KKR passes on option to up stake in IndiGrid

KKR has withdrawn a plan to become a sponsor of India Grid Trust, the first infrastructure investment trust to be established in the country, which currently has 121 billion rupees ($1.6 billion; €1.4 billion) in assets under management.

In May 2019, KKR and Singapore’s sovereign wealth fund GIC invested 10.8 billion rupees and 9.8 billion rupees, respectively, to acquire 42 percent of IndiGrid’s outstanding shares. At that time, KKR said it would acquire an additional 15 percent of IndiGrid’s total units from Sterlite Power Grid Ventures, an Indian private power transmission company that set up IndiGrid in 2016 and serves as its sponsor.

According to a statement IndiGrid filed with the National Stock Exchange of India last week, KKR’s affiliate Esoteric II has terminated the agreement in which it had entered with Sterlite Power to acquire an additional 15 percent stake in the trust and become its sponsor.

“The agreement automatically expired as the transaction could not be consummated by the said long stop date [of 15 July],” IndiGrid CEO Harsh Shah told Infrastructure Investor.

Shah said besides Esoteric II, which currently holds 23 percent, GIC and SPGVL hold 20 percent and 15 percent, respectively. Other investors include insurance companies, mutual funds and pension funds.

Asked how KKR’s withdrawal would impact IndiGrid’s business, Shah said the agreement was between two unit holders and doesn’t concern IndiGrid directly. It is therefore unlikely to have any immediate impact on IndiGrid’s business.

“IndiGrid raised capital in May 2019, which will enable it to reach AUM of 180 billion rupees,” Shah explained. “Growth beyond 180 billion rupees AUM might require IndiGrid to raise further capital, but the timing and mode of [raising capital] would be decided on the basis of the then-prevailing market conditions and other customary approvals.”

IndiGrid currently owns nine operating projects consisting of 20 transmission lines with over 5,800 kilometres circuit length and four substations with around 7,700 MVA (mega-volt amperes) transformation capacity across India. In March, the firm acquired the East North Interconnection Company from Sterlite Power for 10.2 billion rupees, making it the ninth power transmission project in its portfolio.

It is unclear why KKR decided not to increase its stake in the investment trust given the increased activity and focus it has dedicated to the APAC region. In the past two years, it has hired David Luboff, built up a team in the region and launched KKR Asia Pacific Infrastructure Investors, raising $2.5 billion to date.

KKR declined to comment.