Highways Infrastructure Trust, an infrastructure investment trust (InvIT) controlled by private equity firm KKR & Co., has signed a deal to acquire 12 highway assets from PNC Infratech Ltd at an enterprise value of Rs 9,005.7 crore ($1.09 billion).
The equity value of the transaction, including cash, stands at Rs 2,902 crore on an invested equity of Rs 1,740 crore, PNC Infrastructure said in a statement.
The deal comes as InvITs backed by foreign private equity investors have been looking to go long on the Indian roads sector, in the wake giving local highway companies a chance to sell their portfolios and churn the capital into newer projects or pare their debt.
Once completed, the latest deal will be one of the biggest acquisitions in the Indian roads and highways sector, which has seen hectic deal activity over the past three years since the economy re-opened following the pandemic-induced lockdowns of 2020 and 2021.
The road portfolios being acquired by the KKR-backed InvIT comprises 11 hybrid annuity concessions from the National Highways Authority of India (NHAI) and a toll road concession from the Uttar Pradesh State Highways Authority.
The 12 road projects comprise a total length of around 3,800 km across Uttar Pradesh, Madhya Pradesh, Rajasthan and Karnataka, PNC Infratech said. Of these 12 projects, 10 are presently operational while the other two are under construction and will be acquired once they become operational.
KKR owns about 77% of the units of the InvIT, whose current portfolio comprises 10 roads assets with a total length of 628 km across six states. These include a recent acquisition of a toll asset from Navayuga Engineering Company Ltd and three HAM assets from HG Infrastructure.
“The annuity nature of cashflows from the target portfolio would provide further stability to our existing portfolio. This investment is in line with our thesis of acquiring assets with long balance concession life generating predictable distributions for our unitholders,” said Gaurav Chandna, Head–Strategic Finance, Highway Concessions One, the investment manager to the InvIT.
This transaction and other announced transactions will increase HIT’s assets under management to Rs 20,000 crores, or about four times since the initial listing, he said.
KKR entered the Indian highways space in 2021 with the acquisition of the roads portfolio of another US PE firm, Global Infrastructure Partners (GIP). This included GIP’s stake in Highway Concesisons One and seven highway assets which totaled to 487 km.
In August 2022, KKR launched Highways Infrastructure Trust. This was KKR’s third InvIT in India, after IndiGrid, which manages power transmission and renewable energy assets, and Virescent Infrastructure, a renewable energy platform. IndiGrid acquired Virescent last year.
KKR also sought to acquire highway assets from Ashoka Concessions Ltd but the deal collapsed last year.
Other foreign investors in India’s highways sector include Australia’s Macquarie and Canadian pension funds CDPQ and Ontario Teachers’ Pension Plan.
In November 2022, Maple Highways, a dedicated India road investment platform created by CDPQ, bought the Eastern Peripheral Expressway that encircles the National Capital Region for Rs 6,267 crore.
