, asset sales in the road sector, which picked up over the past 15 months, involved Rs 6,500 crore of projects.
“The pace of execution is increasing and as more projects become operational, M&A activity should pick up,” said Shubham Jain, vice-president, ICRA Ratings. He estimates 18 road assets totalling 1,888 km and involving a cost of Rs 30,457 crore are on the block.
According to the National Highways Authority of India, 22 new projects were completed between April 2015 and October 2016. The projects that will be up for sale include those that recently started operations and the figure could be as high as 30.
“Stalled projects are likely to be restarted and M&A activity is expected to rise,” said Manish Sharma, partner, and Vikash Sharda, director, infrastructure, PwC India.
The 2016 deals include IL&FS Transportation Networks’ sale of the Andhra Pradesh expressway to Cube Highways and Infrastructure and Spain’s Abertis buying stakes in Trichy Tollways and Jadcherla Expressway.
“Acquisitions will continue due to deleveraging and also the need to free up equity to invest in newer projects. The toll-operate-transfer model will also provide a new avenue for financial investors,” said Bhavik Damodar, partner, deal advisory, KPMG India.
Some companies that could not conclude deals are toying with the infrastructure investment trust option. “These provide a good platform for infrastructure companies to divest their stakes in projects,” said Jain.
“The infrastructure investment trust market will be more suitable for annuity projects, which constitute 20 per cent of the assets on sale. The M&A market will provide more value to traffic-linked tolling assets,” said Ashish Agarwal, director, infrastructure, Equirus Capital.
