Larsen & Toubro selling infra arm stake to Canada Pension Plan Investment Board for Rs 1,000 crore

MUMBAI: Engineering major Larsen & Toubro has signed an agreement to sell a minority stake in infrastructure development unit IDPL for Rs 1,000 crore to an arm of Canada Pension Plan Investment Board ( CPPIB).

CPP Investment Board Singaporean Holdings 1 (CPPIBSH), will put in another Rs 1,000 crore or more after one year of the investment. ET had reported on February 25 that the deal was likely to be signed soon.

"This transaction represents CPPIB’s first investment in India’s infrastructure sector with a highly reputable partner and fits well with our strategy for India as a key long-term growth market,” said André Bourbonnais, senior vice president, private investments, CPPIB. “We look forward to partnering with L&T and L&T IDPL’s experienced management teams as we build our infrastructure platform in India over the long term."

The Canadian fund is buying preference shares of L&T IDPL, compulsorily convertible into equity shares by 2018 at a valuation to be determined as per a mutually agreed process. After conversion, CPPIBSH will hold a minority stake in L&T IDPL.

"With its long-term view, CPPIB would be an ideal partner for L&T and will provide growth capital to L&T IDPL to expand its infrastructure development business," Larsen & Toubro chief financial officer R Shankar Raman said.

L&T said that the completion of the transaction and receipt of funds is subject to fulfilment of customary closing conditions for transactions of this nature and procuring necessary approvals from relevant government authorities and regulators.

The stake sale is a part of the Indian engineering company’s strategy to deleverage its investment in projects that it is developing under the public-private partnership model. The company is also in the process of getting a trust, backed by its road projects, listed in Singapore.