Goldman Sachs' fund to invest $250 million in Essel Highways

MUMBAI: A private equity fund managed by Goldman Sachs is in final negotiations to invest $200-250 million in Essel Highways, the road infrastructure arm of Subhash Chandra-controlled Essel Group, in what could be one of the biggest PE transactions in the space.

The deal will be a structured financing arrangement between Essel Group and the Wall Street firm, which has made significant investments in real estate, renewable energy and hospitality in India, multiple sources with direct knowledge of the matter told ET.

Essel Highways has 14 roads with 10 operational assets providing significant cash inflows. The company has an order book of close to Rs 11,000 crore, its website showed.

This will be Goldman Sachs’ first investment in Indian roads, if it goes ahead. The US bank has an exposure of about $370 million in alternative energy and is one of the largest investors in real estate in India.

The fresh funds will be used to build a war chest for financing new projects and strategic acquisition of road assets across the country, said a person close to the company.


"Yes, the transaction is on. We are finalising the terms and a definitive agreement is expected to get signed within a few days," the person said. Goldman Sachs and Essel Group declined to comment.

Essel Group is a diversified conglomerate with interests in media, entertainment, packaging, infrastructure, education, precious metals and technology sectors.

The road infrastructure holding company operates eight state and two national highways. One state highway and three national highway projects are under construction.

The company has so far executed more than 3,600 km of roads in nine states. The group’s infrastructure holding company, Essel Infrastructure, raised $132 million in March from Piramal Group and Dutch pension fund APG Asset Management for its solar power project platform.

Through private equity and structured financing transactions, Goldman Sachs has been active in India with investments of more than $1.5 billion. That includes $370 million in ReNew Power, a wind power infrastructure firm, and $150 million in Piramal Realty, the property investment arm of the Piramal Group. It also plans to jointly invest $250 million in commercial real estate assets in India along with realty developer Nitesh Estates.

Global institutional investors such as Goldman Sachs and sovereign and pension funds have been actively looking at cash-generating infrastructure assets in India.

"With infrastructure asset supply becoming scarce in western markets, there is a significant opportunity to attract meaningful investments for India from these investors," Ambit Capital said in a recent note. "A corpus of up to $50 billion is likely to get invested in Indian infrastructure over the next five years."

Last week, ET reported that bulge-bracket private equity funds such as KKR and Apollo Global Management as well as sovereign wealth funds such as Abu Dhabi Investment Authority and Canadian pension investment manager PSP Investments are looking to invest in GMR Infrastructure’s Hyderabad airport.

PSP is also in talks to take control of four toll road assets in Rajasthan, Punjab, Uttar Pradesh and Bihar.

I Squared Capital, a $3-billion global infrastructure fund managed by former Morgan Stanley executives, acquired three operational road assets for about Rs 1,000 crore in January.