CPPIB-led InvIT buys Brookfield's India road portfolio for Rs 9300 crore

Canada Pension Plan Investment Board (CPP Investments), the largest pension money manager in Canada has agreed to buy a portfolio of Indian road assets from Canadian asset manager Brookfield in a deal valued at around Rs 9375 crore ($1.2 billion), in what could be one of the largest road infrastructure transactions in the country.
IndInfravit Trust, an infrastructure investment trust (InvIT) led by Canada Pension Plan Investment Board, has entered into an agreement with investment holdings of Brookfield- BIF India Holdings Pte Ltd. and Kinetic Holdings 1 Pte Ltd, on Friday to buy the entire equity shareholding of five operational road projects from Brookfield, said the press statement.

Brookfield is finalising the sale of its roads portfolio in India to IndInfravit Trust, for an enterprise valuation of Rs 9,000-9,500 crore, ET first reported in April.

The transaction values the equity of the five operational road assets that Brookfield owns through platform Peak Infrastructure at around Rs 6,000 crore. The business also has debt of Rs 3,000-3,200 crore debt, Et report added.

Omers and German insurer Allianz are the other key shareholders of the IndInfravit Trust along with L&T Infrastructure Development Projects (L&T IDPL), which also acts as sponsor of the vehicle.

The Roads Portfolio comprises three toll roads and two annuity roads, with approx. 2,400 lane kms in Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh. The Roads Portfolio has been operational, on an average, for approximately 9 years, and has an average residual concession period of 20 years, added the statement.

IndInfravit currently holds a portfolio of thirteen operational road concessions with approx. 5,000 lane kms spread across five states. This acquisition will expand the portfolio into three additional states, Andhra Pradesh, Bihar and Uttar Pradesh.

“We remain a committed supporter of IndInfravit – a portfolio that encompasses significant and critical roads assets,” said Scott Lawrence, Managing Director and Head of Infrastructure, CPP Investments. “This acquisition provides growth and geographic diversity to the InvIT and will ensure the continued delivery of high-quality infrastructure to different regions across India.

Increasing our interests in Indian infrastructure is part of our ongoing commitment to deliver solid long-term risk-adjusted returns to CPP contributors and beneficiaries,” said said Scott Lawrence.

"Our investment in IndInfravit gives us an opportunity to be part of the vibrant and highly crucial infrastructure sector in India. We look forward to working jointly with our partners on the further development of the IndInfravit platform creating a high quality, well-diversified asset portfolio” said Andrew Cox, Co-Head - Infrastructure for Allianz Capital Partners.

Brookfield entered the road sector in India in 2015 after buying the road assets of Gammon Infrastructure Projects. It then acquired road assets from Hyderabad-based KMC Constructions. Peak handed back two projects acquired from Gammon, Andhra Expressway and Rajahmundry Expressway, to NHAI after managing them.

In 2019, Brookfield had tried to sell its 150-km, Mumbai-Nashik Expressway and engaged in talks with several players such as Cube Highways and IRB Infrastructure. However, a deal didn’t fructify.

ET first reported on September 6 last year that Brookfield was planning to sell Peak for $1.2 billion in enterprise value. KPMG is advising Brookfield on the sale process.

On Thursday, the UK based global investor Actis acquired a portfolio of six operating highway toll road projects in India from Welspun Enterprises Limited (WEL), part of the Welspun Group, for an aggregate Enterprise Value of $775 mn (Rs. 6,000 crore).

In April, rating agency ICRA had revised the outlook on the toll roads sector for FY2023 to Positive from Stable. The change in outlook primarily factors in the expected healthy increase in toll collections in FY2023, supported by healthy toll rate increase on the back of high inflation and improved economic activity.

Toll collections are expected to increase by 17-20% during FY2023 owing to sharp rise in toll rates, traffic growth and adjustment of 3-4% revenues which were lost due to the second wave of Covid in Q1FY2022, ICRA said.