Canada pension funds lead race for GIP’s Indian road assets


MUMBAI: Largest Canadian pension funds — Canada Pension Plan Investment Board (CPPIB) and Caisse de depot et placement du Quebec (CDPQ) — are the front runners for acquiring Indian road assets of the US-based Global Infrastructure Partners (GIP), said two people aware of the development.

Other contenders such as Piramal and National Investment and Infrastructure Fund (NIIF) had backed out, citing high valuations. However, valuations could come down to Rs 2,600-2,800 crore from earlier expectations of Rs 3,500 crore due to subdued growth in highway traffic, said one of the persons cited above.

Highway Concessions One Private Limited (HC1), the roads platform for GIP India, consists of seven road assets with a route length of 472 km. The final buyer will be selected in the next couple of weeks. Last year, GIP purchased IDFC Alternatives’ infrastructure investment business. As part of its realignment exercise, GIP had decided to monetise its stake in Highway Concessions One.


These projects include five toll roads and two annuity roads across seven states — Ulundurpet Expressways in Tamil Nadu, Nirmal BOT in Telangana, Dewas Bhopal Corridor in Madhya Pradesh, Bangalore Elevated Tollway in Karnataka, Godhra Expressways in Gujarat, Jodhpur Pali Expressway in Rajasthan, and Shillong Expressway in Meghalaya. The 472-km roads network fetched Rs 620 crore in revenues for the financial year ending March 31, 2018.

Spokespersons of CPPIB and CDPQ declined to comment, while mails sent to GIP remained unanswered.

The roads sector in India has witnessed a decline in valuation lately after highway traffic has dropped, in line with the recent fall in commercial vehicle sales.

A recent decision of the union transport ministry allowing trucks to carry up to 25% more weight is expected to have its implications on road traffic. After three decades, load carrying capacity for multi-axle trucks has been increased by 25% last year. Under new norms, gross vehicle weight (GVW) has been raised from 16.2 tonnes to 18.5 tonnes for a two-axle truck; from 25 tonnes to 28.5 tonnes for three-axle trucks; and from 37 tonnes to 43.5 tonnes for five-axle trucks.

A drastic fall in commercial vehicle sales also worsened the situation. A decline of 20% and 19% were reported in commercial vehicle sales in India in May and June, respectively. A dip in farm income and lack of financing from NBFCs affected commercial vehicles sales.

Operational road projects had witnessed healthy growth in toll collection of 11% per annum during FY16, which fell to 4.52% during FY17. Growth in toll collection continued to remain stable at 9% during FY18 and 8% during the first half of FY19. Over the next one year, traffic growth of 6-7% is expected, which should result in around 10-11% growth in toll collection, said a recent Care Ratings report.

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