IDFC Project Equity, Ashok Piramal Group, SNC-Lavalin In $250M Tie-up

December 12, 2011

Ashok Piramal Group (APG), India Infrastructure Fund (a fund managed by IDFC Project Equity) and Canada’s SNC-Lavalin have entered into a tripartite arrangement to develop, own, construct and operate public-private partnership (PPP) road projects in India through a joint venture, the companies said in a statement today.

“The total deal value is in the range of $250 million-$300 million,” M.K. Sinha, president & CEO, IDFC Project Equity, told VCCircle.

In terms of shareholding pattern, APG-controlled Piramal Roads Infra Private Limited (PRIL) will hold 51 per cent equity stake, IIF will hold 39 per cent while SNC-Lavalin will own the balance 10 per cent.

PRIL, formed by APG as part of the group’s initiative to pursue opportunities in the infrastructure sector, is currently developing a road project in Madhya Pradesh.

Commenting on the JV, Ashok Piramal Group’s vice-chairman Rajeev Piramal said, “The group has been focused on growth and has been looking to diversify from its existing business. Our goal is to be among the leading infrastructure players in India by 2015.”

IIF, a fund floated by IDFC Project Equity, is a private sector infrastructure equity financer with an existing portfolio of seven road assets, along with its other investments in the energy, ports and urban infrastructure sectors. SNC-Lavalin is among the world’s largest engineering and construction groups and has been active in the infrastructure sector in India for more than 50 years.

According to MK Sinha, president & CEO of IDFC Project Equity, each of the three partners brings together complementary skills and capabilities. “The objectives and expectations of all three partners from this JV are such that they align our interests perfectly well. Also, this initiative is in line with our fund’s long-stated strategy of having a firm, long-term partnership arrangement to build a diversified portfolio of operating and under construction road assets.”

“The idea is to build a portfolio of road projects in excess of $1 billion over the next 3-4 years,” added Sinha. The asset management firm has already committed about $130 million into roads as part of its portfolio.

“It’s an annuity stream once the first dividend cheque comes in. We could package it and sell our fund as a listed fund. Our investment horizon is typically much longer (7-8 years), unlike private equity (3-5 years),” he said, while specifying the terms of providing liquidity to its investors.

In 2008, IDFC Project Equity, an IDFC subsidiary, raised the $930 million India Infrastructure Fund to invest in ‘core’ infrastructure assets.

There have been a slew of big private investment deals in the Indian roads and highways space as investors look to tap the infra opportunities. India may require $1.7 trillion during 2010-20, to meet the country’s overall infrastructure demand and keep pace with the economic growth and urbanisation, a report by Goldman Sachs has stated. Of this, power and roads alone may require upwards of $700 billion.

In another equity partnership for investment in roads, Morgan Stanley Infrastructure Partners and Isolux Corsán Concesiones announced an investment of $200 million each for developing highways in India under long-term concession agreements, awarded through the build-operate-transfer (BOT) programme of NHAI.

Most recently, HCC Concessions Ltd (which has six NHAI concessions) diluted 14.5 per cent stake to US-based investment firm Xander Group for Rs 240 crore.

Private equity major 3i Group has also invested $111.51 million in KMC Infratech Ltd, a subsidiary of KMC Constructions involved in BOT projects in the roads and highways sector. Other major investments in this space have been in Nandi Infrastructure Corridor Enterprises Ltd (JPMorgan) and Tata Realty & Infrastructure (Actis).