Global PEs, funds eye stake in highway projects

By Dipak Kumar Dash & Sidhartha

NEW DELHI: Several global funds and equity investors are making a beeline for investing in the highway sector, a move that will free up thousands of crores for Indian developers — funds that were held up in the absence of a government decision to allow existing players to exit immediately after completing the project.
Sources said Uniquest Infra Ventures, the joint venture between Malaysian government sovereign wealth fund Khazanah Nasional Berhad and IDFC, alone has expressed interest in buying stake in nearly a dozen road projects.

Similarly, SBI Macquarie Infrastructure Fund has discussed the possibility of investing up to Rs 20,000 crore in projects that are nearing completion. Tata Realty is eying four projects, while Morgan Stanley is entering the space too. Sources said Morgan Stanley is in talks for buying into KMC Constructions , which is getting all its road projects under one company . Morgan Stanley is also buying a 15% stake in the Surat Hazira project.

In addition, the Canadian Public Sector Pension Board is acquiring interest in the special purpose vehicle executing the Panipat-Jalandhar highway project, said a source familiar with the developments .

For projects awarded after 2009, there is no restriction on companies to buy into projects that have been in operation for over two years. The National Highways Authority of India (NHAI) is now pushing for allowing developers to offload equity as soon as the project is completed. The change is being pushed in a way that it will also impact projects awarded before 2009, when the rules were last changed to allow for stake sale immediately after completion.

Just when NHAI got all government agencies to agree to the move, the department of economic affairs put a spanner but sources said it has been over-ruled by finance minister P Chidamabaram . Now, the highway developers are awaiting the final guidelines before going ahead with the transactions.

“It will not only free up capital for Indian developers but increase overseas participation . In addition, the Indian players will have resources to bid for new projects and help revive interest in the sector,” said a top government official.

Several Indian companies that are linked to politicians from Andhra Pradesh, former Jharkhand chief minister Madhu Koda and ex-BJP president Nitin Gadkari would especially benefit from the move as banks have been reluctant to lend to them after allegations of their ties surfaced.