Infrastructure Finance Update, April 2021

The companies from the infrastructure sector are likely to report decent earnings for the quarter ended March 2021 driven by a sharp recovery in the pace of execution and improved efficiency. The brokerage house expects infrastructure companies to report around 16 percent YoY blended revenue growth and aggregate absolute revenue from operations of around Rs 16,700 crore. Mid-double-digit YoY revenue growth would be the result also of the benign base, owing to the COVID-kicked-off disruption in March 2020.

Private equity investment in real estate rose 19 per cent last fiscal year to USD 6.27 billion despite the COVID-19 pandemic, driven by increased interest from foreign investors, according to property consultant Anarock. Anarock Capital in its latest report ”Flux – FY20-21 Market Monitor for Capital Flows” highlighted that despite COVID-19, more than USD 6.27 billion were pumped into the sector in FY”21, as against USD 5.8 billion in FY20. Unlike earlier years, the fiscal year 2020-21 saw private equity investors focus majorly on portfolio deals across multiple cities and assets, rather on specific projects or cities, the report said. Such portfolio deals constituted 73 per cent of the overall share, with approx. USD 4,583 million invested via portfolio deals in multiple cities. The average ticket size of PE deals rose by 62 per cent in the fiscal year – from USD 110 million in FY20 to USD 178 million in FY21.

Realty firm Prestige Estates Projects has formed a joint venture with Century group to develop an office park in Bengaluru with an estimated construction cost of around Rs 900 crore. Prestige Estates, one of the leading real estate firm in the country, plans to develop around 2.5 million sq ft of space in this park. Century group owns around 16 acre of land through two special purpose vehicles (SPVs).  Prestige group has acquired stakes in these two SPVs. It has picked up 45 per stake in Century Megacity and 55 per cent stake in Century Landmark.

In the sector of roads and highways, Union Minister Nitin Gadkari suggested to major highway builders and private companies to look into the option of floating an infrastructure finance fund or non-banking financial company to fund road projects.  Replying to a query at a virtual event organised by industry body Assocham, Gadkari said only big contractors who are financially strong and have good relations with banks are getting funds. He also pointed out that the Indian Railways has got the Indian Railway Finance Corporation (IRFC), the power ministry has the Power Finance Corporation (PFC) but the highways ministry does not have a financial arm to provide support to the contractors.

Adani Enterprises won Rs 1,169.10 crore highway project in Odisha from the National Highways Authority of India (NHAI). The contract has been won by Adani Enterprises’ wholly-owned subsidiary Adani Road Transport Ltd (ARTL) and the construction period is two years. It said the group would use its immense expertise and experience of setting up complex and mammoth infrastructure projects in record time and to world-class quality standards and also successfully operating them. With this project award, Adani Group will have a total of 10 NHAI road projects under HAM, Toll-Operate-Transfer (TOT) and Build-Operate-Transfer (BOT) Toll basis in Chhattisgarh, Telangana, Andhra Pradesh, Madhya Pradesh, Kerala, Gujarat, West Bengal and Odisha.

The National Highways Authority of India (NHAI) also filed draft papers with markets regulator Sebi for floating an Infrastructure Investment Trust (InVIT) through which it seeks to raise Rs 5,100 crore. The units are proposed to be listed on the National Stock Exchange and the BSE. ICICI Securities, Kotak Mahindra Capital Company and SBI Capital Markets have been appointed as merchant bankers to the issue.

An arm of IL&FS has received Rs 1,804 crore as claim settlement for across six road projects from the National Highways Authority of India (NHAI and Ministry of Road Transport and Highways. This will help the subsidiary address its Rs 3,500-crore debt. IL&FS Transportation Networks (ITNL), a subsidiary of IL&FS, on March 31, 2021, received a settlement amount of Rs 673 crore for Kiratpur Ner Chowk Expressway (KNCEL) and around Rs 20 crore towards claims for Chenani Nashri Tunnelway (CNTL) from NHAI. The KNCEL project was foreclosed under the ministry of road transport and highways guidelines of March 2019 for incomplete or stalled projects. According to the ministry’s guidelines in March 2019, for incomplete or stalled projects, authorities would be able to foreclose the project’s concession agreement.

The National Highways Authority of India (NHAI) said it has made deployment of Network Survey Vehicle (NSV) mandatory to ensure better quality of roads. NSV uses high resolution digital camera to capture 3,600 imagery, record images/videos at regular intervals, laser road profilometer and other related technology for measurement of distresses in road surface. The statement said NSV will also help to collate data to analyse the road condition including measurement of the road surface, surface cracking, potholes and patches. It will highlight deficiencies in road conditions, prompting BOT (build, operate, transfer) operators/NHAI officials to take corrective steps to bring the road condition to the desired level. The data collected through NSV survey shall be uploaded on NHAI’s AI based portal Data Lake, where it will be analysed by Road Asset Management Cell (RAMS Cell) to assess the condition/roughness of the road to prioritise for the maintenance.

Adani Ports and Special Economic Zone has bought rest 25% stake in Adani Krishnapatnam Port from Vishwa Samudra Holdings for Rs 2,800 crore. A statement said that, together with the 75% ownership acquired in October 2020, the acquisition implies an enterprise value of Rs 13,675 crore implying an EV/FY21 Ebitda multiple of 10.3x. Krishnapatnam Port is an all-weather, deep water port with a current capacity of 64 million tonne per annum (mtpa). With a waterfront of 20 km and 6,800 acres of land, it has a master plan capacity of 300 mtpa and a 50-year concession.

In private equity sector, Blackstone Group Inc. offered to take a controlling stake in Indian IT outsourcing services provider Mphasis Ltd. in a deal worth as much as $2.8 billion, as demand for cloud computing surges amid the pandemic. A wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA), UC Investments and other long-term investors will co-invest along with Blackstone. They’re buying a 55.31% stake from Blackstone Capital Partners VI fund. The agreement triggered an open offer for an additional 26% stake in the Indian firm at 1,677.16 rupees apiece, which amounts to as much as 82.6 billion rupees ($1.1 billion).

Global private equity major Warburg Pincus has picked up a controlling stake in folding carton manufacturer Parksons Packaging by buying out the existing private equity investors, Kedaara Capital, Olza Holdings and IIFL, for an undisclosed amount. The transaction is through Green Fin Investments BV, an affiliate of Warburg Pincus, an entity focused on growth investing. The deal also included the promoters, the Kejriwal family, selling a part of their stake in the company.

Kotak Investment Advisors (KIA) the $4.7 billion asset manager of the Uday Kotak led group is firming up plans to launch $800 million infrastructure fund which will invest in projects across India. The plans for a new fund are even as the $1 billion Kotak Special Situations Fund (KSSF), an investor in distressed assets is likely to complete 75% of its investments by December 2021. The new fund will be ESG (Environmental, Social and Governance) compliant and not invest in thermal power. Money will be raised from domestic as well as institutional investors worldwide. This is Kotak’s second infrastructure fund. The company had raised a $90 million fund in partnership with Sumit.

In digital infrastructure, Morgan Stanley India Infrastructure has acquired a stake in iBus Networks for $21 million (around Rs 150 crore). iBus offers in-building wireless solutions, outdoor small cells and other last-mile connectivity solutions to mobile operators to enable them to serve their customers seamlessly. With Covid forcing professionals and companies to adopt to WFH, the demand for robust in-building connectivity has increased manifold. The need for low latency, high-speed internet is being demanded be it for running schools and colleges online or WFH, e-comm, online transactions and remote health monitoring has never been felt so urgently before. The funds raised will be used for business expansion plans, support working capital requirements to scale the indoor wireless coverage to 400 million sq ft in the next few years to cover 7 million people.

Leading telecom services company Bharti Airtel announced a new corporate structure under which group firm Airtel Digital Ltd will merge into the listed entity Bharti Airtel. While tapping digital opportunities, the telecom major is attempting to unlock value in line with other big players such as Reliance Jio, which had raised more than Rs 1.5 trillion from a clutch of investors including Google and Facebook. The Bharti Airtel board has approved the scheme, enabling the company to file for all statutory approvals and execute the restructuring. Analysts said the move would help the group attract strategic and financial investors as well as scale up its digital business. The company expects to increase the digital business revenue to more than Rs 1,000 crore from Rs 100 crore now.

Picture Credits: heather buckley/Flickr


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