Facing delays in finalising bidder due to COVID-19, cash-strapped IL&FS Group is looking at including one more road project – Pune Sholapur Road Development to its proposed infrastructure investment trust (InvIT), according to a source. It had earlier shortlisted nine road projects with a total debt of around Rs 10,800 crore on the proposed InvIT platform and sent it to market regulator Securities and Exchange Board of India. The approval for the same is awaited. PSRDCL is one of the 10 road projects of the group for which binding bids were received in August 2019. There were four bidders in the fray for this road asset. The names of the bidders could not be ascertained.
However, as the finalisation of bidder for Pune Sholapur Road Development Company Limited (PSRDCL) was taking time due to the pandemic, the group is looking at adding this asset also to the list for proposed InvIT, the source said. “PSDRCL is likely to be listed on the proposed InvIT. A decision on it will be taken by the IL&FS (Infrastructure Leasing and Financial Services) board soon,” the source added.
Once a decision is taken by the board, the debt-ridden group will include it in the earlier list of road assets for the proposed InvIT it had sent to Sebi for approval, the source said adding “it will help in expediting the resolution of this road asset.” When contacted, IL&FS spokesperson declined to comment. PSRDCL, which is classified as red asset, has around Rs 2,000 crore debt. It is a four lane highway of Pune-Solapur section of NH-9 in Maharashtra. NH-9 runs through Maharashtra, Karnataka, Telangana and Andhra Pradesh.
The project is on toll basis with a concession period of 19 years. Investors are using the current COVID crisis to take a relook at valuations and potentially renegotiate the deal, Alvarez & Marsal’s Managing Director Venkataraman Renganathan said.
“The immediate impact of reducing revenues is also a factor. It also gives them a window to redefine their investment strategy including sub sectors and also prioritise deployment of available capital,” he told. As part of its asset sale process, IL&FS group in December 2018 had invited expressions of interest (EoI) for sale of its stake in its domestic road verticals, which included seven operating annuity based road projects, eight operating toll based road projects and four under construction, among others.
In August last year, the group had said that it had received 14 binding bids from multiple bidders for 10 road projects, including PSRDCL, that accounted for over Rs 17,700 crore debt (nearly 19 per cent of total group debt). Last October, IL&FS Group chairman Uday Kotak had said that the company would consider creation of InvIT for nine operating road assets with a total debt of Rs 10,830 crore.
The group has put its five road assets – Moradabad Bareily Expressway with debt of around Rs 2,500 crore; Jharkhand Road Projects Implementation Company (Rs 2,300 crore); Baleshwar Kharagpur Expressway (Rs 600 crore); Road Infrastructure Development Company of Rajasthan Ltd (Rs 2,700 crore) and Sikar Bikaner Highway (Rs 500 crore) under the proposed InvIT. These five road projects were among the 10 road projects for which the group had received bids. As the bids were not favourable, the projects were shortlisted for the proposed InvIT .
The other four assets that are included in the proposed InvIT are – West Gujarat Expressway with debt of nearly Rs 200 crore; East Hyderabad Expressway (Rs 220 crore); Thiruvananthapuram Road Development (Rs 220 crore) and Barwa Adda Expressway (Rs 2,000 crore). The final approval from the market regulator Sebi is yet to be received.
For IL&FS Group, InvIT is an efficient mechanism of transferring ownership and economic benefit of the underlying SPVs to its creditors having exposure to these SPVs. InvIT would provide potential for higher recovery through issuance at yield closer to lending rates of creditors as compared to higher discounting factors that may be applied by potential acquirer through the bid process.