CPPIB makes first infra investment in India

The Canada Pension Plan Investment Board will invest a total of about $332m in a subsidiary of Larsen & Toubro.

The Canada Pension Plan Investment Board (CPPIB), administrator to the Canada Pension Plan, has announced it will be investing a total of INR20 billion (€244 million; $332 million) in L&T Infrastructure Development Projects Limited (L&T IDPL), a subsidiary of Indian construction and engineering company Larsen & Toubro.

The investment, which will be made in two stages by CPPIB’s wholly-owned subsidiary CPP Investment Board Singaporean Holdings I (CPPIBSH), marks CPPIB’s first investment in India’s infrastructure sector.

CPPIBSH will initially invest INR10 billion followed by a second tranche of INR10 billion 12 months after the initial investment.

Under the agreement, CPPIBSH will invest in L&T IDPL preference shares which will be compulsorily convertible into equity shares by 2018 at a valuation to be determined by a mutually agreed process. Post-conversion, CPPIBSH will hold a minority stake in the equity capital of L&T IDPL, CPPIB said in a statement.

L&T IDPL’s road concession portfolio includes 19 toll roads spanning 2,200 kilometres and connecting major cities, ports and economic corridors in India. It also owns a power transmission line project and a metro project in Hyderabad.

According to the statement, the Larsen & Toubro subsidiary is also a pioneer of the public-private partnership (PPP) model in India.

“This transaction represents CPPIB’s first investment in India’s infrastructure sector with a highly reputable partner and fits well with our strategy for India as a key long-term growth market,” CPPIB’s senior vice president of private investments André Bourbonnais said.

“We look forward to partnering with L&T and L&T IDPL’s experienced management teams as we build our infrastructure platform in India over the long term,” he added.

CPPIB has been investing in India since 2010, initially in private equity and then in real estate. “But we had not found an infrastructure opportunity [until now],” a company spokesperson told Infrastructure Investor, adding that finding the right investment opportunity and the right local partner at the same time were critically important.

“One of the reasons we’re happy with this investment with L&T is that we view it as a platform. By that I mean, instead of having to go and find another partner with another project, […] we believe that we’ve found a partner with whom we hope we can then continue to invest and help them expand,” the spokesperson said.

Based in Toronto, CPPIB is an investment management organisation that invests the funds not needed by the Canadian Pension Plan to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries.

As of March 31, 2014, CPPIB’s infrastructure portfolio totaled C$13.3 billion (€9.1 billion; $12.4 billion), representing 6.1 percent of its C$219.1 billion portfolio.