With just a few steps away from buying controlling stakes in six road assets spread across the country, global business conglomerate Piramal group has signalled the emergence of cash-rich investors’ interest in infusing life into the stressed road sector and boosting infrastructure development in a big way.
Piramal group, which has presence in real estate, financial services, etc, has signed non-binding preliminary term sheets to acquire four projects and is in advanced negotiations to do it for two more. The combined valuation for these proposed transactions will be close to Rs 2,000 crore.
“We have signed term sheets to acquire four road projects. Two more are in the offing. In all these cases, we are looking to buy more than 51 per cent to take management control with an investment horizon of six years. We expect to close these transactions by the end of this fiscal year,” said Parvez Umrigar, Co-head, Structured Investment Group, Piramal Enterprises.
A term sheet is a non-binding agreement laying out the basic conditions under which an investment will be made. The final binding agreement is signed when both parties reach an agreement set forth in the term sheet.
Investment banking executives said the group has already started its due diligence for signing agreement. Umrigar said that out of the six targeted assets, three are in the south and the rest are in other parts of the country. He did not disclose further details of the assets.
Three Hyderabad-based companies–NCC, Gayatri Projects and IVRCL–are already negotiating with potential buyers to sell road assets to retire debt and infuse money into fresh projects.
Around 200 road projects with equity investments of Rs 60,000 crore are up for sale as promoters face liquidity problems after the economic downturn squeezed toll collections significantly.
The group’s flagship Piramal Enterprises decided to acquire and manage road assets six months ago after providing mezzanine financing to road projects and renewable energy ventures It now plans to bring operations of road assets under a common umbrella by appointing a separate management team headed by a chief operating officer.
“Our board has approved a proposal to acquire road assets six months ago. This is independent of the mezzanine financing options that we have. We intend to invest close to Rs 5,000 crore to buy road assets in the next three years. Mezanine financing will continue to be our thrust area,” said Umrigar.