The Canada Pension Plan Investment Board (CPPIB) and the Ontario Municipal Employees Retirement System (OMERS) are planning to invest more than ₹4,300 crore ($526 million) in IndInfravit, an infrastructure investment trust (InvIT) that owns and operates Indian road assets and is majority owned by the two investors, said two persons aware of the development.
The funding is linked to IndInfravit’s deal to acquire a portfolio of five road assets from another Canadian investor Brookfield, which was signed in June 2022, valued at $1.2 billion. According to one of the persons, the proposed funding will take CPPIB’s stake to around 60%, while OMERS will become the second-biggest shareholder of IndInfravit.
“The funds to be infused by CPPIB and OMERS are planned to be used for the acquisition of the Brookfield portfolio. It will also be used to repay part of the debts of the portfolio being acquired and also for any capex that needs to be done in these newly acquired assets,” said the second person. CPPIB will lead the funding and is looking to invest around ₹3,300 crore in this round, while the rest will come from OMERS, the person said.
“The funding is contingent on the closure of the deal, which is expected to happen soon,” the person added. The deal received the approval of Competition Commission of India (CCI) in October 2022.
The Brookfield portfolio comprises three toll road projects – the Mumbai-Nasik Expressway, the Simhapuri Expressway and the Rayalseema Expressway. The other two road assets are annuity projects – Gorakhpur Infrastructure Company and Kosi Bridge Infrastructure Co.
The roads portfolio with approximately 2,400 lane km is spread across the states of Andhra Pradesh, Bihar, Maharashtra and Uttar Pradesh. The portfolio has been operational, on average, for approximately nine years, and has an average residual concession period of 20 years.
IndInfravit’s existing portfolio includes 13 operational road concessions with about 5,000 lane km in five states. The portfolio generated a revenue of Rs 1,742 crore in FY22, up from Rs 1,576 crore in the previous financial year.
CPPIB and OMERS declined to comment.
IndInfravit, originally sponsored by India’s largest construction company Larsen & Toubro Ltd, has over time become CPPIB’s primary operating roads platform in India. CPPIB was an anchor investor of the InvIT when it was set up in 2018.
L&T has sold its stake, which it held through L&T Infrastructure Development Projects Ltd (L&T IDPL), in the InvIT in phases. The last stake sale on February 28 saw L&T sell a 6.05% stake to CPPIB, marking its exit from the InvIT.
In 2021, CPPIB consolidated its shareholding in IndInfravit by acquiring an 8.9% stake from L&T IDPL and a 7% stake from Sadbhav Infrastructure Project for a total consideration of Rs 1,005 crore.
CPPIB is the biggest shareholder of IndInfravit with a 49.9% shareholding while OMERS has 20.03%. Allianz Capital is the other big shareholder with a 22.7% stake.
The Brookfield portfolio is the second big road portfolio that IndInfravit is acquiring since its formation. While the initial set of roads came from L&T IDPL, IndInfravit bought a portfolio of nine operating roads from Gujarat-based Sadbhav Infrastructure for an enterprise value of Rs 6,300 crore in March 2020.