PE players make a beeline for road projects
Having harrowing experience by opting for big ticket power projects, private equity (PE) players, are increasingly turning to the road projects with minimum risk factor. A case in point is that of Morgan Stanley Infrastructure Partners, a $4-billion global infrastructure fund, is currently negotiating with infrastructure building giant Lanco Infratech to buy its 401 km of highway projects currently in various stages of construction and are up to grab. Apart from this, scores of other infra-focused PE firms are also carrying out due diligence for Lanco's road assets where valuations are in the range of Rs 1,000-1,200cr.
According to reports emanating from various sources, Ernst & Young is acting as the advisor to Lanco in the ongoing sale process.
However, official spokespersons in both the companies remained tight lipped and refused to disclose any information about the ongoing deals. In a latest development, Morgan Stanley Infrastructure Partners entered into a joint venture with Spanish company Isolux Corsán to invest in road projects with a plan to contribute $200 million each to the joint venture. Market watchers in the field widely believe India's highways sector is ripe for private-equity funding. There are close to $10-billion worth of completed road assets in the market for sale and most of these assets (on build-operate-transfer mode) are post-2006 vintage, which have been picked up in aggressive bidding with low returns (IRR), said sources. In the Indian road sector about 15 deals worth $1 billion have taken place with the size of investment, at $693 million, took place in 2011. During the beginning of the current year 2012, PE firm 3i invested Rs 300cr ($61 million) for a 49% stake in the portfolio of road BOT projects of Supreme Infrastructure India Ltd.
According to reports emanating from various sources, Ernst & Young is acting as the advisor to Lanco in the ongoing sale process.
However, official spokespersons in both the companies remained tight lipped and refused to disclose any information about the ongoing deals. In a latest development, Morgan Stanley Infrastructure Partners entered into a joint venture with Spanish company Isolux Corsán to invest in road projects with a plan to contribute $200 million each to the joint venture. Market watchers in the field widely believe India's highways sector is ripe for private-equity funding. There are close to $10-billion worth of completed road assets in the market for sale and most of these assets (on build-operate-transfer mode) are post-2006 vintage, which have been picked up in aggressive bidding with low returns (IRR), said sources. In the Indian road sector about 15 deals worth $1 billion have taken place with the size of investment, at $693 million, took place in 2011. During the beginning of the current year 2012, PE firm 3i invested Rs 300cr ($61 million) for a 49% stake in the portfolio of road BOT projects of Supreme Infrastructure India Ltd.
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16 June 2012