Singapore sovereign wealth fund GIC, which has been investing in the Indian infrastructure sector for a while now, has made a move to monetise a five-year-old bet in the country’s highways space.
GIC is set to offload nearly half its stake in the IRB Infrastructure Trust, an infrastructure investment trust (InvIT), recouping its 2019 investment in the vehicle which owns a portfolio of operational highway assets.
GIC is selling 24% of the units in the unlisted InvIT and a similar stake in its investment manager to Cintra, a unit of Spanish infrastructure development firm Ferrovial, for €740 million (about $810 million or Rs 6,586 crore).
The total investment amount includes €97 million to fund outstanding equity commitments in projects being developed by the InvIT, Ferrovial said in a statement. The acquisition price and the outstanding equity commitments will be funded with equity and, potentially, non-recourse debt and other sources of financing.
GIC had acquired a 49% stake in the InvIT in 2019 for $621 million (Rs 4,400 crore then). Back then, the InvIT owned a portfolio of nine road assets.
The latest exit effectively means that GIC has recouped more than its investment in the InvIT by offloading less than half the stake. Following this partial exit, GIC retains a 25% stake in the InvIT and the investment manager. Back-of-the-envelope calculations show that this residual stake is valued at $843.75 million.
It is, however, not possible to calculate the total return that GIC may have harvested on the investment since dividend payouts by unlisted InvITs are not publicly disclosed.
InvITs are mandated to regularly distribute dividends, depending on their earnings. These dividends must be distributed once every six months.
Mumbai-listed IRB Infrastructure Developers Ltd, the highway developer which sponsors the InvIT, retains a 51% ownership interest.
Further, as part of the transaction, Cintra will have the right to exercise a put option over 4.7% of non-convertible debentures (NCDs) and shares of highway operator Meerut Budaun Expressway Ltd that are currently held by GIC.
Ferrovial has effectively doubled down on a three-year-old bet. In 2021, the Spanish firm and GIC had acquired a 42% stake in the highway developer for $713.5 million. Ferrovial bought a 24.86% stake for €369 million.
GIC was also an anchor investor in IRB’s listed InvIT, the IRB InvIT Fund. It had led a group of 23 anchor investors when the InvIT went public that year in 2018.
Ferrovial said Thursday that the latest investment “completes its investment in the Indian market, reaching its internal size target.”
The IRB Infrastructure Trust operates 12 toll roads and has a committed pipeline of three more concessions.
Mumbai-listed IRB Infrastructure Developers was set up in 1998 and has since then built more than 18,500 lane kms of roads in India.