Abu Dhabi fund to invest Rs 2,000 crore in Cube Highways & Infrastructure

MUMBAI: The Abu Dhabi Investment Authority (ADIA) would buy a minority stake for about $300 million (Rs 2,000 crore) in Cube Highways & Infrastructure, marking the biggest private equity investment so far in India’s pure-play roads platform. This is ADIA’s first investment in India’s core surface-infrastructure space, with the sovereign Middle East fund looking to further diversify its assets base in the country where debt-laden local developers are increasingly seeking to offload their operating road assets to meet repayment commitments to lenders.

ET first reported in its June 16 edition that ADIA is in talks with Cube for investing about $200 million. The fund will be used for the acquisition of new toll road assets. Furthermore, the existing shareholders of the company will look to invest up to $1 billion in new capital toward the acquisition of additional roads and highways, and in new platform company investments in areas such as NHAI’s Toll-Operate-Transfer (TOT) program, Hybrid Annuity Model (HAM) and other areas, Cube Highways said in a statement issued in Singapore.

Cube Highways is an independent, professionally-managed roads and highways platform that owns and operates more than 1,300 lane-kilometres of highways in India. Set up by private equity investor I Squared Capital and the World Bank’s private investment arm International Finance Corp (IFC), Cube Highways owns, manages and operates four toll road projects in India.

“This new capital commitment comes at a very exciting time, especially following the positive reforms undertaken by NHAI and the ministry of road transport and highways,” said Gautam Bhandari, Director of Cube Highways and Partner of I Squared Capital. “Cube Highways, which we started from scratch, has built an experienced management team with world-class engineering and operational expertise and has now become a recognised leader in the highways sector in India.”

The transaction — predominantly primary infusion of funds with some secondary share sale — is coming at a time when the government last month announced an ambitious road-building plan, targeting the construction of 83,677km of roads, involving a capex outlay of Rs 6.9 trillion (around $106 billion) over the next five years. Edelweiss Financial Services and Barclays were advisors to transaction.

“After the bad experience of JP Morgan and 3i, the complexion of PE changed. The focus was more on buying and owning assets, and players like Brookfield became prevalent. But after a spate of M&As in the space, this looks like a comeback for growth-oriented PE,” said an official directly involved in the transaction.