Ajay Piramal Group leads race to buy 3 highway projects of Ramky Infrastructure

MUMBAI/HYDERABAD: The Ajay Piramal group has emerged as the front runner to purchase three highway projects of Hyderabad-based Ramky Infrastructure, signaling that cash-rich investors are keen on infusing life into the battered roads sector amid the Narendra Modi government’s overall push to revive infrastructure as it looks to boost the economy.

The structured investment group of the real estate to financial services conglomerate owned by billionaire Piramal has signed a non-binding agreement and started final due diligence, said two persons with direct knowledge of the deal.

The group “has signed a nonbinding agreement to buy ownership of Ramky Eslamex Hyderabad Ring Road, Sehore Kosmi Tollways and NAM Expressway,” said one of the persons cited above.

The diversified business conglomerate plans to purchase a majority 51% stake and take management control with an investment horizon of more than six years as part of its strategy to acquire such projects that could see it becoming the country’s biggest roads operator.

Piramal is betting that the sector will recover after sluggish progress during the previous UPA administration due to legal and bureaucratic hurdles. The Modi government wants to get infrastructure projects moving again as it seeks to put India on an accelerated growth track. The Piramal group is targeting a 16% return from investments in road projects and has teamed up with SBI Caps to identify assets it can acquire. An Piramal spokesperson declined to comment on what it said was market speculation.
The deal, which will help Ramky retire some of its Rs 2,700 crore debt, is likely to be finalised at a valuation of Rs 700-750 crore. “Given the current fall in traffic flows and trimmed down traffic projections, Ramky Infrastructure expects a combined valuation of around Rs 720 crore for its equity investments in these three road assets as against some Rs 900 crore expected a few months back,” said a senior executive with Ramky Infra.

Many developers borrowed heavily to build road assets but later ran into problems due to falling toll collections. About 200 road projects with a combined equity investment of Rs 60,000 crore are up for sale as promoters face liquidity problems after the economic downturn squeezed toll collections, throwing business plans out of gear. Ramky owns all of Ramky Eslamex and Sehore Kosmi, while having a 50% stake in NAM Expressway, with IL&FS holding the rest.

Founded in 1994, Ramky Infrastructure is primarily engaged in water and wastewater, irrigation, lift irrigation, dams and barrages. It also constructs shopping malls, apart from residential and commercial buildings.

The Ajay Piramal group is close to finalising six transactions worth Rs 2,000 crore. The group plans to bring road assets under a common umbrella by appointing a separate management team headed by a chief operating officer.