Mumbai: Spanish infrastructure firm Abertis Infraestructuras SA has agreed to buy two operational toll road assets in south India from Macquarie Group Ltd for about Rs1,000 crore, said two people familiar with the development.
Abertis has signed a share purchase agreement to buy the two build, operate and transfer (BOT) toll roads, the Farukhnagar-Jadcherla highway in Andhra Pradesh and the Trichy Tollways project in Tamil Nadu, the two said on condition of anonymity as the talks are private.
Abertis’s bid beat an offer ranging between Rs700 crore and Rs800 crore for the two assets made by Tata Realty and Infrastructure Ltd (TRIL), one of the two people cited above said.
Mint first reported in June that Macquarie will sell its stakes in the two operational toll roads as it tries to deliver returns to its investors.
For Abertis, which is in the business of constructing, operating and maintaining toll-based highways, the deal in India would throw open a high-growth infrastructure market. The government had targeted awarding 25,000km of road projects in the current fiscal year, accelerating the construction of roads in an attempt to improve connectivity.
An Abertis spokesperson declined to comment, citing confidentiality agreements. Macquarie also declined to comment. TRIL did not respond to a query emailed on Thursday.
Selling operational road assets allows debt-ridden developers to reduce debt, private equity investors to offer returns to their investors, and long-term investors—such as pension funds—to buy revenue-yielding assets.
“We see the current environment as highly conducive for consolidation in the BOT space. With interest rates coming down and traffic growth picking up, we expect a surge in demand from developers/investors looking to acquire operational BOT projects with healthy financials,” PhillipCapital analyst Vibhor Singhal wrote in a 7 December report.
In 2009, Macquarie started its first infrastructure fund in India along with the State Bank of India, called the Macquarie-SBI Infrastructure Fund (MSIF). The fund, which planned to raise $3 billion, aimed at investing in infrastructure projects. SBI and Macquarie also jointly operate a domestic investment entity, SBI-Macquarie Infrastructure Trust (SMIT).
In 2013, GMR Infrastructure Ltd sold its 74% stake in the Farukhnagar-Jadcherla highway (GMR Jadcherla Expressways Ltd) to MSIF and SMIT for Rs206 crore. The 58-km project started operations in 2009 and had a total project value of Rs522 crore, according to the GMR website.
In the same year, the Macquarie funds bought a 74% stake in Trichy Tollways Pvt. Ltd, a joint venture project of Malaysia’s IJM Corp. Bhd and India’s Shapoorji Pallonji group, for about Rs275 crore. The 94km project has been operational since September 2009.
Abertis had looked at investing in the Indian roads sector during 2008 and 2009 but packed its bags soon after. It has road assets in 13 countries spanning about 8,000km and had revenue of €4.4 billion in 2015. As of November, the company had €31 billion of assets under management.