CPP Investments and OMERS Expand IndInfravit’s Roads Portfolio

The Canadian Press reports Brookfield Asset Management Inc. selling five India-based road project: 

Brookfield Asset Management Inc. is selling five road projects in India valued at US$1.2 billion to an infrastructure investment trust partially owned by two Canadian pension funds.

The portfolio comprises three toll roads and two annuity roads spread across 2,400 lane kilometres.

The transaction will allow IndInfravit to expand its presence in three additional areas of India.

IndInfravit shareholders include the Canada Pension Plan Investment Board, OMERS Infrastructure and Allianz Capital Partners.

Brookfield made its first significant investment in India’s infrastructure in 2015 with the purchase of six road projects and three power projects.

The deal is subject to certain regulatory and other customary conditions, including approval from IndInfravit unitholders.

George Russell of Asia Financial also reports India’s IndInfravit Trust to acquire Brookfield’s $1.2bn road assets:

India’s largest infrastructure investment trust said on Friday it would acquire five operational road projects from companies owned by Canada’s Brookfield Asset Management’s funds in a deal valued at about $1.2 billion, including debt.

IndInfravit Trust seeks to expand its road portfolio and the deal will extend the trust’s presence into three more states, adding roads spread across 2,400 lane kilometres.

It currently has a portfolio of 13 operational road assets with about 5,000 lane km spread across five states.

IndInfravit’s unit holders include Allianz insurance companies represented by Allianz Capital Partners, Canada Pension Plan Investment Board and OMERS Infrastructure.

The road assets transaction is subject to approval from regulatory authorities, lenders and unitholders of IndInfravit.

Narendra Modi’s government is pouring money into infrastructure in the hope that stimulating the corporate sector will lead to private investment, manufacturing and jobs.

To boost growth, India is aggressively developing its transport infrastructure, including roads, railways and waterways.

The Economic Times of India also reports CPP Investments to buy Brookfield’s India roads portfolio in Rs 9.3k crore deal:

Canada Pension Plan Investment Board (CPP Investments), the largest pension money manager in Canada, has agreed to buy a portfolio of Indian road assets from Brookfield in a deal valued at around Rs 9,300 crore ($1.2 billion), pegged as one of the largest road infrastructure transactions in the country.

The acquisition will be through the IndInfravit Trust, an infrastructure investment trust (InvIT) led by CPP Investments. IndInfravit has entered into an agreement with investment holdings of Brookfield — BIF India Holdings Pte Ltd and Kinetic Holdings 1 Pte Ltd — to buy the entire equity shareholding of five operational road projects from Brookfield, it said in a press statement on Friday.

Canadian asset manager Brookfield is finalising sale of its roads portfolio in India to IndInfravit Trust for an enterprise valuation of Rs 9,000-9,500 crore, ET first reported on April 11. The deal values the equity of the five operational road assets that Brookfield owns through platform Peak Infrastructure at around Rs 6,000 crore. The business also has debt of Rs 3,000-3,200 crore, ET had reported.

Omers and German insurer Allianz are the other key shareholders of the IndInfravit Trust along with L&T Infrastructure Development Projects (L&T IDPL), which also acts as sponsor of the vehicle. The portfolio comprises three toll roads and two annuity roads, with approximately 2,400 lane km in Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh. The roads portfolio has been operational for about nine years and residual concession period of 20 years on average.

IndInfravit currently holds a portfolio of 13 operational road concessions with about 5,000 lane km in five states. This acquisition will expand the portfolio into three additional states — Andhra Pradesh, Bihar and Uttar Pradesh.

"We remain a committed supporter of IndInfravit – a portfolio that encompasses significant and critical roads assets," said Scott Lawrence, managing director and head of infrastructure, CPP Investments."Increasing our interests in Indian infrastructure is part of our ongoing commitment to deliver solid long-term, risk-adjusted returns to CPP contributors and beneficiaries."

"This acquisition provides growth and geographic diversity to the InvIT and will ensure the continued delivery of high-quality infrastructure to different regions across India," said Delphine Voeltzel, managing director, Asia, Omers Infrastructure.

Andrew Cox, co-head, infrastructure, Allianz Capital Partners, said, "Our investment in IndInfravit gives us an opportunity to be part of the vibrant and highly crucial infrastructure sector in India. We look forward to working jointly with our partners on the further development of the IndInfravit platform creating a high quality, well-diversified asset portfolio."

Brookfield entered the road sector in India in 2015 after buying the assets of Gammon Infrastructure Projects. It then acquired road assets from Hyderabad-based KMC Constructions. Peak handed back two projects acquired from Gammon — Andhra Expressway and Rajahmundry Expressway — to the National Highways Authority of India (NHAI) after managing them.

ET first reported on September 6 last year that Brookfield was planning to sell Peak for $1.2 billion in enterprise value. KPMG is advising Brookfield on the sale process. Ambit, Cyril Amarchand Mangaldas advised IndInfravit.

CPP Investments put out a press release on how IndInfravit and Brookfield entered into definitive agreements for the acquisition of five operational road projects from Brookfield: 

IndInfravit Trust (“IndInfravit”) and BIF India Holdings Pte Ltd. and Kinetic Holdings 1 Pte Ltd., companies owned by funds managed by Brookfield Asset Management Inc. (“Brookfield”), today executed definitive agreements whereby IndInfravit has agreed to purchase the entire equity shareholding¹ of five operational road projects (“Roads Portfolio”) from Brookfield. The transaction values the Roads Portfolio at an enterprise value of approximately USD 1.2 billion.

The transaction is subject to certain regulatory and other customary conditions, including approval from relevant regulatory authorities, lenders and unitholders of IndInfravit.

The Roads Portfolio comprises three toll roads and two annuity roads, with approx. 2,400 lane kms in Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh. The Roads Portfolio has been operational, on an average, for approximately 9 years, and have an average residual concession period of 20 years.

IndInfravit currently holds a portfolio of thirteen operational road concessions with approx. 5,000 lane kms spread across five states. This acquisition will expand the portfolio into three additional states, Andhra Pradesh, Bihar and Uttar Pradesh. IndInfravit’s unitholders include Allianz insurance companies represented by Allianz Capital Partners, Canada Pension Plan Investment Board (“CPP Investments”) and OMERS Infrastructure.

“This transaction is one of the largest acquisitions in the highways sector in recent times. It is a testament to the confidence of long-term patient capital in the India growth story, duly represented by the Highways sector. All the five operating assets are part of the National Highways program and in states contributing in total c.30% of India’s GDP. With strong backing of its major unitholders, IndInfravit is well positioned for India’s Infrastructure Monetization plans. Stepping into its fifth year of operations, our InvIT presents itself as an established and reliable platform for developers and sponsors to divest their assets, thus creating value and generating significant economic benefit for both parties,” said Pawan Kant, Chief Executive Officer, LTIDPL IndvIT Services Limited (Investment Manager to the IndInfravit Trust).

“We remain a committed supporter of IndInfravit – a portfolio that encompasses significant and critical roads assets,” said Scott Lawrence, Managing Director and Head of Infrastructure, CPP Investments. “This acquisition provides growth and geographic diversity to the InvIT and will ensure the continued delivery of high-quality infrastructure to different regions across India. Increasing our interests in Indian infrastructure is part of our ongoing commitment to deliver solid long-term risk-adjusted returns to CPP contributors and beneficiaries.”

Delphine Voeltzel, Managing Director, Asia for OMERS Infrastructure, said of the development: “We are proud to support this further growth of the IndInfravit platform and look forward to working with our fellow unitholders, management and all local stakeholders to create additional value for the community and our customers. The acquisition further strengthens IndInfravit’s position as a leading roads platform in India and significantly expands its roads portfolio as well as its geographic footprint. It represents one more example of how OMERS Infrastructure continues building a diverse portfolio of high-quality assets in select locations around the globe, led by strong management teams, and in cooperation with like-minded, long-term partners.”

“We are glad to support the further growth of the IndInfravit platform and its continued path of excellence. Our investment in IndInfravit gives us an opportunity to be part of the vibrant and highly crucial infrastructure sector in India. We look forward to working jointly with our partners on the further development of the IndInfravit platform creating a high quality, well-diversified asset portfolio” said Andrew Cox, Co-Head – Infrastructure for Allianz Capital Partners.

Ambit acted as the exclusive financial adviser to IndInfravit. Cyril Amarchand Mangaldas acted as legal adviser to IndInfravit.

¹Except for less than 0.01% in one of the assets

OMERS Infrastructure also put out a press release on how IndInfravit, an OMERS Infrastructure managed investment in India, to acquire additional road network:

OMERS initially invested in IndInfravit, a road company in India, in February 2019. At the time of the initial investment, IndInfravit had a portfolio of 5 roads. IndInfravit then acquired 8 roads in March 2020 from Sadbhav Engineering. With the financial and strategic backing of OMERS Infrastructure and other partners, the company has today announced that it will acquire Brookfield Asset Management’s portfolio of 5 roads, across 4 states in India, for an enterprise value of USD1.2 billion. Following the close of the transaction, IndInfravit’s portfolio of roads in India will total 18.

Delphine Voeltzel, Managing Director, Asia for OMERS Infrastructure, said of the development: “We are proud to support this further growth of the IndInfravit platform and look forward to working with our fellow unitholders, management and local stakeholders to create additional value for the community and our customers. The acquisition further strengthens IndInfravit’s position as a leading roads platform in India and expands its roads portfolio as well as its geographic footprint. It represents one more example of how OMERS Infrastructure continues building a diverse portfolio of high-quality assets in select locations around the globe, led by strong management teams, and in cooperation with like-minded, long-term partners.”

This is a big deal for InInfravit, India’s largest infrastructure investment trust which has unit holders CPP Investments, OMERS and Allianz Capital Partners.

IndInfravit currently holds a portfolio of thirteen operational road concessions with approx. 5,000 lane kms spread across five states. This acquisition will expand the portfolio into three additional states, Andhra Pradesh, Bihar and Uttar Pradesh.  

Once this transaction is completed, it will own five additional operational road projects (“Roads Portfolio”) from Brookfield, one of the best infrastructure investors in the world. 

The transaction values the Roads Portfolio which comprises three toll roads and two annuity roads, with approx. 2,400 lane kms in Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh, at an enterprise value of approximately USD 1.2 billion.

The Roads Portfolio has been operational, on an average, for approximately 9 years, and have an average residual concession period of 20 years.

That average residual concession period of 20 years is one factor that attracted CPP Investments and OMERS. The other is that India is growing nicely and the Modi government is keen on aggressively developing its transport infrastructure, including roads, railways and waterways.

You can read more about IndInfravit here.  

It's worth noting what Delphine Voeltzel, Managing Director, Asia for OMERS Infrastructure, said of the development: "The acquisition further strengthens IndInfravit’s position as a leading roads platform in India and expands its roads portfolio as well as its geographic footprint. It represents one more example of how OMERS Infrastructure continues building a diverse portfolio of high-quality assets in select locations around the globe, led by strong management teams, and in cooperation with like-minded, long-term partners.” 

And Scott Lawrence, Managing Director and Head of Infrastructure, CPP Investments is spot on. “This acquisition provides growth and geographic diversity to the InvIT and will ensure the continued delivery of high-quality infrastructure to different regions across India. Increasing our interests in Indian infrastructure is part of our ongoing commitment to deliver solid long-term risk-adjusted returns to CPP contributors and beneficiaries.”

It's all about delivering solid long-term risk-adjusted returns to CPP contributors and beneficiaries.

I also agree with what Pawan Kant, Chief Executive Officer, LTIDPL IndvIT Services Limited (Investment Manager to the IndInfravit Trust) said: 

This transaction is one of the largest acquisitions in the highways sector in recent times. It is a testament to the confidence of long-term patient capital in the India growth story, duly represented by the Highways sector. All the five operating assets are part of the National Highways program and in states contributing in total c.30% of India’s GDP. With strong backing of its major unitholders, IndInfravit is well positioned for India’s Infrastructure Monetization plans. Stepping into its fifth year of operations, our InvIT presents itself as an established and reliable platform for developers and sponsors to divest their assets, thus creating value and generating significant economic benefit for both parties.

Speaking of divesting their assets, I also read a Mint article which states CDPQ is seeking investors for its Indian roads infrastructure investment trust (InvIT):

Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) is seeking investors for its Indian roads infrastructure investment trust (InvIT) as the pension fund looks to meet regulatory requirements of minimum dilution of 25% stake, two people aware of the development said.

InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects. According to Sebi norms, privately placed unlisted InvITs are required to have a minimum of five investors, other than sponsor(s), its related parties and its associates, at all times. Further, the norms mandate that such investors, categorized as ‘public investors’, hold at least 25% of the total unit capital at all times.

CDPQ, which invested around $7 billion in India, has set up a platform called Maple Highways to house the operating road assets that it buys in India.

“CDPQ is in talks with institutional investors such as pension funds and insurance companies to sell a stake in the InvIT. They could raise as much as ₹1,000 crore or more through this stake sale. While the InvIT previously met the regulatory requirement, the addition of the TOT-7 package, which Maple Highways is acquiring from NHAI, will increase the size of the InvIT, thus requiring CDPQ to sell some more stake to be in compliance with the 25% dilution norm," said the first person cited above.

The TOT-7 package comprises a 135-km-long eastern peripheral expressway project in Delhi-NCR, for which Maple bid ₹6,267 crore.

Apart from the TOT bundle, Maple’s InvIT comprises Shree Jagannath Expressway, a 67km toll road project from Bhubaneswar to Chandikhole in Odisha, acquired from Bharat Road Network Ltd and the 18.6km Durg Bypass acquired from the Tata group.

A CDPQ spokesperson declined to comment on the development.

InvITs have emerged as a preferred route for investors to invest in roads in India. Foreign investors such as insurance companies and pension funds seeking yield generating assets are finding Indian road assets to be an attractive investment opportunity.

Did you catch that last part? Of course foreign investors are finding Indian road assets attractive and InvITs are a great way to capitlize on these assets.

Whether it's IndInfravit or Maple Highways, Canada's largest pension funds have set up the right platforms to invest properly in India's road and other infrastructure assets.

The only reason CDPQ is seeking to divest is to be in compliance with the 25% dilution norm.

Below, highways play an important role in the advancement of the country's infrastructure, and these Indian National Highways are the primary road networks that connect the northern, southern, eastern, and western portions of India. The National Highways Authority of India (NHAI) or the Central Public Works Department (CPWD) is in charge of various road networks, from building through upkeep.