Cube adds nine Indian roads to its portfolio for $681m

Singapore-based Cube Highways has emerged as the highest bidder for a portfolio of nine roads the Indian government has put on offer as part of its privatisation programme.

Cube Highways has agreed to pay 50.1 billion rupees ($681 million; €575 million) for nine operating roads that span 566 kilometres. It will also invest an additional 7 billion rupees “for various improvements and capital expenditures”, over the course of the 30-year concession, the company said in a statement.

The company, which is backed by Miami-based I Squared Capital through its second infrastructure fund, will be financing part of the upfront payment through a loan of 35 billion rupees it secured from the State Bank of India last month.

Asked whether covid and its impact on traffic volume was a concern, a spokesman for Cube Highways told Infrastructure Investor: “Given the long duration of assets, the investment case for the portfolio of roads is based on a very long-term view and the fundamental belief that the underlying drivers of toll roads in India remain intact – growing middle class, increasing consumption and rapid urbanisation.

“Having said that, the portfolio of roads has seen a healthy recovery in traffic following the covid-19 lockdowns, highlighting the vital role the roads offer in transportation of essential goods,” he added.

The nine four-lane roads run across four states: Tamil Nadu, Jharkhand, Uttar Pradesh and Bihar, and form what is known as TOT Bundle 3.

This is the second time Cube Highways has submitted the highest bid for a bundle of Indian roads. In March 2019, it bid $650 million for eight roads but fell short of the $766 million, amount the National Highways Authority of India sought. As a result, the NHAI cancelled the second bundle of roads (TOT Bundle 2).

Commenting on the lower-than-expected bids the government received at the time, Rajeshwar Burla, an analyst at India’s ICRA credit rating agency, told Infrastructure Investor, the success of the first auction, which resulted in Macquarie Infrastructure & Real Assets paying roughly $1.5 billion for a 30-year concession in 2018, “raised NHAI’s expectation for the second bundle”.

“With the poor response for the second bid, expectations from NHAI will be more realistic going forward,” Burla had commented.

NHAI has since announced a tender process for TOT Bundle 4. However, it cancelled that tender on 28 September, the same day it said it would be inviting bids for TOT Bundle 5. NHAI did not provide details as to why the fourth bundle was cancelled other than to cite “administrative reasons” in a cancellation notice posted on its website. The agency did not respond to a request for comment.

In addition to I Squared Capital, which launched Cube Highways alongside the International Finance Corporation, other shareholders in the company include a wholly-owned subsidiary of the Abu Dhabi Investment Authority and a consortium of Japanese investors.

The company has a portfolio of 27 highways with nearly 8,400 lane-kilometres across India, including assets under various stages of closing, according to the statement.