CDPQ buys its first transportation asset in India

Caisse de dépôt et placement du Québec has agreed to acquire a 67km road in the Indian state of Odisha, marking its first investment in the country’s transportation sector.

The Canadian pension is making the acquisition through the India Highway Concession Trust, an infrastructure investment trust it established last year. The road will be the first asset that CDPQ integrates in its Indian roads platform, which it launched and staffed in 2020.

Road developer Bharat Road Network Limited has agreed, along with its partners, to sell its 40 percent stake in the Shree Jagannath Expressway, which has been in operation since December 2011. The initial concession period was 26 years, but according to Cyril Cabanes, managing director, infrastructure, Asia-Pacific at CDPQ, “the SJEPL concession has a remaining term of 22 years and… expires in 2043”.

Financial details were not disclosed, but CDPQ believes “the consideration paid to be in line with recent precedents for similar vintage roads concessions in India”, he told Infrastructure Investor.

“India toll roads have generally recovered well from the initial impact of covid-19 on traffic and tolls collection – with a number of assets already showing traffic numbers close to or ahead of 2019,” Cabanes said.

“This is particularly true of major roads forming parts of strategic corridors such as SJEPL, which is located on the Chennai-Kolkata stretch of the ‘Golden Quadrilateral’ connecting the four major cities of Chennai, Mumbai, Delhi and Kolkata. However, traffic on intra-urban roads is still recovering due to reduced commuting and the prevalence of remote working.”

According to ICRA, a Moody’s Investors Service company, toll revenue re-bounded in late 2020, after plunging 84 percent in April and gradually returning to 2019 levels in August. From September through November, it recorded year-on-year growth of 12 percent, 16 percent and 10 percent, respectively.

CDPQ has been eyeing the Indian roads sector for a while. In November 2019, it had agreed to buy a platform comprising seven operating roads from Global Infrastructure Partners, but that transaction has reportedly been put on hold as the two parties could not reach an agreement within the agreed-upon timeframe. While Cabanes declined to comment on that transaction, he provided CDPQ’s view of the sector in India.

“CDPQ’s growth plans for the IHCT platform are underpinned by the following factors: ongoing consolidation in the roads sector; [the] plan by National Highways Authority of India to monetise operating assets to recycle capital; a significant opportunity to develop hybrid annuity model projects; as well our long-term belief in the growth of the Indian economy and the role of roads as a key enabler,” he said. “More broadly, CDPQ is building a regional Asian roads platform based in Singapore, with key target markets including India, Indonesia and the Philippines.”