GIC invests $622m in Indian toll roads portfolio

Indian developer IRB will transfer nine operational and under-construction assets spanning 1,200km to an investment infrastructure trust.

Singapore’s sovereign wealth fund GIC will invest up to 44 billion rupees ($621.5 million; €555.2 million) in a portfolio of nine operational and under-construction roads from Indian developer IRB, the latter said in a statement.

As part of the deal, IRB will transfer the nine build-operate-transfer assets into a newly established infrastructure investment trust (InvIT). GIC’s affiliates will acquire a 49 percent stake in the vehicle, while the local developer will retain the remaining 51 percent, the statement said.

The portfolio includes three operational roads and six assets under construction, five of which are already collecting revenues from tolls, according to the statement. The projects span across 1,200 kilometres in the Haryana, Uttar Pradesh, Rajasthan, Gujarat, Maharashtra and Karnataka states and have an average concession period of more than 20 years.

According to the statement, the portfolio generated 6.3 billion rupees during the fiscal year 2019. However, IRB estimates that once the assets are completed, the portfolio could be valued at around 225 billion rupees and generate an annual EBITDA of around 1.2 trillion rupees.

Under the terms of the agreement, GIC will also acquire a 49 percent stake in the investment manager created to manage the trust, while the Indian developer will hold the remaining stake. IRB will execute the remaining construction works and the management of the road.

IRB said it will use the proceeds from the transaction to deleverage its balance sheet and fund the construction of other projects in its portfolio, which comprises 19 build-operate-transfer projects and three hybrid annuity model projects.

The two firms will also look for new opportunities in the road sector through the InvIT, according to the statement.

GIC has ramped up its investments in the Indian infrastructure sector in recent months. In April, it invested 80 billion rupees alongside SSG Capital Management and Tata to acquire a combined 45 percent stake in GMR’s airport subsidiary that manages New Delhi airport.

A month later, the Singaporean sovereign wealth fund joined private equity firm KKR in the acquisition of a combined 57 percent in IndiGrid, an investment trust that manages a portfolio of 11 electricity transmission assets, investing 9.8 billion rupees in the vehicle.

GIC declined to comment for this story. IRB had not replied to a request for comment by the time of publication.